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federal_court_of_australia:fca/single/2006/2006fca0453
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decision
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commonwealth
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federal_court_of_australia
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2006-04-28 00:00:00
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Mathews v Health Insurance Commission (No. 3)[2006] FCA 453
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2006/2006fca0453
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2024-09-13T22:45:40.014523+10:00
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FEDERAL COURT OF AUSTRALIA
Mathews v Health Insurance Commission (No. 3) [2006] FCA 453
ADMINISTRATIVE LAW β health insurance β Professional Services Review β statutory scheme for examination of conduct to ascertain whether inappropriate practice involved β where committee failed to comply with sampling determination βwhere committee's report invalid β form of orders to remit matter to new committee for determination according to law β effect of setting aside adjudicative referral β whether Director must conduct fresh investigation β whether Director must make new adjudicative referral and report.
Health Insurance Act 1973 (Cth) Part VAA Div 3
Federal Court Rules O 35 r 7
JOHN WILLIAM MATHEWS v HEALTH INSURANCE COMMISSION, ALAN JOHN HOLMES IN HIS CAPACITY AS DIRECTOR, PROFESSIONAL SERVICES REVIEW, BERNARD KELLY, PETER CLYNE AND ANN STUART cONSTITUTING THE PROFESSIONAL SERVICES REVIEW COMMITTEE NO. 223 AND THE DETERMINING AUTHORITY ESTABLISHED BY SECTION 106Q OF THE HEALTH INSURANCE ACT 1973 (CTH)
NSD 1584 OF 2004
EDMONDS J
28 APRIL 2006
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD 1584 OF 2004
BETWEEN: JOHN WILLIAM MATHEWS
APPLICANT
AND: HEALTH INSURANCE COMMISSION
FIRST RESPONDENT
ALAN JOHN HOLMES IN HIS CAPACITY AS DIRECTOR, PROFESSIONAL SERVICES REVIEW
SECOND RESPONDENT
BERNARD KELLY, PETER CLYNE AND ANN STUART CONSTITUTING THE PROFESSIONAL SERVICES REVIEW COMMITTEE NO. 223
THIRD RESPONDENT
THE DETERMINING AUTHORITY ESTABLISHED BY SECTION 106Q OF THE HEALTH INSURANCE ACT 1973 (CTH)
FOURTH RESPONDENT
JUDGE: EDMONDS J
DATE OF ORDER: 28 APRIL 2006
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The motion be dismissed.
2. The respondents pay the applicant's costs of and incidental to the motion.
3. To better reflect the intention of the Court, Order 1 made on 10 March 2006 is hereby varied so as to read as follows:
The Director's referral to PSRC No. 223 of the reference known as Adjudicative Referral No. 223 be set aside.
4. To better reflect the intention of the Court, Order 2 made on 10 March 2006 is hereby varied so as to read as follows:
The Director establish a differently constituted committee to consider the reference known as Adjudicative Referral No. 223 according to law.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD 1584 OF 2004
BETWEEN: JOHN WILLIAM MATHEWS
APPLICANT
AND: HEALTH INSURANCE COMMISSION
FIRST RESPONDENT
ALAN JOHN HOLMES IN HIS CAPACITY AS DIRECTOR, PROFESSIONAL SERVICES REVIEW
SECOND RESPONDENT
BERNARD KELLY, PETER CLYNE AND ANN STUART CONSTITUTING THE PROFESSIONAL SERVICES REVIEW COMMITTEE NO. 223
THIRD RESPONDENT
THE DETERMINING AUTHORITY ESTABLISHED BY SECTION 106Q OF THE HEALTH INSURANCE ACT 1973 (CTH)
FOURTH RESPONDENT
JUDGE: EDMONDS J
DATE: 28 APRIL 2006
PLACE: SYDNEY
REASONS FOR JUDGMENT
(NOTICE OF MOTION)
Edmonds J:
2 This is a motion which seeks the vacation or variation of three orders I made on 10 March 2006 and, in the case of the vacated order, its replacement by a new order. I made these orders in the course of delivering judgment in this proceeding and at the time of publishing my reasons: Mathews v Health Insurance Commission [2006] FCA 195.
3 In the course of delivering judgment I declared the Committee's Final Report invalid. No vacation nor variation of that declaration is sought. I also ordered that:
'1. Adjudicative Referral No. 223 be set aside.
2. The matter be remitted to the Director with a direction that he establish a differently constituted Committee to determine the reference to Adjudicative Referral No. 223 according to law.
3. The first, second and third respondents pay the applicant's costs.'
4 All these orders have been entered and the time for filing an appeal has expired.
5 The motion seeks the vacation of the first order and its replacement with the following order:
The findings of Professional Services Review Committee No. 223 that Dr Mathews had engaged in inappropriate practice be set aside.
6 The motion seeks the variation of the second order as follows:
The matter be remitted to the Director of Professional Services Review with a direction that the Director of Professional Services Review amend Adjudicative Referral No. 223 by substituting for any references in that document to the third respondents, references to a differently constituted Committee, AND a direction that the Director of Professional Services Review establish a differently constituted Committee to determine Adjudicative Referral No. 223.
7 The motion seeks the variation of the third order as follows:
The first, second and third respondents pay 6o per cent of the applicant's costs.
8 The basis upon which the first order was sought to be vacated and replaced by the order in [5] supra was put by counsel for the respondents in the following way:
'The reason, your Honour, why the second respondent is troubled and inconvenienced by the form of your Honour's order setting aside the Adjudicative Referral No. 223 is that the effect of your Honour's order is, as we interpret it, to re-enliven the Director's responsibility to actually conduct an investigation, write a report and prepare an adjudicative referral. Since the matter was decided there has been a change in personnel at the [Professional Services Review] and the current Director of Professional Services Review is a gentleman called Dr Tony Webber.
As we interpret the effect of your Honour's order Dr Webber would be bound, even though no error has been found in what Dr Holmes did, to re-investigate the investigative referral, deal with any submissions which Dr Mathews might be inclined to make for the purpose of that re-investigation, prepare a fresh report and prepare another adjudicative referral.'
9 I expressed certain concerns to counsel for the respondents on the form of the replacement order and its implications, to which she responded:
'Your Honour's concern I think might be satisfied if your Honour were to set aside this referral but grant leave to the Director, the current Director, to make a referral in identical terms, save for the references to Committee No. 223, without the necessity to conduct a fresh investigation and create a further investigation report. It's a very wordy sort of order β¦ .'
10 Counsel for Dr Mathews indicated that his client was largely ambivalent about the vacation of the first order and its replacement by the order sought. However, he did strongly reject any suggestion from me that, in consequence of the first order, the Director would have to undertake a fresh investigative referral. There was some confusion here, for which I may have been responsible, because as counsel for the respondents subsequently pointed out, it is the Health Insurance Commission ('HIC') that writes an investigative referral: section 86 ff of the Health Insurance Act 1973 (Cth) ('the Act'). What counsel for the respondents was referring to in the extract from her submissions at [8] supra was not the HIC's investigative referral but the investigation which the Director is required to undertake into the referred services pursuant to subs 89(1) of the Act.
11 The variation of the second order in the terms set out in [6] supra is essentially a consequential function of the terms of the first order, although counsel for the respondents agreed that, temporally, the setting up of the new committee should come before the terms of the remittal.
12 Counsel for Dr Mathews indicated his client's acceptance of order 2 as it stood.
13 So far as the variation sought to the order for costs is concerned, it is, in my view, ill conceived, too late and arguably, without foundation. It is ill conceived in the sense that the fact that Dr Mathews was unsuccessful on the vast majority of his grounds of challenge, does not mean that he was only partially successful; he was totally successful, even if only on one or more of his grounds of challenge. There was, and is, in my view, no basis for departing from the normal rule that the costs order should follow the event. It is too late in the sense that there was more than adequate time for the issue to be raised before the order was entered. And it is, arguably, without foundation. There is much in the contention of Dr Mathews' counsel that O 35 r 7(2) of the Federal Court Rules does not accommodate its agitation.
14 I do not propose to say anything more about the variation sought to order 3 (the costs order).
15 Returning to the first order I made, the intention of that order was to set aside the Director's referral to Professional Services Review Committee No. 223 of the following reference, namely:
'[The consideration of whether conduct by Dr Mathews in connection with rendering and initiating]:
ALL Medicare Benefits Schedule (MBS) items 23, 24 and 193 services from the practice location at 11 Patrick Street, Campbelltown NSW 2560 during the period on and from 1 January 1999 to and including 31 December 1999 [constituted engaging in inappropriate practice as defined in the Act.]'
(Adjudicative Referral No. 223.)
16 It might, therefore, have been more precisely worded as follows:
1. The Director's referral to PSRC No. 223 of the reference known as Adjudicative Referral No. 223 be set aside.
17 The intention of the second order I made was to oblige the Director to establish a differently constituted committee to consider the reference known as Adjudicative Referral No. 223 according to law.
18 It might, therefore, have been more precisely worded as follows:
2. The Director establish a differently constituted committee to consider the reference known as Adjudicative Referral No. 223 according to law.
19 Such orders will not, in my view, require the Director to conduct an investigation pursuant to subs 89(1) of the Act. He has already done that. It will, however, require him to make an adjudicative referral to the new committee pursuant to subs 93(1) of the Act, to prepare a written report to the new committee and attach that report to the adjudicative referral to the new committee pursuant to subs 93(6) of the Act.
20 Moreover, having regard to my reasons, in particular at [62] and [69], the exploratory samples which the new committee examines must be randomly drawn from the preliminary random samples of 99 for Item 23, 96 for Item 24 and 93 for Item 193. They must not be 30 or more consecutively numbered services chosen from the preliminary random samples, whether by the Director, the Committee or someone else.
21 Pursuant to O 35 r 7 of the Federal Court Rule, I propose to make the following orders:
To better reflect the intention of the Court β
1. Order 1 made on 10 March 2006 is hereby varied so as to read as follows:
The Director's referral to PSRC No. 223 of the reference known as Adjudicative Referral No. 223 be set aside.
2. Order 2 made on 10 March 2006 is hereby varied so as to read as follows:
The Director establish a differently constituted committee to consider the reference known as Adjudicative Referral No. 223 according to law.
22 As the respondents' motion has essentially failed, the respondents must pay the applicant's costs of and incidental to the motion.
I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds.
Associate:
Dated: 28 April 2006
Counsel for the Applicant: Mr M Robinson
Solicitor for the Applicant: TressCox
Counsel for the Respondent: Ms R M Henderson
Solicitor for the Respondent: Minter Ellison
Date of Hearing: 19 April 2006
Date of Judgment: 28 April 2006
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federal_court_of_australia:fca/single/2014/2014fca0698
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decision
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commonwealth
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federal_court_of_australia
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text/html
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2014-07-02 00:00:00
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Australian Securities and Investments Commission v Newcrest Mining Limited [2014] FCA 698
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2014/2014fca0698
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2024-09-13T22:45:40.203912+10:00
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FEDERAL COURT OF AUSTRALIA
Australian Securities and Investments Commission v Newcrest Mining Limited [2014] FCA 698
Citation: Australian Securities and Investments Commission v Newcrest Mining Limited [2014] FCA 698
Parties: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v NEWCREST MINING LIMITED (ABN 20 005 683 625)
File number: VID 292 of 2014
Judge: MIDDLETON J
Date of judgment: 2 July 2014
Date of Corrigendum: 11 July 2014
Catchwords: CORPORATIONS LAW β continuous disclosure β penalty hearing β admitted contraventions β role of Court in imposing penalty β appropriateness of agreed facts β whether agreed facts sufficient
Legislation: Corporations Act 2001 (Cth)
Evidence Act 1995 (Cth)
Cases cited: Australian Competition and Consumer Commission v AGL Sales Pty Limited [2013] FCA 1030
Australian Competition and Consumer Commission v Avitalb Pty Ltd [2014] FCA 222
Australian Competition and Consumer Commission v Energy Australia [2014] FCA 336
Australian Competition and Consumer Commission v Mandurvit Pty Ltd [2014] FCA 464
Australian Competition and Consumer Commission v P&N Pty Ltd [2014] FCA 6
Australian Securities and Investments Commission v Chemeq (2006) 58 ACSR 169
Australian Securities and Investments Commission v Macdonald (No 12) (2009) 73 ACSR 638
Australian Securities and Investments Commission v Southcorp Ltd (No 2) (2003) 130 FCR 406
Date of hearing: 27 June 2014
Place: Melbourne
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 88
Counsel for the Plaintiff: Mr M Moshinsky QC with Mr M Borsky and Ms S Gory
Solicitor for the Plaintiff: Australian Securities and Investments Commission
Counsel for the Defendant: Mr J Karkar QC with Mr P Collinson QC and Dr C Button
Solicitor for the Defendant: Allens Linklaters
FEDERAL COURT OF AUSTRALIA
Australian Securities and Investments Commission v Newcrest Mining Limited [2014] FCA 698
CORRIGENDUM
1. In paragraph 53 the first word "This" should be replaced with the word "The", after the word "requirement" the text "in s 1317E(2)(e)" should be inserted, and after the words "not a contravention of a" the words "corporation/scheme" should be inserted.
I certify that the preceding one (1) numbered paragraph is a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justice Middleton.
Associate:
Dated: 11 July 2014
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION VID 292 of 2014
BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Plaintiff
AND: NEWCREST MINING LIMITED (ABN 20 005 683 625)
Defendant
JUDGE: MIDDLETON J
DATE OF ORDER: 2 JULY 2014
WHERE MADE: MELBOURNE
THE COURT DECLARES THAT:
1. The defendant (Newcrest) contravened section 674(2) of the Corporations Act 2001 (Cth) ('the Act') at and from 12.05pm on 28 May 2013 to 9.19am on 7 June 2013 by failing to notify the Australian Securities Exchange ('the ASX') that Newcrest management expected total gold production for financial year 2014 to be approximately 2.2 to 2.3 million ounces.
2. Newcrest contravened section 674(2) of the Act at and from 5 June 2013 to 9.19am on 7 June 2013 by failing to notify the ASX that Newcrest management expected Newcrest's capital expenditure figure for financial year 2014 to be approximately AU$1 billion.
AND THE COURT ORDERS THAT:
3. Newcrest pay the Commonwealth a pecuniary penalty pursuant to section 1317G(1A) of the Act in respect of the first declared contravention of $800,000.
4. Newcrest pay the Commonwealth a pecuniary penalty pursuant to section 1317G(1A) of the Act in respect of the second declared contravention of $400,000.
5. Newcrest pay the plaintiff's party and party costs of the proceeding.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION VID 292 of 2014
BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Plaintiff
AND: NEWCREST MINING LIMITED (ABN 20 005 683 625)
Defendant
JUDGE: MIDDLETON J
DATE: 2 JULY 2014
PLACE: MELBOURNE
REASONS FOR JUDGMENT
BACKGROUND
1 In this proceeding, the Plaintiff ('ASIC') alleges against the Defendant ('Newcrest') two contraventions of s 674(2) of the Corporations Act 2001 (Cth) ('the Act') as follows:
(a) The defendant (Newcrest) contravened s 674(2) of the Act on and from 12.05pm on 28 May 2013 continuing until 9.19am on 7 June 2013 by failing to notify the Australian Stock Exchange (the ASX) that Newcrest management expected total gold production for financial year 2014 to be approximately 2.2 to 2.3 Moz (the total production information) ('the First Contravention').
(b) Newcrest contravened s 674(2) of the Act on and from 5 June 2013 continuing until 9.19am on 7 June 2013 by failing to notify the ASX that Newcrest management expected Newcrest's capital expenditure figure for financial year 2014 to be approximately AU$1 billion (the capex information) ('the Second Contravention').
2 Newcrest admits both contraventions and consents to appropriate declarations being made, the imposition of pecuniary penalties and for it to pay ASIC's costs of this proceeding.
3 ASIC and Newcrest jointly make submissions in relation to the disposition of these proceedings.
4 Agreed Statement of Facts and Admissions are annexed to these reasons as Annexure 'A'.
5 On the basis that each contravention is "serious" for the purposes of s 1317G(1A)(c)(iii) of the Act, ASIC and Newcrest submit that the following proposed penalties are appropriate:
(a) $800,000 for the First Contravention; and
(b) $400,000 for the Second Contravention.
6 Not infrequently, a regulator and a company (or individual) may reach an agreement whereby the company concedes a contravention and the company and the regulator jointly propose a figure (or a range) as the appropriate penalty to be imposed by the court. The approach to be taken by the court in such circumstances has been the subject of some judicial consideration in recent years.
7 I have already considered the Court's role in relation to joint submissions proposing penalties: see Australian Competition and Consumer Commission v Energy Australia [2014] FCA 336 at [113] to [152]. Other judges of the Court have adopted a similar approach: see for a recent example Australian Competition and Consumer Commission v Mandurvit Pty Ltd [2014] FCA 464 per McKerracher J.
8 Specifically, as to the Court's role and the need to scrutinise agreed statements of facts and law, in Australian Competition and Consumer Commission v AGL Sales Pty Limited [2013] FCA 1030; at [40] to [44], I made the following observations:
(a) the Court must form its own opinion about the penalty, undertaking its constitutional role;
(b) in carrying out its constitutional role, statements of agreed fact may, as long as in the circumstances they are adequate, form a sound basis for a Court determination as to the appropriate orders to make, including as to penalty;
(c) there is a danger that the Court becomes blinkered by approaching the determination by reference to an agreed position;
(d) the Court should have an "overall view of the considerations relevant to the making of appropriate orders";
(e) the Court has an "onerous responsibility" in determining appropriate orders;
(f) a court will necessarily rely heavily upon the parties, which will include the regulator, to "appropriately inform the court of all relevant matters for deliberation" and there are risks if "the parties do not put all relevant matters before the court";
(g) a court will be "astute" to identifying whether or not the agreed facts and admissions "do not truly characterise the nature and event of the contravention";
(h) in such circumstances the "trial judge can and should insist upon a 'fuller and more realistic set of agreed facts'", or proceed to hear the matter as a contested hearing.
9 As is clear from the authorities, the Court itself must determine the appropriate penalty in all the circumstances. This is not a process of 'approving' a settlement reached between the regulator and defendant. It may be convenient for parties to inform the public that for their part they have agreed upon what they consider be an appropriate outcome; but is by no means a 'settlement' that is being placed before the Court for its 'approval'.
10 The parties have agreed certain facts and Newcrest has made certain admissions for the purposes of s 191 of the Evidence Act 1995 (Cth). I am satisfied that the agreed facts and admissions are sufficient for the Court to determine the appropriate relief to grant in this proceeding, and provide a sound and proper basis upon which to proceed to impose appropriate penalties: see generally Australian Competition and Consumer Commission v Avitalb Pty Ltd [2014] FCA 222; and Australian Competition and Consumer Commission v P&N Pty Ltd [2014] FCA 6. I do not consider I need any fuller set of agreed facts.
11 At the hearing, Earglow Pty Ltd ('Earglow') sought leave to participate in the proceeding as an intervener. Earglow has agreed to become a participant in proposed Part IVA proceedings which could raise related issues to this proceeding. Earglow did not seek to contest the appropriateness of the declarations and penalties sought by ASIC. Earglow wished the opportunity to place before the Court all relevant details as to when Newcrest first became aware of information which was materially different to information previously disclosed to the ASX concerning Newcrest's expected total gold production for FY14 and its expected capex expenditure figure of FY14. I gave Earglow that opportunity, it not seeking to play any further role in this proceeding.
12 Earglow contended that the Court needed further information going back in time to the matters alleged in the two contraventions. It proposed that ASIC file evidence to address four questions:
(a) when did an officer, or officers, of Newcrest first become aware of information (relevant information) which was materially different to information previously disclosed to the ASX concerning:
(i) its expected total gold production for FY14; and
(ii) its expected capex expenditure figure of FY14?
(b) who was that officer(s)?
(c) what were the circumstances in which the officer or officers became aware of the relevant information?
(d) when was it apparent that the relevant information would have a material effect on the price or value of Newcrest securities (notwithstanding that at that time the financial impact of the relevant information could not be calculated)?
13 I do not regard this as necessary.
14 I am satisfied that the budget process (as described in detail in the agreed statement of facts) was ongoing, and the information contained therein was insufficiently definite. This is a factual characterisation, but one I consider can be definitely made on the basis of the agreed facts.
15 There is no dispute in this proceeding that there was a relatively lengthy budgeting process from May to early June 2013. The facts before the Court sufficiently describe that process, and demonstrate that up to the relevant time the information in the budgets did not need to be disclosed. This is not to say that information, in appropriate circumstances, generated for internal management purposes only, may not be protected from disclosure. It will all depend on the context. In this proceeding, the context has been sufficiently explained by the parties.
16 As is apparent from the agreed facts, the total production information and the capex information were management expectations as to production levels and capital expenditure. They were at all relevant times matters for the Board to determine. It was not information in the sense of an existing fact affecting Newcrest's production capacity, but rather an expectation which was subject to Board deliberation and approval before it would come to fruition.
17 The relevant context is that Newcrest engaged in a process of planning its future production activities and related expenditure.
18 The plan, developed and recorded in drafts of the budget, had to be reviewed and approved by the Board before it was anything more than a proposal from management conveying their recommendation as to what Newcrest should do and spend in the future.
19 Management's expectations necessarily related to a proposal that was incomplete in the sense that the budget had, as at 28 May, not been provided to the Board, and, at 5 June, had not been approved by the Board.
20 I then proceed to consider the appropriate relief to grant based upon the evidence before the Court.
STATUTORY PROVISIONS
21 It is important to recall the statutory setting of the continuous disclose regime.
22 The continuous disclosure regime is set out in Ch 6CA of the Act. Section 674(2) imposes a statutory obligation on listed companies whose securities are listed on the financial market known as "ASX", and operated by ASX, to comply with Listing Rules of the ASX where the information required by the Listing Rules to be disclosed also meets the statutory requirements that it is price-sensitive and not already "generally available".
23 Section 674(2) is a civil penalty provision (s 1317E) and provides as follows:
If:
(a) this subsection applies to a listed disclosing entity;
(b) the entity has information that those provisions require the entity to notify to the market operator; and
(c) that information:
(i) is not generally available; and
(ii) is information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of ED securities of the entity;
the entity must notify the market operator of that information in accordance with those provisions.
24 Newcrest is a "listed disclosing entity" to which s 674(2) applies and the relevant rules are the Listing Rules of the ASX.
25 In order for there to be a contravention of s 674(2), three criteria must be satisfied:
(a) the Listing Rules must require notification of the information to the ASX;
(b) the information must not be "generally available"; and
(c) the information must be price-sensitive, namely, it must be information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of enhanced disclosure securities ('ED securities') of the entity.
26 The determination of whether or not information is generally available is governed by s 676, which provides that:
(2) Information is generally available if:
(a) it consists of readily observable matter; or
(b) without limiting the generality of paragraph (a), both of the following subparagraphs apply:
(i) it has been made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in securities of a kind whose price or value might be affected by the information; and
(ii) since it was so made known, a reasonable period for it to be disseminated among such persons has elapsed.
(3) Information is also generally available if it consists of deductions, conclusions or inferences made or drawn from either or both of the following:
(a) information referred to in paragraph (2)(a);
(b) information made known as mentioned in subparagraph (2)(b)(i).
27 The concept of information having a "material effect on price or value" is also subject to further statutory elaboration. Section 677 provides that:
For the purposes of sections 674 and 675, a reasonable person would be taken to expect that information to have a material effect on the price or value of ED securities of a disclosing entity if the information would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the ED securities.
28 There is no contravention of s 674 unless the Listing Rules require disclosure of the information.
29 Listing Rule 3.1 provides that:
Once an entity becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity's securities, the entity must immediately tell ASX that information.
30 However, the continuous disclosure obligation in Listing Rule 3.1 is subject to exceptions set out in Listing Rule 3.1A. Relevantly, Listing Rule 3.1 does not apply to particular information while:
(a) one or more of the five situations set out in Listing Rule 3.1A.1 applies:
It would be a breach of a law to disclose the information;
The information concerns an incomplete proposal or negotiation;
The information comprises matters of supposition or is insufficiently definite to warrant disclosure;
The information is generated for the internal management purposes of the entity; or
The information is a trade secret; and
(b) the information "is confidential and ASX has not formed the view that the information has ceased to be confidential"; and
(c) "a reasonable person would not expect the information to be disclosed".
31 The requirements in Listing Rule 3.1A are cumulative. Accordingly, if any of the conditions in Listing Rule 3.1A is no longer satisfied, Listing Rule 3.1 applies to require disclosure of the relevant information.
32 In this matter, absent the loss of confidentiality in the total production information and the capex information (which information is the subject of the First and Second Contraventions), Listing Rule 3.1 would not have required Newcrest to make any announcement of that information to the ASX. While management developed expectations in relation to those matters as drafts of the budget were prepared, its expectations of those matters, which were subject to final determination by the board, would not, in the circumstances of this proceeding, ordinarily be disclosed to the ASX. It is only because confidentiality in the total production information and the capex information was lost that the obligation arose to disclose those matters to the ASX.
33 There are agreed facts that confidentiality was lost:
(a) over the total production information, when Newcrest's employee, Mr Spencer Cole had discussions with several analysts between 28 and 31 May 2013 and presented at the Gold Day conference in which he disclosed the total gold production information; and,
(b) over the capex information, when Mr Cole had discussions with analysts from two houses (RBC and Commonwealth Bank) on 5 June 2013 in which he disclosed the capex information.
34 Upon the loss of confidentiality, the exemption from disclosure previously afforded by Listing Rule 3.1A no longer applied and Newcrest was required to tell the ASX each piece of information.
PENALTY PROVISIONS
35 Section 674(2) of the Act is a civil penalty provision, contravention of which requires that the Court make a declaration of contravention (s 1317E)(1)). Section 674(2) is also a "financial services civil penalty provision" (s 1317DA), permitting the Court to impose a pecuniary penalty of up to $1,000,000 if the contravention (s 1317G)(1A)(c)):
(i) materially prejudices the interests of acquirers or disposers of the relevant financial products; or
(ii) materially prejudices the issuer of the relevant financial products or, if the issuer is a corporation or scheme, the members of that corporation or scheme; or
(iii) is serious.
36 ASIC alleges, and Newcrest accepts, that each contravention was "serious".
37 It is relevant for the Court to assess the contravening conduct in light of the statutory provisions and the objectives sought to be served by the continuous disclosure regime.
38 The statutory and regulatory history of the continuous disclosure regime was considered and conveniently summarised by French J (as he then was) in Australian Securities and Investments Commission v Chemeq Ltd (2006) 58 ACSR 169 ('Chemeq').
39 In Chemeq at [43], French J (dealing with the Chapter 6CA regime) quoted from the 1991 report of the Australian Companies and Securities Advisory Committee, which set out the ways in which that committee considered a system of continuous disclosure would promote confidence in the integrity of the Australian capital markets.
40 The Committee considered that continuous disclosure would:
overcome the inability of general market forces to guarantee adequate and timely disclosure by disclosing entities;
encourage greater securities research by investors and advisors, ensuring that securities prices would more closely, and quickly, reflect underlying economic values;
ensure that equity and loan resources in the Australian market are more effectively channelled into appropriate investments and that funds are withheld or withdrawn from poorly performing disclosing entities, promoting capital market efficiency;
assist debt holders in monitoring performance of disclosing entities and thereby determine whether, or when, to exercise any right to withdraw or reinvest their loan funds, or convert debt to equity;
act as a further, or substitute, warning device for holders of charges over corporate assets, that breaches in covenants may have taken place, or the risk of default has increased;
assist potential equity or debt holders of disclosing entities to better evaluate their investment alternatives;
lessen the possible distorting effects of rumour on securities prices;
minimise the opportunities for insider trading or similar market abuses;
improve managerial performance and accountability by giving the market more timely indicators of corporate performance;
encourage the growth of information systems within disclosing entities, thereby assisting directors to make decisions and to comply with their fiduciary duties; and
reduce the time and costs involved in preparing takeover and prospectus documents.
THE CONTRAVENTIONS
41 I now turn briefly to the elements of the First and Second Contraventions.
The existence of "information" requiring disclosure under Listing Rule 3.1
42 There are agreed facts that:
(a) as at 28 May 2013, Newcrest was aware of the total production information; and
(b) as at 5 June 2013, Newcrest was aware of the capex information.
43 The information would not have been required to be disclosed (absent loss of confidentiality) because of Listing Rule 3.1A:
(a) as at 28 May 2013, Newcrest's management was still working on the company's draft Budget, and no draft Budget had yet been proposed by management to Newcrest's board of directors (the budget was provided to the board in draft on 31 May 2013); and
(b) as at 5 June 2013, Newcrest's board of directors had not yet considered and approved the draft Budget presented to it by management on 31 May 2013.
44 In the context of the budget process in this proceeding, I accept that the draft Budget was a work in progress.
45 There are also agreed facts that both the total production information and the capex information constituted information that "a reasonable person would expect to have a material effect on the price or value of the entity's securities".
46 At the time of the First Contravention, the reports of analysts indicated a consensus forecast gold production for FY14 in the order of 2.60 million ounces. The total production information was materially lower than this figure and was market sensitive. The relevant fall in price between 28 May 2013 and 6 June 2013, and in the days after 7 June 2013 was attributable (may be only in part) to statements regarding gold production in FY14 being disseminated following the briefings by Mr Cole and then to the ASX by Newcrest through its 7 June 2013 announcement.
47 The capex information was also market sensitive. In August 2012, Newcrest published a five year outlook for capital expenditure. A specific range of $1.8 to $2 billion was provided for FY13 and a bar chart set out a continuing decline (without specific numbers) over the years from FY14 to FY17. Later, in presentations given by Newcrest the same chart was provided, with an axis giving readers a more specific indication that capex in FY14 was likely to be between $1.3 and $1.5 billion, depending on whether or not approximately $215 million in contingent funding for the pre-feasibility Wafi-Golpu exploration project in Papua New Guinea was included. Although Newcrest's public statements (particularly Mr Robinson's remarks in the March Quarterly Q&A) suggested that capital expenditure was being closely scrutinised and might have been expected to decline, the specific figure of $1 billion was market sensitive, particularly in view of the company's prior indications of the likely level of capital expenditure in FY14 and the analysts' consensus forecast in the order of $1.4 billion.
The loss of confidentiality and loss of protection of Listing Rule 3.1A
48 Confidentiality over the total production information was lost when Mr Cole disclosed the substance of that information in a telephone call with Credit Suisse analysts at approximately 12.05pm on 28 May 2013. Mr Cole similarly disclosed the total production information in discussions with analysts and the audience at the Gold Day conference on 29, 30 and 31 May 2013. When the total production information ceased to be confidential, Listing Rule 3.1A no longer applied and notification to the ASX was accordingly required from that time. Mr Cole's understanding that he was at liberty to disclose the total production information arose from a belief (on his part and that of his superior, Mr Warner) that the information had already been disclosed.
49 Confidentiality over the capex information was lost when Mr Cole disclosed this information to analysts from RBC and CBA on 5 June 2013. When the capex information ceased to be confidential, Listing Rule 3.1A no longer applied and notification to the ASX was accordingly required from that time.
The information was not "generally available" and was price-sensitive
50 The total production information and the FY14 capex information was confidential prior to Mr Cole's disclosures referred to above. Neither piece of information was already "generally available" for the purposes of s 674(2)(c)(i) of the Act. Further, both pieces of information constituted information which a "reasonable person would expect, if it were generally available, to have a material effect on the price or value of the ED Securities" for the purposes of s 674(2)(c)(ii) of the Act.
The information was not notified to the ASX prior to 7 June 2013
51 Newcrest did not notify the ASX of either the total production information or the capex information prior to 7 June 2013.
DECLARATIONS OF CONTRAVENTION
52 Provided the Court is satisfied that the First and Second Contraventions occurred, it must make declarations of contravention pursuant to s 1317E(1). The declarations are required to specify:
(a) the Court that made the declaration;
(b) the civil penalty provision that was contravened;
(c) the person who contravened the provision;
(d) the conduct that constituted the contravention; and
(e) if the contravention is of a corporation/scheme civil penalty provision - the corporation or registered scheme to which the conduct related.
53 The requirement in s 1317E(2)(e) does not apply as breach of s 674(2) (being item 14 in the table in s 1317E(1)) is not a contravention of a corporation/scheme civil penalty provision under s 1317DA.
THE APPROPRIATE PENALTIES IN THIS CASE
54 Section 674(2) is a "financial services civil penalty provision" pursuant to s 1317DA(b). Accordingly, for each contravention, a pecuniary penalty may be imposed by the Court under s 1317G(1A) on the basis that Newcrest contravened a financial services civil penalty provision and a declaration of contravention has been made under s 1317E.
55 The maximum penalty for each contravention by Newcrest as a body corporate is $1,000,000 (s 1317G(1B)).
56 It is important to stress that as this is the maximum penalty currently considered appropriate by the legislature, the Court must assess, with this maximum penalty in mind, the possible range of conduct that may be involved in a contravention. In a circumstance where conduct is deliberate, undertaken at a high level of management, and there is no co-operation made with the regulator, then a penalty close to or at the maximum penalty of $1,000,000 may be appropriate. That is not this case.
The First and Second Contraventions were "serious"
57 Newcrest admits that the First and Second Contraventions were "serious" within the meaning of s 1317G(1A)(c)(iii) of the Act. I consider that the reference to a contravention being "serious" in subparagraph (iii) is a question of fact, and I accept the admission.
58 The First Contravention and the Second Contravention meet the statutory threshold of being serious contraventions for the following reasons:
(a) The First Contravention arises from the disclosure of information concerning Newcrest's expected gold production in FY14, derived from the budget process. For resources companies, which do not typically publish earnings guidance, production estimates are market-sensitive. What Newcrest's management expected gold production in FY14 to be was a sensitive piece of information, particularly in light of the surrounding circumstances including the discrepancy between analyst consensus forecasts and management expectations and the market's, interest in how major gold miners such as Newcrest, would respond to the new, lower gold price environment.
(b) Although the loss of confidentiality over the total production information arose from Mr Cole and Mr Warner's belief that they were able to disclose the total production information, Newcrest's senior management was nevertheless put on notice early on 29 May 2013 that Mr Cole proposed to disclose the total production information to analysts when he met with them in Sydney and that the total production information had ceased to be confidential from 30 May 2013.
(c) During the period of the First Contravention over 40 million shares in Newcrest were traded on market with a total value of over $600 million (being the daily volume-weighted average price ('VWAP') multiplied by the volume of shares).
(d) Mr Cole disclosed the total production information to more than 10 firms of analysts or investors over a period of days. This was apt to create market "[s]peculation and rumour" and "to cause a loss of confidence in the market": see Australian Securities and Investments Commission v Southcorp Ltd (No 2) (2003) 130 FCR 406 ('Southcorp') at [36].
(e) The Second Contravention was serious because Newcrest had made statements previously indicating a significantly higher capex figure for FY14 (which was reflected in analyst consensus) and because of Newcrest's public statements commencing with the March Quarterly regarding a focus on free cash flow generation. Newcrest's lowered capex expectations were significant to the market in an environment where maximising cash flow was paramount, and where there was a direct relationship between capital expenditure and the approach Newcrest was to take to production (in particular, processing stockpiles at Lihir).
Applicable principles in the assessment of penalty
59 The principles applicable to the assessment of civil penalties for breach of regulatory regimes have been considered in a number of cases, including (in the context of s 674(2)) the decision of French J in Chemeq at [90]. As his Honour there stated :
The pecuniary penalties which the Act applies are punitive in nature. Their character is not adequately described by the rather anodyne term 'protective' - Rich v Australian Securities and Investments Commission [2004] HCA 42; (2004) 220 CLR 129 at [35] - [37], [41] - [43] and [99]. Consistently with the characterisation as punitive the object of the penalties is general and specific deterrence. That is the deterrence of those who might be tempted not to comply with the law and the deterrence of the particular contravenor who might be tempted to re-offend - Australian Securities and Investments Commission v Donovan (1998) 28 ACSR 583 at 608 (Cooper J), Australian Securities and Investments Commission v Adler [2002] NSWSC 483; (2002) 42 ACSR 80 at 114 (Santow J).
60 There is an emphasis on specific and general deterrence in fixing civil penalties for contravention of regulatory provisions.
61 In fixing penalty, it is relevant to enquire whether the company has cooperated with the regulator and whether it has acknowledged contraventions. Where there has been cooperation and acknowledgement of wrongdoing, that bears upon the evaluation of the need for specific deterrence in fixing the level of the penalty. Further, it has also been recognised in many cases that, where contraventions are admitted, court resources have been saved and public resources (in the form of the regulators' resources) then become available to be deployed in further regulatory activity.
Penalties imposed in other cases for contravention of s 674(2)
62 Whilst a court may be assisted by an awareness of the penalties imposed in other cases for contravention of the same provisions, the magnitude of a proposed penalty is fact-dependent. Nevertheless, three cases were brought to my attention involving contraventions of s 674(2): Chemeq, Southcorp, and Australian Securities and Investments Commission v Macdonald (No 12) (2009) 259 ALR 116; 73 ACSR 638 ('Macdonald (No 12)').
Australian Securities and Investments Commission v Chemeq (2006) 58 ACSR 169
63 In Chemeq, French J considered the penalties to be imposed for two contraventions of s 674(2) of the Act. At the time of the first contravention, the statutory maximum penalty was $200,000 but, at the time of the second contravention, the statutory maximum had been increased to $1,000,000. The parties jointly submitted, and French J accepted, that a penalty of $150,000 (equivalent to 75% of the maximum penalty) was appropriate for the first contravention and a penalty of $350,000 (equivalent to 35% of the statutory maximum) was appropriate for the second contravention.
64 The first contravention in Chemeq arose from the company's failure to notify the ASX that the costs of constructing a commercial facility had increased from the originally budgeted $25 million to over $50 million. As is evident from the declarations in Chemeq, the company had knowledge of specific cost increases on various dates within a period of just over a year but failed to disclose that information to the ASX. While not disclosing information regarding the increased cost of the facility beyond the level initially announced, the company continued to make announcements concerning the progress of construction.
65 The second contravention in Chemeq arose from the company's failure to tell the ASX information about the limited significance of a patent (which meant that the company's commercial position had not been materially changed by the grant of that patent). The failure to disclose that information occurred against the backdrop of the company having made an announcement to the ASX that the patent had been obtained.
66 In considering the appropriateness of the penalties proposed by the parties, French J stressed, in finding that a penalty at the higher end of the range was appropriate for the first contravention:
(a) the importance of the construction of the relevant facility to the company, which could not produce commercial quantities of its product until that facility was complete;
(b) the context in which the information concerning construction costs was not disclosed, which included the public announcement of the original cost and the making of further announcements regarding the progress of construction (ie use of the ASX to announce good, but not bad, news);
(c) the contravention, while not the result of deliberate or reckless conduct, could not be dismissed as mere carelessness;
(d) the absence of effective compliance systems; and
(e) responsibility for the contraventions being found at the most senior levels of the company (directors and officers were kept informed of cost overruns and announcements concerning construction progress, but not cost overruns, were made).
67 The second contravention was less serious. The contravention arose from the company's initial announcement regarding the patent overstating its significance, contributing to an increase of 58% in the market price of Chemeq's shares. A corrective announcement was made two days later, but not until after a query was received from the ASX.
Australian Securities and Investments Commission v Southcorp Ltd (No 2) (2003) 130 FCR 406
68 In Southcorp, the company contravened s 674(2) when an employee sent an email to several analysts disclosing information about the company's likely sales and gross profit during the 2003 financial year. The email was sent at about 4.29-4.30pm on 18 April 2002, and several analysts then issued updated reports before trade opened on 19 April. The company's securities were placed in a trading halt (at the company's request) at 1.07pm on 19 April. A corrective announcement was made after the market closed on 19 April. ASIC and Southcorp jointly submitted that a penalty of $100,000 was appropriate. At the time the maximum penalty was $200,000. The Court imposed a penalty at the proposed level.
Australian Securities and Investments Commission v Macdonald (No 12) (2009) 73 ACSR 638
69 In Macdonald (No 12), the Court considered the penalties to be imposed on two companies in the James Hardie group, JHIL and JHINV. Amongst other contraventions, JHIL was found to have contravened the former continuous disclosure provisions (s 1001A(2)) in February 2001 by negligently failing to notify the ASX of information concerning aspects of the restructure of the James Hardie group and its asbestos liabilities. ASIC did not seek pecuniary penalties against JHIL. The other company, JHINV, was found (again, amongst other contraventions) to have breached the new continuous disclosure provision, s 674(2), from late March to the end of June 2003 by failing to disclose to the ASX information concerning the transfer of JHIL out of the James Hardie group of companies.
70 In considering the pecuniary penalty to be imposed on JHINV, the Court determined that a pecuniary penalty of $80,000 would be imposed, negligent conduct being involved.
FACTORS CONSIDERED
71 I have taken the following significant factors into account in determining penalty.
Newcrest's size and financial position
72 Newcrest is the one of the world's largest gold mining companies. The financial position of Newcrest as at 30 June 2013 was as follows:
(a) total sales revenue was $3.775 billion;
(b) earnings before interest, tax, depreciation and significant items was $1.367 billion;
(c) net assets were $10.085 billion;
(d) number of issued shares was 766,510,971; and
(e) market capitalisation was approximately $7.565 billion (based on a closing price of $9.87).
73 It could be argued that even a $1,000,000 penalty for each contravention (the maximum this Court could impose) may not be sufficient specific deterrence, in view of Newcrest's size and financial position. However, in considering penalty, as I have indicated, the Court must view the potential range of conduct that may occur, including mitigating factors. This is not a case where ASIC has alleged that Newcrest (the corporate defendant) knowingly or intentionally contravened its continuous disclosure obligations. I am also satisfied that Newcrest took its continuous disclosure responsibility seriously. Further, there is no suggestion that there was a systemic problem within Newcrest as to continuous disclosure obligations.
Market impact and prejudice to investors
74 During the period of the First Contravention:
(a) The volume of Newcrest shares traded on market was over 40 million shares; and
(b) The value of Newcrest shares traded on market was over $600 million (being the daily VWAP multiplied by the volume of shares traded).
75 The announcement that Newcrest expected gold production to be at a level which was materially lower than analysts' consensus figures would have led to a fall in the share price.
76 In relation to the Second Contravention, disclosure of the capex information by itself would have had only a limited impact on the price of Newcrest's shares. The price impact of disclosure of that information to the market by the 7 June announcement cannot be isolated from the price impact of the disclosure of other information by that announcement, including very significant asset impairments.
77 As price-falls referable to each piece of information were delayed by reason of the two contraventions, it may be inferred that some persons may have acquired securities in the period between 28 May (First Contravention) or 5 June (Second Contravention) and 7 June at a price that was higher than the price the securities would have traded at had the total production information been disclosed on 28 May and the capex information on 5 June. Disposers of shares in this period would not have suffered any damage as it is not suggested that the price of the securities was depressed in that period.
Impact on market integrity
78 Selective disclosure to analysts can generate confusion and a loss of faith in market integrity: other material information was also disclosed in the 7 June announcement, including significant asset impairments. Newcrest's disclosures involved many of the large broker firms, created market "[s]peculation and rumour" (see Southcorp at [36]), during the period of the contravention from 28 May 2014 to the morning of 7 June 2014. This resulted in significant media attention following the 7 June announcement, which was apt to cause a loss of confidence in the market.
Compliance policies and procedures
79 Prior to the contraventions occurring, Newcrest had written policies and procedures to manage its continuous disclosure obligations. The continuous disclosure policy provided for the Head of Investor Relations to be the sole point of contact with analysts and investment advisers, on a day to day basis, subject always to the Managing Director and the Finance Director having authority to do so. Although the situation arose by reason of Mr Warner being located in New York, Mr Cole's contact with analysts was not consistent with this aspect of Newcrest's policy. Newcrest's policy also provided that "[a]ll significant meetings and briefings conducted pursuant to the Investor Relations program must be attended by at least one Newcrest person in addition to the presenter so that the nature and content of what was discussed can be verified", and required that a record be kept of all substantive discussions, meetings and briefings and placed on file with the Head of Investor Relations. These aspects of the policy were also not complied with.
80 After the events in question, Newcrest recognised the need to examine its continuous disclosure and investor relations processes and practices. Newcrest commissioned an independent review of its disclosure and investor relations policies and practices. Newcrest released the independent review to ASX on 5 September 2013, and has since made changes to its policies and procedures following the recommendations contained in the report. That process led to:
(a) the establishment of the Disclosure Committee (comprised of the Managing Director, Finance Director, General Counsel and Company Secretary, and Executive General Manager of External Affairs), which has delegated authority for making and executing disclosure decisions (save for matters expressly reserved to the board and approval of routine or incidental releases) and overseeing investor relations functions; and,
(b) the approval by the board on 13 February 2014 of revised and restructured policies, in the form of the publicly available Market Disclosure Policy and the internal Market Releases and Investor Relations Policy and Media and External Communications Policy.
The level of management involved and circumstances in which the contraventions occurred
81 Newcrest's senior management was put on notice that Cole intended to disclose the total production information to analysts. Similarly, Newcrest's senior management was put on notice that Cole had disclosed market sensitive information that was not public. ASIC does not allege that Newcrest knowingly or intentionally contravened its continuous disclosure obligations.
Cooperation with the regulator and the making of admissions
82 Newcrest has cooperated fully with ASIC in its investigations in relation to Newcrest's contraventions and has admitted the First and Second Contraventions.
CONCLUSION
Penalty
83 I consider that a penalty of $800,000 for the First Contravention is appropriate. A penalty at that level lies towards the higher end of the scale of contraventions, while accepting that there are mitigating factors that make a penalty at the statutory maximum inappropriate.
84 As to the proposed penalty of $400,000 for the Second Contravention, at the hearing I raised with the parties whether this figure was appropriate or within the appropriate range. I am satisfied that the penalty of $400,000 is appropriate. The second contravention lies far lower on the scale than the First Contravention. It involved the disclosure of information that was less sensitive, the disclosure was only made to two analysts, the time between the contravention, the release of the 7 June announcement was shorter, and, senior management did not receive any emails that might have alerted Newcrest to the contravention at an earlier point in time.
85 I do consider the penalty reflects the importance of a system of continuous disclosure to promote confidence in the integrity of the Australian capital markets. It is particularly important to encourage the giving to the market timely indicators of corporate performance. Mindful that the maximum penalty is $1,000,000, and the mitigating factors in favour of Newcrest, I consider that $400,000 penalty is the appropriate penalty. This amount provides a general deterrence, whilst at the same time recognising the mitigating factors relied upon by Newcrest (and ASIC).
86 I have also considered the 'totality principle'. I consider that the combined penalty of $1,200,000 for both Contraventions is appropriate in light of my consideration of the factors to take into account in assessing the overall conduct of Newcrest. It is important to recall the maximum penalty for the two contraventions is $2,000,000. Further, the penalty is in excess of any previously imposed for conduct under the continuous disclosure provisions.
87 Both penalties give appropriate weight to general deterrence as the primary consideration in fixing the penalty. These are significant penalties keeping in mind the maximum penalty available. The legislature has prescribed the maximum penalty. Within the confines of the maximum penalty of $1,000,000 for each contravention, the penalties are such to send a strong message to market participants to be mindful of the care and caution needed when interacting with analysts. These penalties also reinforce the message that equal access to market sensitive information is paramount in ensuring that markets operate on an informed, and equally informed, basis.
88 Therefore, for the foregoing reasons, I will make orders as follows:
THE COURT DECLARES THAT:
1. The defendant ('Newcrest') contravened section 674(2) of the Corporations Act 2001 (Cth) ('the Act') at and from 12.05pm on 28 May 2013 to 9.19am on 7 June 2013 by failing to notify the Australian Securities Exchange ('the ASX') that Newcrest management expected total gold production for financial year 2014 to be approximately 2.2 to 2.3 million ounces.
2. Newcrest contravened section 674(2) of the Act at and from 5 June 2013 to 9.19am on 7 June 2013 by failing to notify the ASX that Newcrest management expected Newcrest's capital expenditure figure for financial year 2014 to be approximately AU$1 billion.
AND THE COURT ORDERS THAT:
3. Newcrest pay the Commonwealth a pecuniary penalty pursuant to section 1317G(1A) of the Act in respect of the first declared contravention of $800,000.
4. Newcrest pay the Commonwealth a pecuniary penalty pursuant to section 1317G(1A) of the Act in respect of the second declared contravention of $400,000.
5. Newcrest pay the plaintiff's party and party costs of the proceeding.
I certify that the preceding eighty-eight (88) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton.
Associate:
Dated: 11 July 2014
ANNEXURE 'A'
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Deputy Commissioner of Taxation v Warrick (No 2) [2004] FCA 918
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FEDERAL COURT OF AUSTRALIA
Deputy Commissioner of Taxation v Warrick (No 2) [2004] FCA 918
TAXATION β income tax β recovery action β application for summary judgment β defence and counterclaim β challenge to validity of amended assessments and penalty notices β alleged formal defects β alleged jurisdictional error β breach of natural justice β want of bona fides β improper purpose β production of certified copies of assessments and evidentiary certificate - operation of privative clause β scope of judicial review β clause effective β no arguable defence β summary judgment awarded β stay of proceedings or execution β objection lodged β failure to determine objections β no satisfactory explanation β stay of execution to enable deemed refusal to operate and Part IVC review or appeal proceedings to be instituted
CONSTITUTIONAL LAW β Judiciary Act 1903 (Cth ) β s 78B β whether proceedings involve a matter arising under the Constitution or involving its interpretation β unarguable plea β no obligation to issue s 78B notices β no obligation to stay proceedings
Taxation Administration Act 1953 (Cth) s 14ZY, s 14ZYA, s 14ZZ, s 255-1, s 255-5, s 255-45, s 255-50
Income Tax Assessment Act 1936 (Cth) s 6(1), s 166, s 167, s 169, s 170, s 175, s 175A, s 177
Administrative Decisions (Judicial Review) Act 1977 (Cth) s 13
Income Tax Regulations 1936 reg 172
Federal Court Rules O 20
Deputy Commissioner of Taxation v Warrick [2004] FCA 488 cited
Caterpillar Inc v Sun Forward Pty Ltd (1996) IPR 411 cited
CLC Corporation v Cambridge Gulf Holdings NL [1997] FCA 236 cited
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 cited
Webster v Lampard (1993) 177 CLR 598 cited
FJ Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 cited
Deputy Commissioner of Taxation v Richard Walter Pty Limited (1995) 183 CLR 168 applied
R v Hickman; Ex parte Fox and Clinton (1945) 70 CLR 598 cited
R v Commissioner of Taxation (WA); Ex parte Briggs (1986) 12 FCR 301 cited
Plaintiff S157/2002 v Commonwealth of Australia (2003) 211 CLR 476 cited
Applicant WAFV of 2000 v Refugee Review Tribunal (2003) 125 FCR 351 cited
Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (1999) 167 ALR 303 cited
Snow v Deputy Commissioner of Taxation (1987) 14 FCR 199 cited
DEPUTY COMMISSIONER OF TAXATION v WAYNE PATRICK WARRICK
W46 OF 2004
FRENCH J
13 JULY 2004
PERTH
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY W46 OF 2004
BETWEEN: DEPUTY COMMISSIONER OF TAXATION
APPLICANT
AND: WAYNE PATRICK WARRICK
RESPONDENT
JUDGE: FRENCH J
DATE OF ORDER: 13 JULY 2004
WHERE MADE: PERTH
THE COURT ORDERS THAT:
1. There be judgment for the applicant in the sum of $1,429,791.03 together with further general interest charges to be assessed.
2. There be a stay of execution on the judgment until 28 January 2005 or such earlier date as may be ordered.
3. There be liberty to apply as to the assessment of the further general interest charges and the lifting of the stay of execution.
4. The respondent's counterclaim be dismissed.
5. The respondent pay the applicant's costs of the application for summary judgment and of the proceedings.
6. The applicant pay the respondent's costs of the motion for a stay of proceedings.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY W46 OF 2004
BETWEEN: DEPUTY COMMISSIONER OF TAXATION
APPLICANT
AND: WAYNE PATRICK WARRICK
RESPONDENT
JUDGE: FRENCH J
DATE: 13 JULY 2004
PLACE: PERTH
REASONS FOR JUDGMENT
Introduction
1 A Deputy Commissioner of Taxation instituted proceedings against a taxpayer for recovery of unpaid income tax and penalties on 18 September 2003 in the Supreme Court of Western Australia. The proceedings have been transferred to the Federal Court. The Deputy Commissioner has applied for summary judgment. The taxpayer seeks to defend that application by arguing that the assessments relied upon by the Deputy Commissioner are invalid and should be set aside. Formal defects, breach of the rules of natural justice, want of bona fides and improper purposes are alleged against the Deputy Commissioner by the taxpayer.
2 For the reasons which follow, the matters raised by the taxpayer do not provide an arguable defence to the recovery action and the Deputy Commissioner is entitled to summary judgment. However because the Australian Taxation Office ('ATO') has delayed in resolving the taxpayer's objections to the assessments without any satisfactory explanation, execution of the judgment will be stayed until 28 January 2005. The taxpayer may still pursue his contentions about the correctness of the assessments through the appeal processes provided for in Pt IVC of the Taxation Administration Act 1953 (Cth ) ('TAA').
Procedural History
3 On 11 December 2002, the Commissioner of Taxation issued five notices of amended assessments of income tax to Wayne Patrick Warrick. The notices related to the income years ended 30 June 1998 through to 30 June 2002 inclusive. The amounts of the assessments included amounts for understatement penalty and interest.
4 On 19 December 2002, Mr Warrick's solicitors wrote to the ATO seeking information about the factual and legal bases for the amended assessments and, without admitting liability, requesting an extension of time for the payment of the tax assessed.
5 On 20 December 2002, two notices of assessment of penalty for having a tax shortfall issued to Mr Warrick in respect of the years ended 30 June 2001 and 30 June 2002.
6 Objections to all the assessments were lodged. The objection to the assessment for the year ended 30 June 1998 was lodged on 21 February 2003. The objections to the other assessments were lodged on 8 July 2003. On 4 August 2003, the ATO wrote to Mr Warrick's solicitors refusing the request for a deferment of legal action and requiring payment of $1,409,634.57 within seven days of the date of the letter. The objections have not yet been determined.
7 On 18 September 2003, the Deputy Commissioner of Taxation issued a writ of summons out of the Supreme Court of Western Australia claiming a total amount of $1,429,791.03 against Mr Warrick together with further general interest charges pursuant to s 204 of the Income Tax Assessment Act 1936 (Cth) ('ITAA 1936') and s 298-25 of the TAA. On 19 November 2003, Mr Warrick filed a defence and counterclaim in the Supreme Court.
8 In respect of each year of income Mr Warrick admitted that he had not paid the tax assessed but denied that the Deputy Commissioner had 'properly or validly made an assessment of income tax according to law'. He alleged that by reason of those matters he was not obliged as a matter of law to pay the tax or any part of it. He alleged that each of the disputed assessments had been issued to him on the basis of taxable income purportedly received when in fact no such taxable income was ever derived for the purposes of the ITAA 1936 in respect of any of the relevant years. He also alleged that none of the disputed assessments reflected any rational assessment of his income tax liability. By virtue of those matters and others he asserted that each of the disputed assessments was respectively void, invalid and not 'an assessment' as contemplated by the ITAA 1936.
9 Mr Warrick further pleaded that none of the disputed assessments was issued 'in any bona fide exercise or purported exercise of powers under the Act'. This allegation was particularised. The particulars will be referred to later. He further alleged that none of the assessments was issued 'for any proper purpose under the Act' and that they were all issued 'for an ulterior purpose'. Again, particulars of the ulterior purpose were provided.
10 Mr Warrick went on to refer to the lodgment of notices of objection against each of the disputed assessments and the failure or refusal of the Commissioner to make a determination in relation to any of the objections. In respect of the two assessments of administrative penalties the defence raised similar grounds for their invalidity.
11 Mr Warrick also asserted in his defence that the institution and continuation of the recovery action was an abuse of process in circumstances where each of the disputed assessments is null and void, and that the writ was issued at a time when the objections to the assessments were undecided.
12 The pleas going to the validity of assessments and the abuse of process were repeated by reference in the counterclaim. The relief claimed in the counterclaim was a declaration that the assessments are each null and void, a stay of the proceedings until determination of the objections and alternatively, in the event the objections are not upheld, a stay until determination of appeals to be lodged in the Administrative Appeals Tribunal.
13 On 24 December 2003, the Deputy Commissioner of Taxation filed an application in the Supreme Court seeking summary judgment pursuant to O 14 r 1 of the Supreme Court Rules. On 12 February 2004, consent orders were made transferring the proceedings to this Court. On 23 April 2004, a declaration was made that the proceedings had been validly cross-vested pursuant to the consent order β Deputy Commissioner of Taxation v Warrick [2004] FCA 488. Directions were made for the hearing of the summary judgment application. The application was set down for hearing on 4 June 2004. On 3 June 2004, Mr Warrick filed a motion seeking a stay of proceedings pursuant to O 20 r 2(1)(c) until the determination of his objections and penalty objections to the amended assessments.
The Commissioner's Evidence
14 The Deputy Commissioner's application was supported by the affidavit of Victor John Eikelboom, sworn 24 December 2003, which exhibited copies of the notices of assessment as to income tax and the assessment of administrative penalties, certified by Deputy Commissioner Holland as true copies. Also exhibited to the affidavit was an evidentiary certificate under s 255-45 of Schedule 1 of the TAA. Bearing a facsimile signature of Deputy Commissioner Holland it certified that notice of the assessments for the years ended 30 June 1998 to 30 June 2002 'were, or are taken to have been served on Wayne Patrick Warrick under a taxation law...'. Notices of amounts of administrative penalties imposed pursuant to s 284-75(1) of the TAA for the years ended 30 June 2001 and 30 June 2002 were also covered by the certificate. The certificate went on to state that the sum of $1,475,386.99 was, at 24 December 2003, a debt due and payable by Mr Warrick to the Commonwealth.
Mr Warrick's Evidence
15 Mr Warrick's affidavits of 28 May 2004 and 4 June 2004 set out a history of dealings and transactions to which the contested assessments relate and of his dealings with the ATO. The history is somewhat convoluted. As set out here it does not embody findings of fact but rather an account of the background which Mr Warrick claims is relevant to the determination of his liability and to the question whether he should be given leave to defend the action.
16 Mr Warrick is an accountant. In August 1992, he became bankrupt on a creditor's petition. He attributed the bankruptcy to claims against him which he could not meet and which arose out of a misappropriation of funds, by one of his former accounting partners, from the firm's trust account. He was discharged from bankruptcy in November 1995. He continued to work as a contract accountant after his discharge. In July 1996, he became the in-house accountant for a construction firm run by George Ongarezos, retaining a right of private practice. He had previously endeavoured to raise funds to acquire an accounting practice but was unable to do so because of his recent bankruptcy. Mr Ongarezos suggested to him that they should form a company to undertake construction work and also to acquire accounting practices which Mr Warrick could run. He considered that Mr Ongarezos had the financial resources to acquire accounting practices. They decided to set up a company called Queststyle Pty Ltd to undertake the enterprise. Queststyle was formed in late 1996. It acquired two accounting practices, one in Geraldton and one in Leederville.
17 By May 1997, Mr Warrick decided that the arrangement with Queststyle and Mr Ongarezos had become unbearable for a number of reasons. He was concerned that Queststyle would become insolvent. He spoke to a solicitor, Warwick Mowbray, whom he had known for about 15 years. He told him about his problems with Queststyle. Mr Mowbray told Mr Warrick that he had a colleague who was an accountant in Hong Kong with clients looking to invest or to get their funds out of Hong Kong because of the then impending changeover of control from the United Kingdom to the Peoples Republic of China. The accountant's name was Mr Alan Chueng. Mr Mowbray arranged an introduction with Mr Chueng.
18 In June 1997, Mr Warrick telephoned Mr Chueng and between June 1997 and March 1998 had a number of negotiations and discussions with him and another accountant in Hong Kong, Mrs Lillian Fung. As a result of his negotiations Mr Warrick received a letter of approval for a loan of $600,000. The letter signed by Mr Chueng, and dated 3 March 1998, was under the letterhead of 'Fortune House Management'. It said:
'Further to our recent discussions, we are pleased to confirm that we have successfully negotiated a personal loan facility to you for the amount of A$600,000.
Given Proof Enterprises Limited, the financier, will issue a formal offer letter for your acceptance prior to your drawdown of the loan.'
Two documents, described respectively as a Personal Guarantee and a Corporate Guarantee were executed on 18 March 1998. The first was executed by Mr Warrick and the second by his company, Swanway Enterprises Pty Ltd ('Swanway'). In each case the deed was executed by Given Proof Enterprises Limited ('Given Proof') as lender. Mr Warrick is the sole director of Swanway and has been since March 1996.
19 The first drawdown from the $600,000 loan was made on 18 March 1998 in the amount of $65,000 paid into Swanway's bank account. This money was applied to part payment of the purchase of an accounting practice in Geraldton by Kingprince Holdings Pty Ltd ('Kingprince'), a company of which Mr Warrick was a director, through which he operated his practice, and which traded as WP Warrick & Co. Subsequent drawdowns were made as follows:
Date Amount Recipient Purpose
13 July 1998 $ 45,000 Swanway Payment of balance of moneys required by Kingprince to acquire Geraldton practice.
6 September 1998 $175,000 Swanway Repayment of a loan owed by Ongarezos to acquire two accounting practices for Queststyle.
15 March 1999 $ 11,000 Swanway Kingprince for working capital.
23 June 1999 $ 12,000 Swanway Kingprince for working capital.
29 June 1999 $132,000 Unstated Purchase of accounting practice of Pass Newton.
17 September 1999 $ 50,000 Ralph Cooper Kingprince for further repayment of Ongarezos loan.
17 November 1999 $190,000 Swanway Advance to Warrick to acquire land at Ascot Waters on loan from Swanway.
20 On 1 March 1999, Mr Warwick sought the consent of Given Proof to borrow $400,000 from Challenge Bank. On 8 March 1999, Given Proof approved the proposed borrowing. Its approval was on condition that Kingprince would provide a corporate guarantee to Given Proof and that Mrs Warrick would provide Given Proof with a personal guarantee for the Given Proof loan facility. Kingprince and Mrs Warrick executed personal guarantees on 11 March 1999.
21 On 16 November 1999, Mr Warwick sought approval to increase the amount of the loan from Given Proof from $600,000 to $1.2 million. On 25 November 1999, Given Proof agreed to the increase subject to the granting of a registered debenture in its favour over the assets of Kingprince. On 31 December 1999, Kingprince executed a fixed and floating charge over its assets in favour of Given Proof. Drawdowns on the facility for the year ended 30 June 2001 were as follows:
Date Amount Recipient Purpose
19 September 2000 $254,000 Kingprince Acquisition of accounting practice in Carnamah.
10 October 2000 $ 90,000 Kingprince Acquisition of accounting practice in Geraldton.
11 April 2001 $ 39,500 Swanway Finance investment by Mrs Warrick in Grampian Olives project.
26 June 2001 $ 20,000 Kingprince Working capital.
22 Mr Warrick sought another increase in the facility with Given Proof to $1.75 million. He requested this increase on 12 June 2001. His stated object was to enable Swanway to acquire a 20% interest in a liquor store in Mindarie, operating as Mindarie Liquor Merchants. He offered by way of additional security an assignment of a partnership interest from himself to Given Proof. Given Proof responded on 17 August 2001 accepting the assignment of the partnership interest in Mindarie Liquor Merchants as additional security.
23 Drawdowns on the facility from Given Proof to the year ended 30 June 2002 were as follows:
Date Amount Recipient Purpose
20 September 2001 $190,000 Kingprince Acquisition by Swanway of interest in Mindarie Liquor Merchants' partnership.
13 May 2002 $ 80,000 Kingprince Acquisition of one third interest in Circuit Nightclub in Geraldton.
5 June 2002 $ 13,500 Kingprince Working capital.
According to Mr Warrick the various drawdowns described above were the only moneys advanced under the facility with Given Proof.
24 Mr Warrick described the accounting arrangements for the loan moneys. He said that as between Swanway, Kingprince and himself the loan from Given Proof which he had procured in his own name was treated as a loan made in the first instance to Swanway with Swanway then advancing the moneys to Kingprince or to Mr Warrick himself (in the case of the purchase of the Ascot Waters' land) or to his wife (in the case of her investment in something called the Grampian Olives' project). Mr Warrick did not have his own bank account at any time. He conducted his affairs by making payments using a credit card, with the credit card account paid out by Kingprince or by causing Kingprince to write out cheques reflected in the accounts of Kingprince, including his loan account with it. He recorded moneys lent by Given Proof as a loan to Swanway. It received the moneys. He did not receive any immediate benefit but at all times remained liable to the lender in terms of the original agreement.
25 On 2 November 2002, Mr Warrick repaid the sum of $290,000 to Given Proof. This came from the sale of his house at Noranda. In May 2003, he sold the Kingprince accounting practice in Geraldton to Westwood Accountants for $502,000. He repaid $300,000 to Challenge Bank and paid the balance to Given Proof. In June 2003, Kingprince sold the accounting practice in Carnamah. The sale of the Carnamah practice included the land and buildings on which it was conducted. He could no longer find the documents for this sale but said he believed they were in the Commissioner's possession as a result of the investigations which the Commissioner had carried out. The consideration for the sale of the Geraldton and Carnamah practices was in each case to be provided by way of payments over time which were fulfilled. All payments after settlement were paid to Given Proof. Subsequently Swanway disposed of its interest in the Mindarie Liquor Merchants' partnership and the Circuit Nightclub and from those sales proceeds of $200,000 were paid to Given Proof in reduction of the loan. Having given this account of his dealings with Given Proof, Mr Warrick then turned to the history of his dealings in investment products which were evidently structured to attract tax deductions for the benefit of the investors.
26 In 1997, Mr Warrick was introduced by Mr Mowbray to a product known as 'infomercial investments'. This was described to him as '... an investment in an information type documentary with a product advertising and marketing purpose'. It was to be produced for use on television in the American market. Mr Mowbray showed Mr Warrick a legal opinion which referred to the tax implications of the investment. He made an arrangement for Mr Warrick to meet with Peter Ambrosy, the project manager for the investments. Mr Warrick met Mr Ambrosy at his office in St Kilda. It was at this office that infomercials were to be filmed and edited.
27 Mr Warrick gave his own consideration to the cases and rulings referred to in Mr Mowbray's legal opinion and concluded that the infomercial investments could be of benefit to his accounting clients. He had received from Mr Ambrosy information memoranda concerning the infomercials and he left them in the waiting room of the Kingprince accounting practice. He attached a sheet to the memoranda which set out the cost of the project, the fees to be incurred and tax deductions which would be available to anybody making an investment in them. Kingprince was to charge a fee of 1.5% of the tax deduction actually obtained by its clients who entered into an infomercial investment. This would be charged once a return had been lodged with the ATO and an assessment issued. He never received any money himself on this basis. The only moneys that were received were received by Kingprince. The fees earned by Kingprince in the first year from clients who took up investments in infomercials were in the vicinity of $50,000 to $60,000. They were all paid to Kingprince and accounted for in its records and tax returns. In November 2001, there was an investigation by ASIC in relation to the marketing of the infomercials and other 'tax structured investments'. However, according to Mr Warrick, no further action was taken in this respect. He said that the opportunity presented by the infomercial investments lasted for about two years. Swanway itself invested in the products in the years ended 30 June 1997 and 30 June 1998. Subsequently he found that the ATO '... did not consider the tax advantages which had flowed from the Infomercial Projects to be supportable under the terms of the Income Tax Assessment Act ('Act')'. He denied in his affidavit that he had received any money in respect of the infomercial project investments from any other person by way of commission or otherwise.
28 In 1999, Mr Warrick was introduced, by Mr Don McGregor, to a 'tax structured investment' called 'Theme-Based Music Collaborations'. This was set up in the same way as the infomercial investments. He brought the product to the attention of Kingprince's clients in the same way as he had done for infomercial projects. Information memoranda were made available in the reception areas of the accounting practices carried on by Kingprince. Again, there was a sheet added prepared by either himself or Kingprince's staff showing the costs and benefits. Kingprince's fee for services in getting its client into the investment was 1.5% of any tax deduction payable in the same manner as the fee for the infomercial investments. In the event, the tax benefits were disallowed. Swanway invested in the Theme-Based Music Collaboration projects in the same way as it had done in the infomercial investments. Mr Warrick said he received no moneys from any source in relation to clients of Kingprince who invested in the music projects.
29 At the time that Kingprince's clients were investing in the Theme-Based Music Collaborations projects, Mr Warrick received a brochure or explanatory memorandum for something called the 'Venture Hedge Trading Fund'. This appeared to have come from Mr Chueng's address in Hong Kong. He had never discussed the Venture Hedge Trading Fund with Mr Chueng or with Ms Fung or anyone associated with them. The same went for the infomercial investments and the Theme-Based Music Collaborations investments. After receiving the documentation for the Venture Hedge Trading Fund he telephoned Mr Mowbray and discussed the taxation implications with him so far as they related to the payment of withholding tax. Mr Mowbray told him that withholding tax might not apply as part of the structure for the Venture Hedge Trading Fund would be deemed to be a loan in Australia. An accountant who worked for Kingprince, Mr Cassidy, arranged for some of the clients he controlled to invest in the Fund. None of the clients that Mr Warrick dealt with did so. Mr Cassidy received a fee, which was a fixed fee of maybe $1,000 for each client. Mr Warrick said that neither Kingprince nor he had received any amounts by way of fee, commission or otherwise in relation to the Venture Hedge Trading Fund.
30 In 2000, further documents were received at Kingprince's office, again from Mr Chueng's offices, regarding investments in the Dragon Asia Fund. Mr Warrick asked Mr Mowbray for a 'taxation opinion of Dragon Asia'. Mr Mowbray came to Perth and gave his views about the taxation implications of the Dragon Asia investment to some of Kingprince's clients and two other accountants who were also in attendance. Clients of Kingprince entered into investment with Dragon Asia. Mr Warrick left information memoranda or prospectuses for Dragon Asia in Kingprince's waiting room with an attached sheet setting out other information. Again, Kingprince charged its clients 1.5% of the tax benefit they obtained. Clients of Kingprince did enter into agreements with respect to Dragon Asia and Kingprince was paid fees. According to Mr Warrick these payments were recorded in the company's accounting records and also in its tax returns. He never received any moneys in person by way of commission or otherwise from any person or entity, including Given Proof. He said he had never discussed Dragon Asia with Mr Chueng or with Ms Fung.
31 Swanway invested in Dragon Asia for the year ended 30 June 2000. As with the infomercial project, the deductions claimed in Dragon Asia were disallowed. Mrs Warrick has lodged an objection to an assessment she received in that respect.
32 Sometime after 30 June 2000, Mr Warrick was introduced to an olive growing project known as 'Grampian Olives' by Mr Mil Hanna. He was told by Mr Hanna that the promoter of Grampian Olives was seeking a private ruling from the ATO for one of the investors. Mr Warrick was later told that the Grampian Olives project obtained a positive product ruling in June 2001. Again, he promoted the investment scheme by leaving information memoranda in Kingprince's waiting room with a sheet attached setting out costs and benefits of entering into the project and Kingprince's fee which was fixed at 1.5% of the tax deduction obtained by its client. There was a financier involved in the scheme, known as Saville Finance Pty Ltd.
33 Mr Warrick was told by someone from Saville Finance that money raised for the project had to be deposited in bank accounts in Hong Kong. At that time he held money for clients invested in the project in Swanway's trust account. Kingprince did not have a trust account and he always used Swanway's trust account to hold money on behalf of Kingprince's clients. He said he was not going to release funds until such time as a favourable product ruling was obtained. He was also not prepared to send Kingprince's clients' money to Hong Kong unless he had some control over it by way of being a signatory on the bank account into which the money was deposited. To organise this he flew to Hong Kong, at Kingprince's expense, in March or April 2001 and met with Mr Chueng and Ms Fung. He was advised that it would be very difficult for him to become a signatory on bank accounts in Hong Kong. In the event he arranged with Mr Chueng that Mr Chueng would act as signatory for a fee to be paid by each individual investor. Mr Warrick told Mr Chueng, who agreed, that a full audit trail should be provided including all bank statements, invoices and other documents evidencing the moneys coming into the bank account from the investors.
34 Following the issuing of a positive product ruling on the Grampian Olives project, Mr Warrick said he arranged for moneys to be transferred from Swanways' trust account to the Hong Kong bank accounts. The only money Kingprince received was the 1.5% fee which was recorded in its accounting records and its tax returns. Mr Warrick said he received no moneys whether by way of commission or otherwise from anyone in relation to the Grampian Olives project. His wife had also invested in it. The tax deductions claimed under the project have been disallowed by the ATO.
35 In October 2000, Kingprince's premises were searched by officers of the ATO. Mr Warrick was visited by Paul Robb, an investigator from the ATO who told him he was going to go through all Kingprince's records. The search took two days. Mr Warrick said he did not recall ever receiving a receipt for copies of documents which were taken. He did claim privilege on some of them and these were put in a sealed envelope to be delivered to the Australian Government Solicitor. He called Mr Mowbray to get advice about his own rights and Kingprince's rights. However Mr Mowbray could not talk to him because his offices in Melbourne were also being searched by officers of the ATO.
36 In December 2000, Mr Warrick underwent an examination under s 264 of the ITAA 1936 in which questions were put to him by officers of the ATO. He heard nothing further following that examination until he received a notice to attend another examination under s 264, which he attended and which was held on 17 May 2002.
37 Following the second examination he heard no more until he and his wife received letters from the ATO dated 2 December 2002. The letter addressed to Mr Warrick stated that a review of his income tax returns for the years ended 30 June 1998 to 30 June 2002 had been finalised. The findings of the review resulted in increases of his business income by the following amounts:
1. Year Ended 30 June 1998 $123,000
2. Year Ended 30 June 1999 $375,000
3. Year Ended 30 June 2000 $295,000
4. Year Ended 30 June 2001 $403,500
5. Year Ended 30 June 2002 $270,000
The letter recorded that alternatively and without prejudice to anything contained in the letter, the Commissioner was of the opinion that for the years ended 30 June 1998 to 30 June 2002 tax had been avoided due to fraud or evasion:
'As a result, the payments from Given Proof Enterprises Ltd have been included in your business (non-primary production) income in each of the years under review as stated above.'
Adjustment sheets and tax shortfall penalty calculations were attached. The letter concluded by advising that relevant notices of assessment including penalties and general interest charges to reflect the adjustments would be issued under separate cover. In each case the adjustment sheet included as the item by which his income was increased 'Funds from Given Proof Enterprises Ltd considered to be commission income'.
38 Mrs Warrick received a similar letter dated 2 December 2002. It notified increases in her income for the relevant financial years on the basis of increasing distributions to her from the LH Warrick Family Trust No 2 in each of those years. It was also claimed by the Commissioner that for the years ended 30 June 1998 to 30 June 2001 tax had been avoided due to fraud or evasion. Adjustment sheets were attached to the letter addressed to Mrs Warrick.
39 Mr Warrick contended that the claims against himself and Kingprince were in effect that the loan from Given Proof was not a loan but somehow income. He inferred from questions asked of him during the course of his second examination that the Commissioner might consider those loans to represent commissions on either all or some of the projects in which his clients invested including the infomercial project, the music project, Dragon Asia and the Grampian Olives project.
40 On 6 December 2002, departure prohibition orders were issued under the TAA to both Mr Warrick and his wife. The order made against Mr Warrick and signed by a delegate of the Commissioner was, in the relevant parts, in the following terms:
'Pursuant to sub-section 14S(1) of the Taxation Administration Act 1953, I Suzette Laker, delegate of the Commissioner of Taxation, believing on reasonable grounds that it is desirable to do so for the purposes of ensuring that Wayne Patrick Warrick, a person subject to the tax liability referred to in the Schedule, does not depart from Australia for a foreign country without β
(a) wholly discharging the tax liability; or
(b) making arrangements satisfactory to the Commissioner of Taxation for $1,341,057.99 the tax liability to be wholly discharged
hereby prohibit the departure of Wayne Patrick Warrick from Australia for a foreign country.'
A schedule then set out details of asserted tax liability for each of the financial years from 1998 through to 2002.
41 Notices of amended assessments issued on 11 December 2002 to both Mr Warrick and his wife. The adjustment sheets attached indicated that payments received from Given Proof were considered to be commission income. Mr Warrick caused objections to the assessments to be lodged. Although in his affidavit he says the objections were lodged on 20 February 2003, it appears from the exhibits to the affidavit, that the only objection lodged on that date was an objection in respect of the 1998 assessment. The remaining objections were lodged on 8 July 2003.
42 Considerable correspondence was exchanged between the solicitors then acting for Mr and Mrs Warrick, Minter Ellison, another firm Halsey & Associates who were assisting Minter Ellison in the matter, and the ATO. The correspondence from Minter Ellison and from Halsey & Associates included:
1. A request under s 28 of the Administrative Appeals Tribunal Act 1975 (Cth) for reasons for the decision to issue departure prohibition orders.
2. Requests for reasons for the decisions to adjust the Warricks' taxable income for the years ended 30 June 1998 to 30 June 2002 including findings on material questions of fact referring to the evidence on which such findings were based.
3. Requests for copies of any supporting documentation, including any internal position papers prepared by the ATO in relation to the adjustments.
4. Requests for extensions of time to pay the tax assessed under the amended assessments until the objections to be lodged in relation to those assessments could be determined.
5. A request under the Freedom of Information Act 1982 (Cth) for access to documents concerning the following:
(a) adjustment of Mr Warrick's taxable income in the relevant years;
(b) the issue of the amended assessments;
(c) the imposition of penalties in the amended assessments;
(d) the opinion of the Commissioner that for the relevant years tax had been avoided due to fraud or evasion;
(e) departure prohibition orders dated 6 December 2002 issued by Suzette Laker, Delegate of the Commissioner of Taxation under the cover of a letter from Neil Mann, Deputy Commissioner of Taxation, Small Business β International to the Warricks also dated 6 December 2002.
A copy of any position paper prepared in relation to the amended assessments was also requested.
43 On 3 January 2003, a Deputy Commissioner of Taxation wrote to the Warricks' solicitors in relation to their requests for further information about the amended assessments stating:
'We advise that as the nature of the information was not specifically stated in your request, we are not obliged under the TAA to provide the information requested. However we have attached copies of the notice of amended assessments that were earlier sent to your clients. These documents have stated the reasons why we had adjusted your clients' taxable income for the financial years stated above. They also provide you with details of the reasons for the penalties imposed.'
44 On 10 March 2003, Mr and Mrs Warrick's solicitors wrote to the Senior Assistant Commissioner International at the ATO complaining about the behaviour of officers of the ATO and their refusal to provide sufficient detail for their clients to draft objections with any confidence.
45 A statement of reasons issued on 25 March 2002 for the decisions to issue departure prohibition orders against Mr Warrick and his wife. The letter covering the reasons was signed by Suzette Laker. The statement of reasons was expressed to be pursuant to s 13 of the Administrative Decisions (Judicial Review) Act 1977 (Cth). Under the heading 'Findings on Material Questions of Fact and Evidence on which the Findings were Based', she said:
'8. The ATO discovered that funds were transferred a number of times between 1998 and 2002 from a company called Given Proof Enterprises to Mr Warrick. These transfers totalled $1,466,000 and were done via entities that Mr Warrick fully controls. Mr Warrick claims that these amounts are loans and are not assessable to him.
9. There is sufficient evidence that the transfer of funds was not a loan but a commission for promoting various arrangements to which Part IVA of the Income Tax Assessment Act 1936 ("ITAA 1936") applies. These amounts are therefore assessable to Mr Warrick under section 6-5 of the Income Tax Assessment Act 1997.
10. On 2 December 2002 Amended Notices of Assessment under section 167 of the ITAA 1936 for the 1998, 1999, 2000, 2001 and 2002 financial years were issued.
11. As a result of these amendments the following debts were owed to the Commissioner by Mr Warrick:
Year ended 30 June 1998 $ 120,939.60
Year ended 30 June 1999 $ 382,500.55
Year ended 30 June 2000 $ 274,549.10
Year ended 30 June 2001 $ 351,266.24
Year ended 30 June 2002 $ 211,802.50
$1,341,057.99
12. As at 6 December 2002, ATO records indicate that this tax liability had not been discharged.
13. The ATO has information from sources such as ASIC (Australian Securities and Investment Commission) and the Registrar of Titles, Western Australia indicate that Mr Warrick (and entities that he controls) have sufficient assets to discharge this tax liability.'
46 The reasons went on to deal with the evidence of Mr Warrick's alleged intention to leave Australia without discharging his obligations. It referred to advice he gave to his business banking manager that he planned to sell his practice by 30 June 2003 and move to Bali, take up residence and purchase a business there. He also allegedly told the manager that he planned to purchase a villa in Bali. Reference was made to Mr Warrick's previous bankruptcy and an objection which had been lodged by his trustee to his discharge on the ground that he had failed to disclose a liability to the trustee and had left Australia and not returned. It referred to his frequent travel to Bali in recent years and summarised records from the Department of Immigration and Multicultural Affairs. Under the heading 'Reasons for Decision' it was said:
'17. Mr Warrick has a substantial tax debt. He has sufficient assets to fulfil his tax obligations.
18. There is evidence that Mr Warrick intends to sell his practice and leave Australia by 30 June 2003. He has taken steps to carry out this plan.
19. Mr Warrick has been identified as a promoter of various arrangements to which Part IVA of ITAA 1936 applies. He has used tax haven countries as a conduit for collecting payments from investments and diverting income to himself through related entities. Evidence indicates that Mr Warrick has sufficient funds to maintain a comfortable lifestyle overseas.
20. For the reasons outlined above, I believe that Mr Warrick intends to leave Australia without discharging his tax liability nor making arrangements for the tax liability to be wholly discharged before he departs Australia.
21. Accordingly, I made the decision to issue the notice.'
47 In May 2003, default assessments were raised against Kingprince under s 167 of the ITAA 1936. Details of the default assessments were summarised in a letter dated 2 May 2003. They involved the assessment of taxable income for each of the financial years 30 June 1998 to 30 June 2001 in precisely the same amounts as had been raised against Mr Warrick as set out in the letter of 11 December 2002 from the ATO. For the year ended 30 June 2002 the income assessed for Kingprince was $283,500. The income assessed against Mr Warrick in that year was $270,000.
48 On 29 May 2003, Minter Ellison on behalf of Mr Warrick and Kingprince Holdings made a complaint to the Commonwealth Ombudsman about the conduct of the ATO. Their letter referred to the assessments issued to Kingprince as 'amended assessments'. So too did Mr Warrick's affidavit. However it appears from copies of the assessments exhibited to Mr Warrick's affidavit that they were in fact default assessments under s 167 of the ITAA. In the letter to the Ombudsman Mr Warrick's solicitors asked the Ombudsman to encourage the ATO to respond to their request for reasons so that they could prepare objections to the Kingprince assessments for 1998 and subsequent years which had to be lodged by 11 July 2003.
49 Departure prohibition orders were issued to Mr Warrick and his wife on 30 May 2003 and superseded those which had earlier issued. Again reasons were requested for the departure prohibition orders. On 3 July 2003, the ATO confirmed that the reasons relied upon to support the orders of 6 December 2002 were also relied upon for the issue of the later orders.
50 The ATO wrote to Mr and Mrs Warrick's lawyers on 24 June 2003 in relation to the request for the deferment of legal action. At that time objections had only been lodged in respect of the amended assessment for the year ended 30 June 1998. The solicitors were asked to provide details of their clients' asset and income position by 11 July 2003. They were also informed that unless objections in respect of the financial years ended 30 June 1999 to 2002 were lodged by 11 July 2003 the amounts owing in respect of those years would be treated as not being subject to dispute.
51 On 30 June 2003, the Taxation Ombudsman informed the solicitors for the Warricks that their letters of 1 May 2003 and 29 May 2003 had been referred to his office for consideration. He had decided at that stage to make preliminary inquiries of the ATO including the possibility of according priority attention to requests made pursuant to the Freedom of Information Act and for extended time to pay the tax. A further letter from the ATO dated 2 July 2003 said the taxation debts for the years ended 30 June 1999 to 2002 in respect of Mr and Mrs Warrick would be treated as though subject to dispute provided the objections were lodged by 25 July 2003. They still required details of the asset and income position to be forwarded by 11 July 2003.
52 On 25 July 2003, the ATO acknowledged receipt of letters dated 4 July 2003 objecting to the assessments issued to Mr and Mrs Warrick for the years ended 30 June 1999 to 30 June 2002 inclusive. In its acknowledgment it said:
'In accordance with the Taxpayers' Charter, a decision on your objection is to issue normally within 56 days of receipt of your letter, unless we determine that we need more information and/or we are unable to reply within this time because of, for example, the complexity of the matter.
As the present matter is extremely complex, it is expected that we will need more time to reply.'
The letter went on to state that the tax assessed was payable by the due date even if disputed. The request for deferment of legal action remained under consideration.
53 On 4 August 2003, the ATO wrote to Minter Ellison stating that the Commissioner would not defer collection action in respect of the assessments raised against Mr Warrick. The letter stated:
'After considering all the information currently available, including the details provided by you on 4 July 2003, the Commissioner is of the view that to defer collection action pending the outcome of the objections would pose a significant risk to the revenue. Pursuant to the ATO Receivables Policy, paragraph 28.4.2, your request for deferment has been refused.
Payment of $1,409,634.57 is required within 7 days of the date of this letter.'
Legal action was threatened in the event that payment was not made.
54 On 8 August 2003, the solicitors for the Warricks were sent preliminary estimates of the costs of complying with their Freedom of Information Act requests. In the case of Mr Warrick the estimate was said to be $77,244.17. This was based on the following:
'Search and retrievable time.
295 hours and 50 minutes at $15 per hour $ 4,437.50
Decision making time 3,615 hours and 20
Minutes at $20 per hour $72,306.67
Photocopying 5,000 pages at 10 cents per
Page $ 500.00
Total $77,244.17'
In the case of the request relating to Mrs Warrick the estimate was $19,260.
55 According to Mr Warrick, he was unaware of anything in any of the documents taken by the ATO from any of Kingprince's premises which showed that moneys paid by Given Proof were anything other than a loan. He said:
'Of course, I am unaware of what other documents they have got from other parties, save I can say that as the monies were a loan, there can be no authentic documents or credible evidence in existence to show that it was in commissions as alleged because it is simply not the fact.'
He referred to his decision not to pursue the FOI requests because of the amount the ATO wanted to be paid. He characterised this as absolutely prohibitive and alleged that there had been no bona fide attempt made to identify what was really relevant. He went on to say that as at the date of swearing his affidavit there had been no decision on his objections nor those of Kingprince which had been outstanding for over 12 months. He said:
'The ATO has told me the matter is 'very complex' but I have not seen or heard anything suggesting even an attempt by the ATO to come to grips with the real issues.'
Evidence β The Section 264 Examination of May 2002
56 A s 264 examination conducted by a barrister and officers of the ATO on 17 May 2002 elicited that Mr Warrick's income tax returns for the years ended 30 June 1998 to 30 June 2001 disclosed total income at $5,000, $5,200, $5,400 and $8,000 respectively. For the year ended 30 June 1997 he had returned $26. The payments in 1998 and following years were 'wage payments' made out of a discretionary trust of which Kingprince was the trustee. He accepted that the payments were arbitrary and made so that he would have a wage for the year. The balance of the proceeds of his accounting practice flowed through the Kingprince Discretionary Trust. That Trust made weekly distributions to his wife. Mr Warrick paid domestic expenses such as medical benefits, school fees and telephone charges through the LH Warrick No 2 Family Trust account. He also paid housekeeping to his wife through one or other of the Trusts.
57 Mr Warrick told the examiner that he had an ongoing relationship with Mr Mowbray in connection with providing tax planning advice to his clients. Correspondence from his practice to clients was put to Mr Warrick which was said to be indicative of a proactive promotion of tax planning investments for his clients. He denied that characterisation and denied that certain of the letters, sent out over the name of an employee, Ricky Bejawn, reflected a 'practice decision'. But in a letter dated 13 November 1997 to a Mr SV Scott he referred to the need to process applications and cheques in relation to infomercial investments by mid-March 1998 and said:
'I will be allocating all of my time during the month of February to try and catch up with all clients interested in making such contributions.'
58 Mr Warrick was examined about the loans made to him by Given Proof. It emerged that the fixed and floating charge security was prepared by his own lawyers. No further security was required in relation to the increase in the amount advanced from $1.2 million to $1.7 million. There was no provision for repayment of principal within any particular time. Repayment of principal was on demand. There was no time limit on the term of the facility. Mr Warrick was asked whether he was ever told there was a time limit on the facility or whether it would have to be rolled over or renewed by a certain date. In answer to that question he said 'No'. The examination was directed in part to whether the loans were truly loans or in fact disguised payments for commission. It was put to Mr Warrick that he had received fees and commissions for introducing clients to the Dragon Asia investments. The contributions made by the clients had been telegraphically transferred to accounts in Israel and Switzerland but his fees and commissions were said to have been retained in Hong Kong. It was further put to him that in respect of the infomercials, the music schemes and the Venture Hedge Trading Fund, his fees and commissions flowed through from a company called Berrimah International to an account in Hong Kong and from the United Mizrahi Bank in Israel to accounts in Hong Kong where the funds were held for his benefit. It was also suggested that, as he required funds, they were drawn down and came back to Australia by way of 'loans'. Mr Warrick characterised this proposition as 'absolutely insane'. The examination was more extensive than summarised here but the proceeding summary refers to salient features relevant to the basis upon which the amended assessments were said to have issued.
Statutory Framework
59 The provisions of the ITAA 1936relating to returns and assessments are still in operation and were, at all material times, not yet having been replaced by the progressive rewriting project reflected in the Income Tax Assessment Act 1997 (Cth).
60 The term 'assessment' is defined in s 6(1) thus:
'assessment means:
(a) the ascertainment of:
(i) the amount of taxable income; or
...
and of the tax payable on that taxable income or net income.
...
(b) the ascertainment of the amount of additional tax payable under a provision of Part VII.'
61 Part IV of the ITAA 1936 is entitled 'returns and assessments'. The obligation upon persons to provide annual returns of income arises under s 161. Section 166 provides:
'From the returns, and from any other information in his possession, or from any one or more of these sources, the Commissioner shall make an assessment of the amount of the taxable income of any taxpayer, and of the tax payable thereon.'
62 Default assessments are provided for in s 167:
'If:
(a) any person makes default in furnishing a return; or
(b) the Commissioner is not satisfied with the return furnished by any person; or
(c) the Commissioner has reason to believe that any person who has not furnished a return has derived taxable income;
the Commissioner may make an assessment of the amount upon which in his judgment income tax ought to be levied and that amount shall be the taxable income of that person for the purpose of section 166.'
Section 169 provides:
'Where under this Act any person is liable to pay tax, the Commissioner may make an assessment of the amount of such tax.'
The amendment of assessments is authorised by s 170, which provides inter alia:
'(1) The Commissioner may, subject to this section, at any time amend any assessment by making such alterations therein or additions thereto as he thinks necessary, notwithstanding that tax may have been paid in respect of the assessment.'
63 Amended assessments are treated as assessments for all purposes of the ITAA 1936 (s 173). Notice of assessment is to be served in writing by post or otherwise upon the person liable to pay the tax as soon as conveniently may be after the assessment is made (s 174(1)). Section 175 then provides:
'The validity of any assessment shall not be affected by reason that any of the provisions of this Act have not been complied with.'
Objections to assessments are referred to in s 175A:
'A taxpayer who is dissatisfied with an assessment made in relation to the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953.'
Judicial notice is to be taken of the signature of Commissioners and Deputy Commissioners provided it is attached or appended to an official document (s 176).
64 A key provision for present purposes is s 177 which provides, inter alia:
'(1) The production of a notice of assessment, or of a document under the hand of the Commissioner, a second Commissioner or a Deputy Commissioner, purporting to be a copy of a notice of assessment, shall be conclusive evidence of the due making of the assessment and, except in proceedings under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment that the amount and all the particulars of the assessment are correct.'
65 Part IVC of the TAA provides for taxation objections, review and appeals. Division 3 of Pt IVC of the TAA relates to taxation objections. It requires that a person making taxation objection must make it in the approved form and lodge it with the Commissioner within the period set out in s 14ZW and state in it fully and in detail the grounds that the person relies on (s 14ZU). Section 14ZW provides for time limits for the lodgment of taxation objections. No issue of time arises in this case.
66 The obligation of the Commissioner to decide taxation objections is set out in s 14ZY:
'(1) If the taxation objection has been lodged with the Commissioner within the required period, the Commissioner must decide whether to:
(a) allow it, wholly or in part; or
(b) disallow it.
(2) Such a decision is in this Part called an 'objection decision'.
(3) The Commissioner must cause to be served on the person written notice of the Commissioner's objection decision.'
67 Section 14ZYA deals with the circumstance in which the Commissioner does not make an objection decision within 60 days:
'(1) This section applies if the taxation objection has been lodged with the Commissioner within the required period and the Commissioner has not made an objection decision by whichever is the later of the following times:
(a) the end of the period (in this section called the 'original 60 day period') of 60 days after whichever is the later of the following days:
(i) the day on which the taxation objection is lodged with the Commissioner;
(ii) if the Commissioner decides under section 14ZX to agree to a request in relation to the taxation objection β the day on which the decision is made;
(b) if the Commissioner, by written notice served on the person within the original 60 day period, requires the person to give information relating to the taxation objection β the end of the period of 60 days after the Commissioner receives that information.
(2) The person may give the Commissioner a written notice requiring the Commissioner to make an objection decision.
(3) If the Commissioner has not made an objection decision by the end of the period of 60 days after being given the notice then, at the end of that period, the Commissioner is taken to have made a decision under subsection 14ZY(1) to disallow the taxation objection.'
68 Rights of review and appeal are set out in s 14ZZ:
'If the person is dissatisfied with the Commissioner's objection decision, the person may:
(a) if the decision is both a reviewable objection decision and an appealable objection decision β either:
(i) apply to the Tribunal for review of the decision; or
(ii) appeal to the Federal Court against the decision; or
(b) if the decision is a reviewable objection decision (other than an appealable objection decision) β apply to the Tribunal for review of the decision; or
(c) if the decision is an appealable objection decision (other than a reviewable objection decision) β appeal to the Federal Court against the decision.'
69 In the present case it is not suggested that the objections relate to other than appealable and reviewable objection decisions.
70 Division 4 of Pt IVC of the TAA deals with the Administrative Appeals Tribunal reviewable objection decisions. On a review application to the Tribunal the applicant has the burden of proving, if the taxation decision concerned is an assessment, that the assessment is excessive (s 14ZZK). A similar burden lies on the taxpayer in appeals to the Federal Court (s 14ZZO).
71 Section 255-1 of Schedule 1 of the TAA provides:
'A tax-related liability is a pecuniary liability to the Commonwealth arising directly under a taxation law (including a liability the amount of which is not yet due and payable).'
Section 255-5 provides:
'(1) An amount of a tax-related liability that is due and payable:
(a) is a debt due to the Commonwealth; and
(b) is payable to the Commissioner.
(2) The Commissioner, a Second Commissioner or a Deputy Commissioner may sue in his or her official name in a court of competent jurisdiction to recover an amount of a tax-related liability that remains unpaid after it has become due and payable.'
72 Section 255-45 provides:
'(1) A certificate:
(a) stating one or more of the matters covered by subsection (2); and
(b) signed by the Commissioner, a Second Commissioner or a Deputy Commissioner;
is prima facie evidence of the matter or matters in a proceeding to recover an amount of a tax-related liability.
(2) A certificate may state:
(a) that a person named in the certificate has a tax-related liability; or
(b) that an assessment relating to a tax-related liability has been made, or is taken to have been made, under a taxation law; or
(c) that notice of an assessment, or any other notice required to be served on a person in respect of an amount of a tax-related liability, was, or is taken to have been, served on the person under a taxation law; or
(d) that the particulars of a notice covered by paragraph (c) are as stated in the certificate; or
(e) that a sum specified in the certificate is, as at the date specified in the certificate, a debt due and payable by a person to the Commonwealth.'
73 Section 255-50 of Schedule 1 of the TAA gives prima facie effect to statements or averment made by the plaintiff in recovery actions:
'(1) In a proceeding to recover an amount of a tax-related liability, a statement of averment about a matter in the plaintiff's complaint, claim or declaration is prima facie evidence of the matter.
(2) This section applies even if the matter is a mixed question of law and fact. However, the statement of averment is prima facie evidence of the fact only.
(3) This section applies even if evidence is given in support or rebuttal of the matter or of any other matter.
(4) Any evidence given in support or rebuttal of the matter stated or averred must be considered on its merits. This section does not increase or diminish the credibility or probative value of the evidence.
(5) This section does not lessen or affect any onus of proof otherwise falling on a defendant.'
74 Regulation 172 of the Income Tax Regulations 1936 provides:
'(1) Judicial notice shall be taken of the names and signatures of the persons who are, or were at any time, the Commissioner, a Second Commissioner, a Deputy Commissioner or a delegate of the Commissioner.
(2) A certificate, notice or other document bearing the written, printed or stamped name (including a facsimile of the signature) of a person who is, or was at any time, the Commissioner, a Second Commissioner, a Deputy Commissioner or a delegate of the Commissioner in lieu of that person's signature shall, unless it is proved that the document was issued without authority, be deemed to have been duly signed by that person.
(3) In this regulation, "certificate, notice or other document" includes a certificate, notice or other document under the Income Tax Assessment Act 1997 or Regulations made under that Act.'
The Application for Summary Judgment
75 The Commissioner moves for summary judgment. The application was brought in the Supreme Court under O 14 r 1 of the Supreme Court Rules. The orders sought are that:
'1. Judgment be entered for the Plaintiff against the Defendant in the sum of $1,475,386.99 together with further general interest charged pursuant to s 204 of the Income Tax Assessment Act and Division 1 Part IIA of the Taxation Administration Act 1953 ('TAA 53') calculated upon an amount or amounts and for a period or periods at the rates prescribed.
2. The Defendant to pay the Plaintiff's costs of this application, and the action, including any costs reserved, such costs to be taxed.'
The application now falls to be determined under O 20 of the Federal Court Rules relating to summary judgment which provides:
"(1) Where in relation to the whole or any part of the applicant's claim for relief, there is evidence of the facts on which the claim or part is based, and β
(a) there is evidence given by the applicant or by some responsible person that, in the belief of the person giving the evidence, the respondent has no defence to the claim or part; or
(b) the respondent's defence discloses no answer to the applicant's claim or part;
the Court may pronounce judgment for the applicant on that claim or part and make such orders as the nature of the case requires.
(2) Where the Court pronounces judgment against the party under this rule, and that party claims relief against the party obtaining the judgment, the Court may stay execution on, or other enforcement of, the judgment until determination of the claim by the party against whom the judgment is directed to be entered.
(3) The Court in any application under this rule may give such directions, whether for amendment of the pleading or otherwise, as may be thought fit.'
76 Considered against the backdrop of the case management system of the Federal Court embodied in O 10, the function of O 20 is to provide '... an expeditious means of resolving litigation where the applicant can clearly demonstrate that there is no real defence to particular claims made by it' β Caterpillar Inc v Sun Forward Pty Ltd (1996) 36 IPR 411 at 414 (Drummond J). The criteria for the award of summary judgment require that it be given only '... where it is clear that there is no arguable defence to the claim. If there is an arguable issue to be tried, in particular where there are matters of fact to be resolved which can only be resolved at trial, the court gives leave to defend and the case goes to trial to be heard out. Summary judgment is a means of short-circuiting that system in the clear case where it is shown that, even if it went to trial, the defence could not succeed.' β CLC Corporation v Cambridge Gulf Holdings NL [1997] FCA 236 (Carr J). The power should be exercised with great care and never exercised unless clear that there is no real question to be tried β Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99. See also Webster v Lampard (1993) 177 CLR 598 at 602 (Mason CJ, Deane and Dawson JJ).
The Operation of Sections 175 and 177 of the ITAA
77 Sections 175 and 177 are to be read together. Their operation was described in FJ Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 at 376 as effectively confining a taxpayer to the appeal procedures for which the taxation legislation provides. In the joint judgment in that case Mason and Wilson JJ, with whom Stephen and Aickin JJ agreed, said that the production of a notice of assessment (at 378):
'... will put beyond contention the due making of the assessment so that the court cannot find that no assessment was made or that, if made, it was made for an inadmissible purpose.'
78 Relevantly for the present case, Mason CJ in Deputy Commissioner of Taxation v Richard Walter Pty Limited (1995) 183 CLR 168 said of the observation quoted from Bloemen's case that it (at 187):
'... proceeds upon the footing that the paramount purpose of the Act is to ascertain the liability of taxpayers to tax and that the Act, with that object in view, sets up a legislative regime whereby the Commissioner assesses a taxpayer to tax, the taxpayer being liable to pay the amount stated in the notice of assessment, subject to a reference to the Administrative Appeals Tribunal or an appeal under Pt IVC to the Federal Court. In such an appeal, it is for the taxpayer to show that the assessment is excessive. In that context, the existence of an inadmissible purpose on the part of the Commissioner plays no part. The central element of the legislative regime is the making of an assessment by the Commissioner which ascertains the taxpayer's liability to tax and the reference to the Tribunal or the appeal to the Federal Court, in which the taxpayer is entitled to dispute his or her substantive liability to tax. In such an appeal, the taxpayer is at liberty to challenge the exercise of any relevant discretion by the Commissioner. Thus, on appeal, the court will set aside the assessment if any relevant exercise of discretion by the Commissioner is affected by error of law, if he has taken an extraneous factor into account or if he has failed to consider a material factor.'
79 The observations by Mason CJ in Richard Walter reflected a view of the effect of s 177 as a privative clause influenced by the decision in R v Hickman; Ex parte Fox and Clinton (1945) 70 CLR 598. At 180 in Richard Walter, Mason CJ referred to the Hickman 'principle' as expressed in the Hickman decision at 615 where, speaking of privative clauses, Dixon J said:
'Such a clause is interpreted as meaning that no decision which is in fact given by the body concerned shall be invalidated on the grounds that it has not conformed to the requirements governing its proceedings or the exercise of its authority or has not confined its acts within the limits laid down by the instrument giving it authority, provided always that its decision is a bona fide attempt to exercise its power, that it relates to the subject matter of the legislation, and that it is reasonably capable of reference to the power given to the body.'
Applying that 'principle' to s 177, Mason CJ saw the section as 'consistent with the Hickman principle' on the basis that (at 188):
'Section 177 gives effect to the substantive provisions of the Act, in particular s 175, the effect of which is to ensure that the validity of an assessment does not depend upon compliance with any of the particular provisions of the Act or considerations of purpose'.
80 The Hickman principle as enunciated in the judgment of Mason CJ does not extend the protection of ss 175 and 177 to assessments which are not made in good faith or which are, on their face, not assessments at all or where there has been a concession that the Commissioner has made no attempt to ascertain or estimate the taxpayer's taxable income β R v Commissioner of Taxation (WA); Ex parte Briggs (1986) 12 FCR 301.
81 The effect of ss 175 and 177 together precludes judicial review of assessment decisions in proceedings under s 75(v) of the Constitution or s 39B of the Judiciary Act 1903 (Cth) for error of law, failure to take into account mandatory relevant considerations and breaches of procedural fairness. In Richard Walter, Brennan J said (at 196):
'... if s 175 confers validity on assessments made in a bona fide attempt to exercise the power to make them, it authorises the Commissioner to determine in good faith, rightly or wrongly, the application of the general provisions of the Act to the facts of the particular case subject to correction by the objection, review and appeal procedures. That accords with the policy of the Act which most clearly appears from the text of s 177(1).'
Deane and Gaudron JJ applied the Hickman principle to the operation of ss 175 and 177 (at 211):
'The result of its application is that s 175's protection from invalidity is applicable only if the purported "assessment" (i) is "a bona fide attempt" by the Commissioner or other authorised officer to exercise powers conferred by the Act, (ii) "relates to the subject matter" of the Act and (iii) "is reasonably capable of reference to" those powers.'
To avoid constitutional invalidity their Honours took the view that s 177 had to be read down so as not to apply to a case in which it was alleged that the assessment had not complied with the Hickman criteria (at 213).
82 Dawson J, at 220, saw s 177 as only operating:
'... to create a situation in which, upon the evidence constituted by a notice of assessment, liability and recovery proceedings is conclusively established, rather than to deny the jurisdiction to grant the remedies referred to in s 75(v).'
83 Toohey J, at 227, appeared to reject a contention that an assessment could be challenged, other than in proceedings under Pt IVC, for jurisdictional error:
'... the weight of authority is clearly against any general proposition that a court may inquire into the making of an assessment with a view to determining whether there has been an abuse of power.'
See also at 233-234 and per McHugh J at 242.
84 The weight of High Court authority in relation to the operation of ss 175 and 177 stands against any challenge to the validity of an assessment where the purported assessment is a bona fide attempt to exercise the powers conferred by the Act, relates to the subject matter of the Act and is reasonably capable of reference to those powers.
85 Counsel for Mr Warrick argued that the decision of the High Court in Plaintiff S157/2002 v Commonwealth of Australia (2003) 211 CLR 476 required a reconsideration of the line of authority on ss 175 and 177. The decision in Plaintiff S157 was relied upon for the proposition that an assessment should be able to be challenged in proceedings under s 75(v) of the Constitution or s 39B of the Judiciary Act for jurisdictional error including want of procedural fairness. It would be inappropriate to award summary judgment where there was a potentially arguable defence of that character.
86 Plaintiff S157 characterised the so called Hickman principle as '... simply a rule of construction allowing for the reconciliation of apparently conflicting statutory provisions' (at [60] Gaudron, McHugh, Gummow, Kirby and Hayne JJ). On that basis it followed that there could be '... no general rule as to the meaning or effect of privative clauses'. The conclusion in Plaintiff S157 that decisions under the Migration Act 1958 (Cth) were amenable to review for jurisdictional error turned upon the limited application of the privative clause, s 474, to 'decisions made under the Migration Act'. A purported decision affected by jurisdictional error would not be a decision to which s 474 applied. Whatever broader propositions may be extracted from Plaintiff S157 they do not stand against the weight of authority in the High Court on the operation of ss 175 and 177 stated recently and authoritatively in Richard Walter. It is not open to a single judge at first instance to infer that the correctness of Richard Walter is now open to question to the extent that there is an arguable defence based on that premise.
Formal Objections to Assessments by the Respondent
87 In support of the application for summary judgment the Deputy Commissioner relied upon the production of certified copies of the notices of assessments and the certificate of their service upon Mr Warrick. Upon service of the notices Mr Warrick became liable to pay the tax assessed and shown as due to the Commonwealth, payable to the Commissioner and, by s 255-5 of the TAA, recoverable in a court of competent jurisdiction. The evidentiary certificate bearing Deputy Commissioner Holland's facsimile signature was relied upon as evidence of the service of the notices upon Mr Warrick and that the sum of $1,475,386.99 was a debt due and payable to the Commonwealth by him. She relied upon s 255-45 of Schedule 1 of the TAA.
88 A point was taken in the submissions made on behalf of Mr Warrick that Deputy Commissioner Holland did not issue any of the amended assessments or penalty assessments relied upon. They bore the imprinted names of two other persons each described as a Deputy Commissioner. Mr Eikelboom who swore the affidavit exhibiting the certified copies of the notices of assessments was said to be 'clearly wrong and/or relying on inadmissible hearsay' when he said in his affidavit that the documents 'were issued and sent by pre-paid mail by the plaintiff to the defendant'. The fact that he said, in effect, that Deputy Commissioner Holland issued the notices when they clearly bore a different person's name undermined any formal validity or s 177 protection which might otherwise be available to documents of such a class.
89 In my opinion there is no substance in the point. It is plain from Mr Warrick's own affidavit that the notices of assessment and of administrative penalties were sent to and received by him. The production of the notices of assessment was, by virtue of s 177, and subject to other arguments going to their validity, conclusive evidence of their due making not to be undermined by arguments that Mr Eikelboom's affidavit contained hearsay evidence. In any event, Mr Eikelboom's affidavit referred to the issue of the notices of assessment by 'the plaintiff' and in so doing, in my opinion, referred to a person occupying the office of Deputy Commissioner of Taxation.
90 An argument was also advanced that the evidentiary certificate was not signed by 'the Commissioner, a Second Commissioner or a Deputy Commissioner'. Counsel for Mr Warrick accepted that, under reg 172 of the Income Tax Regulations 1936, a Deputy Commissioner can sign by affixing a facsimile of her signature. In this case a facsimile signature of Erin Holland was affixed to the certificate. Below it and below her signature the words 'Deputy Commissioner of Taxation and delegate of the Commissioner of Taxation' appeared. Below these words were handwritten letters 'pp' and an indecipherable signature. It was suggested that it could be inferred from this that some person other than Ms Holland had affixed her facsimile signature.
91 In my opinion, a Deputy Commissioner can affix a facsimile signature personally or through an appropriate officer acting under her authority. The facility of a facsimile signature for which the regulations provide suggests a signature that can be affixed for the Deputy Commissioner by someone acting under her direction or with her authority. In any event, where a certificate, notice or other document bears a facsimile of the signature of a Deputy Commissioner reg 172 has the effect that the onus lies upon the person challenging its authenticity to show that the document was issued without authority. This is not established by the existence of the handwritten letters 'pp' together with another signature. In my opinion there is nothing in the submission to detract from the evidentiary force of the certificate.
92 Section 177 is proof against the contention in the defence that the person who purportedly issued the assessments was not authorised to do so pursuant to the Act. It also stands against the plea that Mr Warrick did not receive the assessed taxable income. That is a matter to be taken up in proceedings under Pt IVC of the TAA.
Breach of Natural Justice
93 It was submitted that the making of the relevant assessments was vitiated by want of procedural fairness to Mr Warrick. The case against Mr Warrick, it was said, has never been particularised. He had been given no opportunity to deal properly, in his objections, with the asserted omissions in his returns. By the failure to decide his objections he had been denied access to Pt IVC appeal proceedings. All of this was said to be contrary to the Taxpayer's Charter.
94 Reliance was placed upon the Taxpayer's Charter as giving rise to enforceable legitimate expectations on the part of taxpayers and, in particular, on the part of Mr Warrick that he would be dealt with in a particular way.
95 Arguments as to want of procedural fairness cannot provide any defence against summary judgment in recovery proceedings under the ITAA 1936 and the TAA. This is the combined effect of ss 175 and 177 and the evidence of certified notices of assessment and the evidentiary certificate produced to the Court. For the reasons already set out, the recovery proceedings cannot be resisted upon the basis of jurisdictional error short of the failure of the Commissioner to observe the criteria referred to broadly under the rubric of 'the Hickman principle'. While the failure to determine objections may have a bearing on the question whether a stay of proceedings should be granted, they have no bearing on the question of liability. In my opinion therefore, the argument based upon breach of the requirements of procedural fairness does not provide any defence to the claim.
Want of Bona Fides and Ulterior Purpose
96 It was submitted for Mr Warrick that the amended assessments and the tax shortfall penalties were not imposed in a bona fide exercise or attempted exercise of power. This was said to be a proposition at least sufficiently arguable to warrant leave to defend. It was submitted that there had been no real or proper attempt to investigate or determine the facts. The material before the Court was said to point to the Deputy Commissioner acting on a 'hunch' and a speculative 'scenario'. The parallel decision-making process of imposing a departure prohibition order on Mr Warrick revealed decision-making premised upon out dated information, error and half-truth.
97 The alleged capriciousness of the decision-making process relating to the amended assessments and penalties was indicated by the ATO's failure to observe procedural fairness despite the Taxpayer's Charter. When Mr Warrick was interviewed the case against him was never put except as a speculative scenario. His solicitor's requests for grounds and reasons went unanswered. No particulars had ever been given. No position paper was ever issued. His FOI request was met with a requirement for payment of $77,000 to access 'a sea of documents'. Reliance was also placed upon the fact that his objections to the amended assessments had been outstanding since 21 February 2003. There was no evidence that they are even being considered. The Deputy Commissioner had instituted and pursued recovery proceedings while failing to decide the objections. This meant that Mr Warrick could not institute any Pt IVC appeal.
98 It was submitted that the impositions were made for an ulterior purpose, namely that the respondent and his 'entrepreneurial activities' should be targeted because he was seen by the ATO as a tax promoter. Such a purpose was said to be ultra vires of the tax legislation allowing for the making of amended assessments.
99 Counsel referred to the absence of any discernable 'basis' for the ATO's actions. He submitted that there could be no genuine dispute that Mr Warrick obtained the payment in issue from Given Proof. He had deposed on affidavit that they were all loans. He was the borrower. The loan and security documents had been produced. The payments had been accounted for in books and records in Western Australia. The loan documentation and related securities had been produced. Substantial repayments of interest and capital had been made. As at 6 December 2000, the ATO knew that Kingprince was sending money to Given Proof in Hong Kong. The Deputy Commissioner had issued purported assessments labelling the relevant payments the income of both Mr Warrick and Kingprince. The only ground disclosed to Mr Warrick for the amended assessments was that payments from Given Proof were 'considered to be commission income'.
100 In my opinion there is nothing in the materials put before the Court by Mr Warrick that would arguably support a finding of lack of bona fides on the part of the Commissioner. That is so even on the basis that want of bona fides may be established not only by showing bad faith, but also by showing the absence of a diligent and conscientious approach to the decision-making process involved in making an assessment β Applicant WAFV of 2000 v Refugee Review Tribunal (2003) 125 FCR 351. Whatever deficiencies can arguably be inferred about the reasoning process which may have been adopted by the Deputy Commissioner in characterising payments received by Mr Warrick as commission rather than loans, whatever non-sequiturs may be demonstrated, there is not disclosed an arguable failure to endeavour diligently and conscientiously to exercise the power entrusted to her by the statute. In particular, questions put in the course of the s 264 examination do not constitute evidence of the basis upon which the Deputy Commissioner finally made the assessments which are here under challenge. The reasons for the departure prohibition orders are also, at best, a slender basis for any inference and in this case do not support any inference of want of bona fides. The threshold for demonstrating a failure to exercise a power bona fide is not a low one. While it does not require proof of malice or dishonesty it does import a serious dereliction of duty which borders upon, if not amounts to, recklessness in the decision-making process. Want of bona fides is not a vehicle through which the taxpayer may challenge the adequacy of the Commissioner's logic in making assessments of taxable income.
101 By the same token I do not consider that any arguable case of improper purpose has been made out. The reference in the reasons for the departure prohibition order to Mr Warrick's activities as a promoter of tax avoidance arrangements had some basis in facts which were put to him and which emerged in the course of the s 264 examination. That characterisation was made in the context of justification of the departure prohibition order made against him. Its logical support for that order may be questionable but it does not go to demonstrate, even arguably, an ulterior purpose or improper purpose in the making of the assessment. Even if it did, it would not seem to rise higher than the level of an irrelevant consideration which would not be a basis for the grant of prerogative relief in the face of the provisions of ss 175 and 177 as construed by High Court authority.
A Constitutional Question β Whether Section 78B Notices are Required
102 The defence appeared to raise a constitutional question. In par 6(p) it was said that the persons responsible for issuing the disputed assessments had not made a calculation of 'taxable income' or an assessment of 'income tax' as authorised by s 51(ii) and/or s 55 of the Constitution. In par 6(q) it was alleged that there is no power under the Constitution '... which empowers the Commissioner or any Officer or any delegate of the Commissioner to assess the defendant to income tax when there is not a sufficient connection between the object of the tax and the subject of the tax'. In the premises it was said in par 6(r) that the disputed assessments were invalid because they were not made or issued 'pursuant to the law with respect to "taxation" within s 51(ii) of the Constitution'.
103 In my opinion there is no viable defence disclosed by these pleadings. They seem to be drawn without regard to the operation of s 51(ii) as a head of legislative power. There was no argument advanced in respect of the constitutional points pleaded. They do not in my opinion lead to the characterisation of these proceedings as involving 'a matter arising under the Constitution or involving its interpretation' for the purposes of s 78B of the Judiciary Act. That section does not impose a duty on the Court not to proceed pending the issue of notices to the Attorneys-General in every case in which the Constitution is mentioned in a pleading no matter how trivial, unarguable or concluded the constitutional point may be β Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (1999) 167 ALR 303 at 308 [14] and the cases there cited. No arguable defence and no basis for staying the proceedings pursuant to s 78B of the Judiciary Act was disclosed by reason of the reference in the pleadings to the Constitution.
Conclusion and Orders
104 In my opinion, for the preceding reasons, no arguable defence has been disclosed to the claim in the recovery action. The Deputy Commissioner is entitled to summary judgment. I am concerned however that these proceedings have been brought notwithstanding the failure to determine the objections lodged by Mr Warrick to the amended assessments and administrative penalty assessments. It is not a complete answer to that concern that Mr Warrick can force the Deputy Commissioner to a deemed disallowance of the objections under s 14ZYA of the TAA. The Commissioner has a clear duty to determine objections so that if there is a basis upon which an assessment can be revisited administratively that can be done expeditiously and with a minimum of expense and inconvenience to both the Commissioner and the taxpayer.
105 Absent a determination of objections and absent any reasonable explanation for the failure to determine them, the question arises whether the recovery proceedings or execution of the judgment should be stayed. In Snow v Deputy Commissioner of Taxation (1987) 14 FCR 199, I set out factors relevant to the question whether or not a stay of recovery proceedings should be ordered. They were as follows:
1. The policy of the ITAA 1936 as reflected in its provisions gives priority to recovery of the revenue against the determination of the taxpayer's appeal against his assessment.
2. The power to grant a stay is therefore exercised sparingly and the onus is on the taxpayer to justify it.
3. The merits of the taxpayer's appeal constitute a factor to be taken into account in the exercise of the discretion.
4. Irrespective of the legal merits of the appeal a stay will not usually be granted where the taxpayer is party to a contrivance to avoid his liability to payment of the tax.
5. A stay may be granted in the case of abuse of office by the Commissioner or extreme personal hardship to the taxpayer called on to pay.
6. The mere imposition of the obligation to pay does not constitute hardship.
7. The existence of a request for reference of an objection for review or appeal is a factor relevant to the exercise of the discretion.
106 In the present case, in my opinion, the priority given to recovery of the revenue should be qualified by an appropriate recognition of the taxpayer's right to object and to have his objection determined and the Commissioner's duty in that respect. I express no view as to the merits of Mr Warrick's position with respect to the assessments. Nor do I express any view on whether he is a party to a contrivance to avoid his liability to payment of tax. I do not suggest that the present case is one of abuse of office by the Commissioner, but I do consider that no satisfactory explanation has been given for the delay in and failure to deal with the objections to the assessments. In my opinion, execution of the judgment should be stayed for a period sufficient to enable Mr Warrick to require the making of an objection decision pursuant to s 14ZYA of the TAA and to take advantage of the deemed refusal at the expiry of 60 days from that period to institute a review process. The stay will be subject to liberty to apply.
107 Having regard to the basis upon which I have decided to award summary judgment in this case, it follows that the counterclaim must also be dismissed.
I certify that the preceding one hundred and seven (107) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French.
Associate:
Dated: 13 July 2004
Counsel for the Applicant: Mr JD Allanson
Solicitor for the Applicant: Australian Government Solicitor
Counsel for the Respondent: Dr JT Schoombee
Solicitor for the Respondent: Christensen Vaughan
Date of Hearing: 11 June 2004
Date of Judgment: 13 July 2004
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SZCCX v Minister for Immigration and Citizenship [2007] FCA 2002
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2007/2007fca2002
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2024-09-13T22:45:42.623902+10:00
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FEDERAL COURT OF AUSTRALIA
SZCCX v Minister for Immigration and Citizenship [2007] FCA 2002
SZCCX AND SZCCY v MINISTER FOR IMMIGRATION AND CITIZENSHIP AND REFUGEE REVIEW TRIBUNAL
NSD1679 OF 2007
MOORE J
13 DECEMBER 2007
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD1679 OF 2007
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN: SZCCX
First Applicant
SZCCY
Second Applicant
AND: MINISTER FOR IMMIGRATION AND CITIZENSHIP
First Respondent
REFUGEE REVIEW TRIBUNAL
Second Respondent
JUDGE: MOORE J
DATE OF ORDER: 13 DECEMBER 2007
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The application for leave to appeal be dismissed with costs.
2. The applicant pay the Minister's costs fixed in the sum of $1000.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD1679 OF 2007
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN: SZCCX
First Applicant
SZCCY
Second Applicant
AND: MINISTER FOR IMMIGRATION AND CITIZENSHIP
First Respondent
REFUGEE REVIEW TRIBUNAL
Second Respondent
JUDGE: MOORE J
DATE: 13 DECEMBER 2007
PLACE: SYDNEY
REASONS FOR JUDGMENT
1 This is an application for leave to appeal against a judgment of a federal magistrate of 20 August 2007: SZCCX v Minister for Immigration & Anor [2007] FMCA 1655. The Federal Magistrate concluded that an application for judicial review, filed by the applicant, was frivolous, vexatious and an abuse of process and dismissed the matter under rule 13.10 of the Federal Magistrates Court Rules 2001. Nothing has been put by the applicant today to indicate that the Federal Magistrate erred in reaching that conclusion. It was a conclusion reached against a background where the applicant had earlier litigated in the Federal Magistrates Court, this Court and the High Court, the correctness of the decision to refuse a protection visa and the attendant decision of the Refugee Review Tribunal handed down on 18 November 2003: see SZCCX & Anor v Minister for Immigration & Anor [2006] FMCA 509; SZCCX v Minister for Immigration & Multicultural Affairs [2006] FCA 1006; SZCCX & Anor v MIMA & Anor [2007] HCATrans 213.
2 It is not apparent to me that the Federal Magistrate erred in dismissing the application for judicial review. Accordingly, any appeal is doomed to fail and it is appropriate that the application for leave to appeal be dismissed. I order that the application for leave to appeal be dismissed with costs. I fix those costs in the sum of $1000.
I certify that the preceding two (2) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.
Associate:
Dated: 21 December 2007
The Applicant appeared in person
Solicitor for the Respondent: Sparke Helmore
Date of Hearing: 13 December 2007
Date of Judgment: 13 December 2007
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National Building Suppliers Group Pty Ltd v Mitre 10 Australia Pty Ltd [2017] FCA 1262
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2017/2017fca1262
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2024-09-13T22:45:43.574438+10:00
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FEDERAL COURT OF AUSTRALIA
National Building Suppliers Group Pty Ltd v Mitre 10 Australia Pty Ltd [2017] FCA 1262
File number: VID 1062 of 2017
Judge: O'CALLAGHAN J
Date of judgment: 26 October 2017
Catchwords: PRACTICE AND PROCEDURE β application for leave to file further amended statement of claim β application to join non-parties to proceeding and for interlocutory relief against proposed new parties β application for procedural orders against existing parties
Legislation: Federal Court Rules 2011 (Cth), r 9.05(1)
Date of hearing: 23 October 2017
Registry: Victoria
Division: General Division
National Practice Area: Intellectual Property
Sub-area: Copyright and Industrial Designs
Category: Catchwords
Number of paragraphs: 17
Counsel for the Applicant: Mr E Heerey QC with Mr P Creighton-Selvay
Solicitor for the Applicant: Holding Redlich
Counsel for the First, Third and Fourth Respondents: Mr A J Ryan SC and Mr I P Horak
Solicitor for the First, Third and Fourth Respondents: Herbert Smith Freehills
Counsel for the Second Respondent: Mr P Wallis
Solicitor for the Second Respondent: K&L Gates
ORDERS
VID 1062 of 2017
BETWEEN: THE NATIONAL BUILDING SUPPLIERS GROUP PTY LTD (ACN 064 279 787)
Applicant
AND: MITRE 10 AUSTRALIA PTY LTD (ACN 009 713 704)
First Respondent
RYAN CHARD
Second Respondent
HOME TIMBER & HARDWARE GROUP PTY LTD (ACN 004 037 049)
Third Respondent
DANKS HOLDINGS PTY LTD (ACN 004 295 532)
Fourth Respondent
JUDGE: O'CALLAGHAN J
DATE OF ORDER: 26 OCTOBER 2017
THE COURT ORDERS THAT:
1. By 4:30pm on 27 October 2017, the parties file and serve any such submission as they may wish to make in respect of the form of orders proposed in [17] of these reasons.
2. The case management hearing be stood over to a date to be fixed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
O'CALLAGHAN J:
introduction
1 By an interlocutory application filed on 19 October 2017 the applicant seeks:
(1) an order that nine further respondents be joined to this proceeding pursuant to r 9.05(1) of the Federal Court Rules 2011 (Cth) and that it have leave to file a further amended statement of claim;
(2) interlocutory relief against the nine further respondents and further orders requiring some of them to provide affidavits identifying any dealings they may have had with confidential documents and information, which the applicant alleges were improperly obtained from it;
(3) orders that the existing respondents provide to the applicant certain documents and data and that the first, third and fourth respondents make and provide further forensic copies of certain computer backup drives; and
(4) directions for the further conduct of the proceeding, including the fixing of a trial date next year.
2 The application came on for hearing on 23 October 2017. The parties agreed to deal with the question of directions in relation to the further conduct of the proceeding after the other issues now in dispute have been determined.
3 Senior counsel who appeared for all of the current respondents (except the second respondent) and for the proposed respondents, did not oppose the making of many of the orders sought by the applicant. He consented to an order that the two corporate proposed respondents, and Mr Brett Martin, be joined to the proceeding. However, he opposed the joinder of the other proposed individual respondents, namely Richard Walker, Andrew Rumbelow, Zoe Miatke, Sallie Daniels and Jacki Kersting (the proposed individual respondents), on the sole ground that the pleaded case against them does not disclose an arguable cause of action arising out of a breach of confidence.
4 Senior Counsel also agreed that injunctive relief should go against the two new corporate respondents, and against Mr Martin, but not against the proposed individual respondents. At the conclusion of the hearing on 23 October 2017, and upon senior counsel for the applicant giving the usual undertaking as to damages, I made an order, until further order, restraining each of the proposed respondents β that is Independent Hardware Group Pty Ltd, Metcash Trading Ltd and Mr Martin, and the proposed individual respondents β whether by themselves, or by their servants or agents or otherwise, from accessing, viewing, downloading, disseminating or otherwise using the "Natbuild Materials", as defined in para 50 of the amended statement of claim filed 19 October 2017.
5 The applicant also sought orders that each of the proposed individual respondents make and serve on the other parties to the proceeding an affidavit setting out, to the best of his or her ability and knowledge, all dealings with, and use of, certain confidential materials, defined in the amended statement of claim filed 19 October 2017 as "Natbuild Materials", and the content of those materials. The making of that order was opposed.
6 The making of an order that the first, third and fourth respondents (the existing corporate respondents) obtain forensic copies of any backups of a "P:/drive", a "Q:/drive" and certain email accounts which existed on or about 28 September 2017 was also opposed, on the grounds that the applicant already has such backups as at 10 October 2017, or thereabouts, and that it would cost approximately $2,600 to obtain the backups. The applicant pressed for the orders on the basis that:
(1) the order made by Tracey J made on 28 September 2017 required the existing corporate respondents "forthwith" to produce those documents;
(2) that order had not been complied with because the documents were not "forthwith" produced;
(3) the state of the documents as at around 28 September 2017 is, or may well be, of forensic importance in this proceeding; and
(4) the cost of the exercise in the scheme of things is neither here nor there.
7 I take each issue in turn below.
The pleading/joinder
8 I do not propose, and it is not necessary, to recite in these reasons the history of the proceeding to date; to deal in detail with the proposed pleaded case against each of the proposed individual respondents; or to recite the allegations and proposed allegations of serious wrongdoing made by the applicant in this proceeding.
9 The applicant's application to join the proposed individual respondents arises out of the content of two affidavits, one of Annette Welsh dated 13 October 2017 and the other of the second respondent, Mr Chard, dated 12 October 2017, both filed on behalf of the existing corporate respondents pursuant to orders previously made by the Court. As the applicant submitted:
[Those affidavits] disclosed that the [proposed individual respondents] either personally accessed, used or disseminated the Natbuild Materials, or employed or otherwise commercially benefited from those people who did so. The allegations made against each of [them] β¦ All arise out of the same course of misconduct sought to be impugned by[the applicant] in this proceeding. In essence, [those affidavits] have revealed that many more people were involved in the misappropriation and misuse of the Natbuild Materials, for the benefit of additional corporate entities.
10 Senior counsel for the proposed individual respondents submitted that, unlike Mr Chard (the second respondent) and Mr Martin (whom it was agreed should be joined as a respondent), no allegation is made against the proposed individual respondents that they improperly or illegitimately accessed the applicant's database. He submitted that the proposed individual respondents are "innocent recipients" of the various documents referred to in the amended statement of claim. He further submitted that because that is so, and that the proposed individual respondents are "only employees" of the relevant corporate respondents, they owe no duty to the applicant and "it can't be said that by reason of some duty owed, accessing and misusing it, if it be the case, confidential information amounts to a breach of confidence".
11 Senior counsel for the applicant submitted, to the contrary, that the amended statement of claim articulates, at the very least, an arguable case that, on the face of the relevant documents referred to in the pleading in respect of each of the proposed individual respondents, it ought to have been apparent to each of them in their positions that the documents with which they had been provided or shown was or contained confidential information that belonged to, and could only have belonged to, the applicant; and that each of the proposed individual respondents had no permission from the applicant to view the information, let alone use it or disclose it to anybody else. Senior counsel submitted that that is a perfectly acceptable basis upon which one may plead a case of breach of confidence.
12 In my opinion, the applicant has, at the very least, pleaded a case against each of the proposed individual respondents of the type described by senior counsel for the applicant. The Court was taken to one example of a confidential document that it is alleged was shown by Mr Martin to Mr Rumbelow, one of the proposed individual respondents. Having viewed the document, which includes references to a trading agreement of the applicant, "member deals" and a claim by the applicant to copyright in the document, it is, at the very least, arguable that Mr Rumbelow must have known, and/or did know, that the document was confidential, that the information in it belonged to the applicant and that he had no permission from the applicant to use or disclose it. In my view, the pleaded case against each of the other proposed individual respondents may be described in similar terms.
13 Accordingly, I will order that each of the proposed individual respondents be joined as a respondent to this proceeding.
BACKUPS SOUGHT
14 The existing corporate respondents have not given any good reason why they should not provide the backups sought. I accept the submissions of senior counsel for the applicant recorded at [6] above. The existing corporate respondents did not timely comply with the order made by Tracey J on 28 September 2017 and there is no good reason demonstrated why the applicant should not, in effect, be given the information that ought to have been "forthwith" disclosed. Even allowing for the intervention of the Victorian public holiday associated with the Australian Football League Grand Final, a factor upon which senior counsel for the existing corporate respondents sought to rely for part of the delay, no good explanation was given for the delay. Further, the submission that, in a case such as this, the expenditure of $2,600 to obtain the backups is meaningful prejudice, cannot be accepted.
Injunctive relief
15 Given that I propose to make orders joining each of the new individual respondents, I will also make the orders sought by the applicant for injunctive relief against all of the new respondents, so that they will be subject to the same restrictions and obligations as the existing respondents.
Affidavits SOUGHT from proposed individual respondents
16 I am not persuaded that there is any particular need for an order that each of the proposed individual respondents make and serve an affidavit setting out, to the best of their ability and knowledge, all dealings with, and use of, the confidential materials. For the time being at least, in my view, it would not be reasonable to impose this burden on the proposed individual respondents. Unless and until it can be demonstrated otherwise, it is sufficient that the existing corporate respondents, having consulted with the proposed individual respondents, disclose the nature and extent of their dealings with the confidential materials, if any, either through the accountants retained or by Ms Welsh and/or others. That said, if the applicant can demonstrate a particular need for evidence to be adduced directly from particular respondents, it may make an application for orders accordingly pursuant to liberty to apply.
Conclusion
17 For those reasons, I propose to make the following orders, subject to further submissions from any party (if any), which I will direct be made by 4:30pm tomorrow:
(1) Pursuant to r 9.05(1) of the Federal Court Rules 2011 (Cth), the following persons be joined as respondents to this proceeding:
(a) Independent Hardware Group Pty Ltd;
(b) Metcash Trading Limited;
(c) Brett Martin,;
(d) Richard Walker;
(e) Andrew Rumbelow;
(f) Zoe Miatke;
(g) Sallie Daniels; and
(h) Jacki Kersting (collectively, the New Respondents).
(2) Until trial or further order, the New Respondents be restrained, whether by themselves, or by their servants or agents or otherwise, from accessing, viewing, downloading, disseminating or otherwise using the "Natbuild Materials", as defined in para 50 of the amended statement of claim filed 19 October 2017 (the ASOC).
(3) The New Respondents refrain from deleting any evidence relating to the accessing, viewing, downloading, dissemination or other use of the Natbuild Materials from any of their personal computers, smartphones, or portable storage devices.
(4) The existing corporate respondents must, by no later than Friday, 27 October 2017, instruct Ernst & Young forthwith to take all practicable steps to obtain forensic copies of:
(a) any backup of the P:/ drive of the Mitre 10 network identified in para 64(b)(i) of the affidavit of Annette Welsh (the Welsh Affidavit) affirmed 13 October 2017 which existed on or about 28 September 2017;
(b) any backup of the Q:/ drive of the HTH network identified in para 64(b)(ii) of the Welsh Affidavit which existed on or about 28 September 2017;
(c) any backup of the email accounts of Ryan Chard, Brett Martin, Andrew Rumbelow and Zoe Miatke identified in para 64(b)(ii) of the Welsh Affidavit which existed on or about 28 September 2017.
(5) The existing corporate respondents must, by no later than Monday, 30 October 2017, cause Ernst & Young to provide to all of the applicant's independent engaged computer experts, who have signed and provided an undertaking in the form of Annexure to the orders made by O'Callaghan J on 5 October 2017, the full forensic copies of:
(a) the Chard laptop, the meeting room computer, the Martin laptop, the Martin phone, the Rumbelow laptop, the Rumbelow phone, the Miatke laptop, the Miatke phone, and the Kersting phone, as identified in para 60 of the Welsh Affidavit;
(b) all email activity (including retainable deleted items) for the email accounts of Ryan Chard, Brett Martin, Andrew Rumbelow and Zoe Miatke, as identified in para 61 of the Welsh Affidavit;
(c) each of the backups identified in para 62 of the Welsh Affidavit; and
(d) each of the backups identified in order 4 above.
(Collectively, the Forensic Copies.)
(6) By no later than Friday, 3 November 2017, all of the applicant's independent engaged computer experts who received the Forensic Copies pursuant to order 5 above must notify the existing corporate respondents as to whether they consider the Forensic Copies to constitute satisfactory forensic images.
(7) If the applicant's independent engaged computer experts notify the existing corporate respondents that the Forensic Copies constitute satisfactory forensic images, then: in accordance with the procedure set out below, the existing corporate respondents are to instruct Ernst & Young securely to delete, and ensure the secure deletion of, all Natbuild Materials, and all materials containing reference to the Natbuild Materials, from:
(a) the Chard laptop, the meeting room computer, the Martin laptop, the Martin phone, the Rumbelow laptop, the Miatke laptop, the Miatke phone, and the Kersting phone, as identified in para 60 of the Welsh Affidavit;
(b) the P:/ drive of the Mitre 10 network, as identified in para 64(b)(i) of the Welsh Affidavit;
(c) the Q:/ drive of the HTH network, as identified in para 64(b)(ii) of the Welsh Affidavit;
(d) the email accounts of Ryan Chard, Brett Martin, Andrew Rumbelow and Zoe Miatke, as identified in para 64(b)(ii) of the Welsh Affidavit; and
(e) any backups of the aforesaid drives and accounts.
(Collectively, the Quarantined Electronic Materials.)
(8) If the applicant's independent engaged computer experts notify the existing corporate respondents that the Forensic Copies do not constitute satisfactory forensic images, then the applicant's independent engaged computer experts are forthwith to be provided with access to the Quarantined Electronic Materials for the purpose of undertaking the tasks identified in para 5 of the orders made by O'Callaghan J on 5 October 2017.
(9) For the purpose of the deletion of the Natbuild Materials, and all materials containing reference to the Natbuild Materials, from the Quarantined Electronic Materials, the applicant's independent engaged computer experts shall provide to the legal representatives of all respondents, a list of the materials they propose to be deleted from the Quarantined Electronic Materials, being materials constituting, or containing reference to, the Natbuild Materials.
(10) Upon receipt of the list referred to in order 9 above, the respondents' legal representatives will, within three business days, inform the applicant whether they have any objection to the materials referred to in order 9 above being securely deleted from the Quarantined Electronic Materials.
(11) If all of the respondents' legal representatives inform the applicant that the respondents have no objection to the materials referred to in order 9 above being securely deleted from the Quarantined Electronic Materials, Ernst & Young shall forthwith securely delete the materials referred to in order 9 above from the Quarantined Electronic Materials.
(12) If any of the respondents' legal representatives inform the applicant that any of the respondents has an objection to any of the materials referred to in order 9 above being deleted from the Quarantined Electronic Materials, the respondents legal representatives will advise the applicant and Ernst & Young of the basis for such objection, and if the matter cannot be promptly resolved between the parties, will contact the Court and the other parties to ask for the matter to be listed.
(13) Ernst & Young shall provide written confirmation of the secure deletion of any Natbuild Materials, or any materials containing reference to the Natbuild Materials, from the Quarantined Electronic Materials, once completed, to the Court and to the parties within two business day of such deletion.
(14) The case management hearing be adjourned to a date to be fixed.
(15) Costs reserved.
(16) Liberty to apply.
I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Callaghan.
Associate:
Dated: 26 October 2017
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Genovese v BGC Construction Pty Ltd [2005] FCA 215
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2005/2005fca0215
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2024-09-13T22:45:44.268539+10:00
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FEDERAL COURT OF AUSTRALIA
Genovese v BGC Constructions Pty Ltd [2005] FCA 215
BANKRUPTCY β bankruptcy notices β abuse of process β whether issue of multiple bankruptcy notices abuse of process β election to proceed on third notice β second notice issued by respondent creditor subject of application by appellant debtor to set aside β judgment on application reserved β respondent creditor informed appellant debtor it was not proceeding with second notice β respondent creditor failed to inform Federal Magistrates Court of election β judgment delivered in respondent creditor's favour β costs order in favour of respondent creditor β respondent creditor subsequently began enforcing costs order β whether conduct inconsistent with election.
Bankruptcy Act 1966 (Cth)
Abignano & Anor v Wenkart [1998] FCA 1468 followed
Re a Debtor; Ex parte the Debtor v National Westminster Bank Plc [1983] 3 All ER 545 cited
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 cited
Farrington v Deputy Commissioner of Taxation [2002] FCA 1013 applied
In re Fredericke and Whitworth; Ex parte Hibbard [1927] 1 Ch 253 cited
Re Hansen; Ex parte Hansen (1985) 4 FCR 590 cited
In re a Judgment Debtor [1908] 2 KB 474 cited
HERCOLE PIETRO GENOVESE v BGC CONSTRUCTIONS PTY LTD
WAD 272 of 2004
LANDER J
11 MARCH 2005
PERTH
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY WAD272 OF 2004
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN: HERCOLE PIETRO GENOVESE
APPELLANT
AND: BGC CONSTRUCTIONS PTY LTD
RESPONDENT
JUDGE: LANDER J
DATE OF ORDER: 11 MARCH 2005
WHERE MADE: PERTH
THE COURT ORDERS THAT:
1. The appeal be allowed.
2. Bankruptcy Notice 247 of 2004 is set aside.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY WAD272 OF 2004
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN: HERCOLE PIETRO GENOVESE
APPELLANT
AND: BGC CONSTRUCTIONS PTY LTD
RESPONDENT
JUDGE: LANDER J
DATE: 11 MARCH 2005
PLACE: PERTH
REASONS FOR JUDGMENT
1 This is an appeal from a decision of McInnis FM, dismissing the appellant's application (the second application) to set aside a bankruptcy notice (number 247 of 2004) (the third notice) issued on 8 September 2004.
history of proceedings between the parties
Proceedings in the Western Australian Magistrates Court
2 The respondent was incorporated as Homestyle Pty Ltd. It changed its name to BGC Constructions Pty Ltd on 9 July 2003.
3 The respondent is a registered builder under the Builders' Registration Act 1939 (WA). The appellant was a bricklayer who subcontracted to the respondent in respect of a property to be erected at Lot 742 Burnside Terrace, Canning Vale for Mr and Mrs Van den Hoff.
4 The respondent brought proceedings against the appellant in the Local Court of Western Australia and on 17 October 2003, being the second day of the trial, Boothman SM entered judgment for the respondent, with the consent of the respondent, in the sum of $10,000 and costs. The proceedings were brought by the respondent under its former name. Its change of name was not notified to the Local Court before judgment.
5 On 3 November 2003 the respondent issued a warrant of execution to enforce the judgment.
6 On 9 January 2004 the appellant appealed to the District Court of Western Australia against the consent judgment entered in the Local Court.
7 On 16 January 2004, the respondent obtain a Certified Copy of Judgment which provided:
'In the LOCAL COURT of WESTERN AUSTRALIAβ¦
Held at Perth Local Court
Between
HOMESTYLE PTY LTD Plaintiff
C/- Level 8, 28 The Esplanade
PERTH WA 600
And
GENOVESE Hercole Pietro Defendant
32 Salisbury Street
BAYSWATER WA 6053
JUDGMENT for $10000.00 for debt (or damages), $18422.69 for Costs and $0 for Interest, together amounting to the sum of $28422.69 given for Plaintiff on 17-10-2003.
SUBSEQUENT PROCEEDINGS
(In Chronological Order)
DATE NATURE OF ACTION AMOUNT FOR COSTS RESULTS
3/11/03 Warrant of Execution $14979.33 $227.45 Pending
15/1/04 This Certificate $28687.14 $37.00
SUMMARY
Amount of Judgment or Order and Taxed Costs $28422.69
All Subsequent Costs $264.45
Sub Total $28687.14
Paid into Court $0.00
Remaining due on Judgment or Order $28687.14'
8 On 18 February 2004 a further warrant of execution issued. The costs of that warrant are not included in a second Certified Copy of Judgment which was obtained on 26 February 2004. That document was in the same terms as the Certified Copy of Judgment dated 16 January 2004, except that an additional $37.00 of costs was claimed for the issue of the second certified copy, which brought the total amount outstanding on the second copy to $28,724.14.
9 On 12 March 2004 the respondent filed a bankruptcy notice (63 of 2004) in the Federal Magistrates Court which it served on the appellant on 17 March 2004.
10 On 2 April 2004 the appellant applied to the Federal Magistrates Court seeking to set aside bankruptcy notice 63 of 2004 (WZ40 of 2004).
11 On 6 April 2004 the bankruptcy notice was set aside by consent.
12 On 8 April 2004 the appellant commenced proceedings against the respondent in the District Court of Western Australia claiming damages of $41,200 for breach of contract. Those proceedings have not been heard.
13 On 21 April 2004, the respondent issued bankruptcy notice 91 of 2004 (the second notice) pursuant to s 40(1)(g) of the Bankruptcy Act 1966 (Cth) (the Act). The Certified Copy of Judgment dated 26 February 2004 was attached to that notice.
14 The notice of 21 April 2004 was in the following form:
'This Bankruptcy Notice is prescribed, under subs. 41(2) of the Bankruptcy Act 1966 ("the Act"), by r 4.02 of the Bankruptcy Regulations.
To: HERCOLE PIETRO GENOVESE
("the debtor")
of: 32 Salisbury Street
BAYSWTER WA 6053
This Bankruptcy Notice is an important document. You should get legal advise if you are unsure of what to do after you have read it.
1. HOMESTYLE PTY LTD
("the creditor")
of: 4/22 Mount Street
PERTH WA 6000
Claims you owe the creditor a debt of $26,412.29, as shown in the Schedule.
β¦
Schedule
Column 1 Column 2
1. Amount of judgments or orders $28,422.69
Plus 2. Legal costs if ordered to be paid and a specific amount was not included in the judgments or orders (see Note 1, below)
Plus 3. If claimed in this Bankruptcy Notice, interest accrued since the date of judgments or orders (see Note 2, below) NIL
4. Subtotal $28,422.69
Less 5. Payments made and/or credits allowed since date of judgment or orders $2,010.40
6. Total debt owing $26,412.29
15 The bankruptcy notice wrongly stated the amount of the judgment was $28,422.69 when, in fact, the amount of judgment was then $28,724.14. It also credited the appellant with payments or credit of $2,010.40. The respondent creditor was described by its former name. As already observed, the respondent company had lawfully changed its name to BGC Constructions Pty Ltd on 9 July 2003. It retained the same ACN number.
16 A change of company name does not create a new legal entity: s 161(1)(a) of the Corporations Act 2001 (Cth). Nor does it render defective any legal proceedings brought by the company: s 161(1)(c). Any legal proceedings brought by the company in its former name may be continued in its new name: s 161(2).
17 On 18 May 2004 the appellant applied in the Federal Magistrates Court to set aside the second notice: WZ57 of 2004.
18 The grounds of the application were:
(1) the appellant had a cross-demand exceeding the amount claimed in the bankruptcy notice;
(2) the respondent was not a legal entity entitled to enter and enforce the judgment;
(3) the name on the bankruptcy notice was not the present name of the respondent.
19 On 23 July 2004 the appellant applied to a Master of the Supreme Court of Western Australia for an order nisi for a writ of certiorari to set aside the order made by consent in the Local Court. I have not seen that application and I have not been made aware of the grounds.
20 I was told by the appellant, who was unrepresented, that at some time he also lodged an appeal from the Magistrate's order to the District Court of Western Australia. I have not been told the grounds of the appeal. That appeal has not been heard.
Proceedings in the Federal Magistrates Court
21 The application to set aside the second notice was heard on 28 July 2004 in the Federal Magistrates Court by McInnis FM.
22 The Federal Magistrate received written submissions on 6 August 2004 and judgment was reserved.
23 On 17 August 2004 the respondent applied ex parte in the Local Court of Western Australia to amend the respondent's name on the judgment in the Local Court proceedings from Homestyle Pty Ltd to BGC Constructions Pty Ltd. That order was made on 18 August 2004.
24 On 18 August 2004 the appellant's application in the Supreme Court of Western Australia for an order nisi for the issue of a writ of certiorari was dismissed with costs.
25 On 25 August 2004, the respondent obtained a third Certified Copy of Judgment. Additional costs were included on that copy for a Chamber Summons and Warrant of Execution (costs). The sum of $2,010.40 was shown as having been paid into Court. The amount remaining due as disclosed in this Certified Copy of Judgment was $26,889.19.
26 On 8 September 2004, the appellant filed a Notice of Appeal in the Full Court of the Supreme Court of Western Australia, seeking to set aside the decision of a Master of the Supreme Court of Western Australia, refusing to grant the appellant an order nisi for a writ of certiorari to quash the order entered by the Magistrate in the Local Court of Western Australia. I have been provided with a copy of that Notice of Appeal. The grounds of appeal assert that the Master erred in not making an order nisi for the issue of a writ of certiorari to quash Boothman SM's order on the ground of that Magistrate's bias.
27 On the same day, and before judgment had been delivered on the first application, the respondent issued a third bankruptcy notice (number 247 of 2004) (the third notice) in the following form:
'This Bankruptcy Notice is prescribed, under subs. 41(2) of the Bankruptcy Act 1966 ("the Act"), by r 4.02 of the Bankruptcy Regulations.
To: HERCOLE PIETRO GENOVESE
("the debtor")
of: 32 Salisbury Street
BAYSWTER WA 6053
This Bankruptcy Notice is an important document. You should get legal advise if you are unsure of what to do after you have read it.
1. BGC CONSTRUCTION PTY LTD [sic]
ACN 008 783 248 (formerly known as
HOMESTYLE PTY LTD ACN 008
783 248)
("the creditor")
of: Level 6 18 Mount Street
PERTH WA 6000
Claims you owe the creditor a debt of $26,412.29, as shown in the Schedule.
β¦
Schedule
Column 1 Column 2
1. Amount of judgments or orders $28,422.69
Plus 2. Legal costs if ordered to be paid and a specific amount was not included in the judgments or orders (see Note 1, below)
Plus 3. If claimed in this Bankruptcy Notice, interest accrued since the date of judgments or orders (see Note 2, below) NIL
4. Subtotal $28,422.69
Less 5. Payments made and/or credits allowed since date of judgment or orders $2,010.40
6. Total debt owing $26,412.29
28 The notice specified the same debt as owing on the second notice. There are two differences between the two notices. First, the creditor's address in the second notice was given as Level 6, 18 Mount Street, Perth WA 6000, whereas the creditor's address in the first notice was given as 4/22 Mount Street, Perth WA 6000. More significantly, the creditor is identified in the second notice as BGC Construction Pty Ltd ACN 008 783 248 (formerly known as Homestyle Pty Ltd ACN 008 783 248), whereas the creditor in the second notice was given simply as Homestyle Pty Ltd.
29 It is not, in my opinion, without significance that the creditor is misdescribed in that third notice as 'BGC Construction Pty Ltd', rather than 'BGC Constructions Pty Ltd' which is its correct name.
30 On 10 September 2004, the respondent's solicitors wrote to the appellant enclosing the third notice:
'Enclosed is a bankruptcy notice, 247 of 2004, in respect of judgment and costs obtained in Local Court Plaint 18423 of 2001. Our client BGC Construction Pty Ltd (formerly known as Homestyle Pty Ltd) does not intend to proceed with bankruptcy notice 91 of 2004, the validity of which is currently being considered by the Federal Magistrates Court. Our client elects to proceed with the enclosed bankruptcy 247 of 2004.'
31 The appellant wrote to the respondent's solicitors on 10 September 2004, attaching a copy of his Notice of Appeal to the Full Court. It would seem then that at the time the respondent issued the third notice, it had not been informed of the appellant's intention to appeal.
32 The appellant was served with the third notice on 13 September 2004.
33 On 15 September 2004, the appellant wrote to the respondent's solicitors asserting that, because judgment was still pending on the second notice, the issue of a third notice was oppressive and an abuse of process. The appellant claimed that the respondent ought to have obtained leave of the Court before issuing a further bankruptcy notice. He wrote:
'Dear Sir
BANKRUPTCY NOTICE 247 OF 2004
I refer to your recent letter and enclosed bankruptcy notice. It is an abuse of process and oppressive for you to have taken the course of action you did. I find it is delivered in bad faith and embarrassing. The timing of your decision to elect not to proceed with bankruptcy notice 91 appears frustrated and belated for the following reasons;
1. I made application to appeal against bankruptcy notice 91 within 21 days of service on various grounds.
2. the Registrar extended time for compliance due to my application.
3. you gave notice that you objected and sought orders for and granted adjournment to cross appeal [respond].
4. orders were made for submissions to be filed by both parties.
5. you filed 2 extra submissions to support your case than were called for.
6. directions were made by registrar Stanley the matter go to a final hearing before Federal Magistrate McInnis on the 28 July 2004.
7. the hearing concluded and orders made for each party to file a further 2 page submission each on the question of issue of the ACN number.
8. Both parties subsequently filed the final submissions.
9. the matter has now concluded and awaits the reserved decision of the Court yet to be handed down.
Quite clearly it is an abuse of process for your client to elect to not proceed with a bankruptcy notice after it has been concluded by announcing that you have issued another no. 247 of 2004 without fir obtaining leave of the Court.
In any event you cannot issue a new bankruptcy notice unless the former notice 91 had not been proceeded with.
The assertion that you claim your client changed its name from Homestyle pty ltd to BGC Constructions pty ltd is not new one and has been pleaded by you in your previous submission in WZ 57 and his Worship is aware of it.'
34 On 22 September 2004, the respondent's solicitors wrote to the appellant in response to that letter:
'We confirm that on 13 September 2004 bankruptcy notice 247 of 2004 was served on you along with our covering letter of 10 September 2004 which clearly stated that BGC Construction Pty Ltd did not intend to proceed with bankruptcy notice 91 of 2004 rather, our client elected to proceed with bankruptcy notice 247 of 2004. The fact that the validity of bankruptcy notice 91 of 2004 is being considered by the Court does not affect our client's ability to elect to proceed with a further notice.
A second bankruptcy notice may be issued in respect of a judgment debt, where a prior notice in respect of the same debt has been issued and not proceeded with. See: Abignano v Wenkart (unreported) Federal Court, Ryan, Heerey, Tamberlin JJ, 13 November 1998.'
35 Notwithstanding that the respondent advised the appellant that it did not intend to proceed with bankruptcy notice 91 of 2004 it did not advise the Court. Mr Buchan, who appeared for the respondent on this appeal, said that his client had no obligation to advise the Court that it was not proceeding with the second notice. That is plainly wrong. The Court should have been advised, even if only as a matter of courtesy, that the bankruptcy notice was not being pursued. The Court would then not have given judgment and would not have ordered the appellant to pay the respondent's costs.
36 But, more than that, the respondent had an obligation to allow the second bankruptcy notice to be set aside so that the appellant could know that the bankruptcy notice, which he was obliged to satisfy, was the third notice.
37 On 27 September 2004, the appellant wrote to the Registrar of the Federal Magistrates Court:
'I write to inform you that as you know the above matter was heard 2 months ago with the decision to be reserved. [copy letter dated 30 June 2004 enclosed] The Bankruptcy notice in this matter was No. 91
On the 13 September 2004 I was served a new bankruptcy Notice No. 247 in the same matter, accompanied by letter dated 10 September 2004 from the creditors solicitor. [copy letter enclosed]
On the 15 September 2004 I wrote to Hotchkin Hanly to the effect that it is an abuse of process to issue another notice on the same issues when the former has been concluded and fully ventilated. [copy letter dated 15 September enclosed]
Mr Buchan contends that his client now elects not to proceed with bankruptcy notice 91 of 2004 but with notice 247 of 2004.
Bankruptcy notice 91 was issued on 21 April 2004.
"ditto" 8 Sept. 2004.
Nearly 5 months have elapsed between the issues of notice 91 and 247 and I contend that it is an abuse of process to assert that notice 91 has not been proceeded with at such a late stage when in reality it has run its course.
I would be pleased if you could give directions on procedure with respect to the issue of whether or not I need to comply with notice 247 given the information supplied hereto. My understanding is also that time to comply was extended to me and is still current because of my submission in WZ 57 on the ground of cross demand Section 41(7)
I have made enquiries to ITSA in respect to whether I need to comply with notice 247 and they have referred my enquiry to their legal department in the Eastern States for a ruling because they do not know at this stage.'
38 Because of later events, I assume this letter did not come to the attention of the Federal Magistrate.
39 On the same day the Registrar of the Federal Magistrates Court replied advising the appellant to obtain independent legal advice having regard to the time constraints in the bankruptcy notice.
40 On 30 September 2004, the appellant wrote again to the respondent's solicitors, advising them that he intended to dispute the validity of the third notice. He wrote:
'BANKRUPTCY NOTICE 247 OF 2004
I write to inform you that in accordance with the Bankruptcy Act 1966 Section 41 sub-section (5) I dispute the validity of the notice on the ground of the misstatement.
The amount claimed exceeds that allegedly due. There is inter alia an amount claimed that did not form part of and is outside the terms of the consent judgment. The computer generated CCJ dated 25 August 2004 is not accurate nor does it reflect the terms of the judgment or accord with the CCJ dated 26 February 2004. There was a praecipe for warrant of execution lodged by you on 12 March 2004 is for a greater amount.'
Second Proceedings in the Federal Magistrates Court β Bankruptcy Notice 247 of 2004
41 On 1 October 2004 the parties were advised by McInnis FM's associate that judgment would be handed down on 5 October 2004.
42 On that day, the respondent's solicitor arranged for a colleague within the firm to attend for the handing down of judgment. The respondent's solicitor was unavailable.
43 On the same day, the appellant brought proceedings to set aside the third bankruptcy notice.
44 The application sought the setting aside of the bankruptcy notice on the following grounds:
'1. The bankruptcy notice 247/04 is an abuse of process and be struck out.
2. The bankruptcy notice does not follow the terms of the judgment and be struck out.
3. The bankruptcy notice is invalid Section 41 sub-law (5) and be set aside.'
45 The grounds take up the matters raised by the appellant in his letters of 15 September and 30 September 2004 to the respondent.
46 The respondent had informed the appellant, prior to 1 October 2004, that it did not intend to proceed on the second bankruptcy notice and that it elected to proceed on the third notice. It was aware that the appellant had brought proceedings to set aside that third bankruptcy notice and that one of the grounds of the appellant's challenge was that the third bankruptcy notice was an abuse of process.
47 Nothing could be plainer, in my opinion, than that the respondent was under an obligation to bring to the attention of the Court, prior to the Court delivering judgment on the appellant's challenge to the second bankruptcy notice, that the respondent did not intend to proceed upon that notice; that a further notice had issued; and that that third notice was subject to challenge on the grounds stated in the proceedings issued on 1 October 2004.
48 If the respondent had brought those matters to the attention of the Court, the Court, in my opinion, would not have ruled upon the appellant's challenge to the second notice but would have set aside the second notice on the ground that the respondent did not intend to proceed with it and had elected to proceed on the third notice.
49 In those circumstances, the respondent, in my opinion, would not have been entitled to costs against the appellant in relation to the appellant's application to set aside the second bankruptcy notice because the notice was to be set aside on the motion of the respondent.
50 Indeed, the respondent may have had to meet whatever expenses the appellant had been put to in relation to the proceedings to set aside the second notice.
51 The respondent, however, took no steps whatsoever to notify the Court of those matters.
52 Judgment on the first application (WZ57 of 2004) was not handed down until 5 October 2004, which was also the date upon which the second application was listed for hearing before McInnis FM.
53 The Magistrate made the following orders in that first application:
1. The application to set aside the bankruptcy notice be dismissed.
2. The applicant shall pay the respondent's costs to be taxed in default of agreement pursuant to O 62 of the Federal Court Rules.
54 The appellant contends that during the hearing he advised the Federal Magistrate and the solicitor attending at the hearing that the respondent had withdrawn the notice the subject of decision which was about to be given and issued a new bankruptcy notice.
55 He said that the Federal Magistrate inquired of the solicitor present and she told him that she knew nothing about it.
56 In an affidavit sworn by that solicitor, she said that at the time she attended the hearing she had a very limited knowledge of the file and the matter. She said that the appellant did raise the matter of another application after the Federal Magistrate had given his decision. She agrees that she told the Federal Magistrate that she knew nothing about any further application and that, to her knowledge, the respondent had not been served with any application.
57 McInnis FM adjourned the hearing of the second application to 9 November 2004.
58 The appellant was given leave to file and serve an amended application, which he did on 12 October 2004. The amended application sought the following further relief in respect of the third bankruptcy notice:
'AND the applicant claims by way of interlocutory relief:
1. That the orders made 5 October 2004 in the matter of WZ 57 by FM McInnis be amended.
2. That orders be made the respondent bears all the costs for electing to discontinue bankruptcy notice 91 and application WZ 57 [F.M.C.R] Rule 13.02(1)'
59 The appellant's amended application claiming interlocutory relief is misconceived.
60 In my opinion, the appellant should have appealed from the decision of McInnis FM in which he dismissed the appellant's application to set aside the second notice and ordered the appellant to pay the respondent's costs.
61 In any event, the amended application was supported by two affidavits sworn by the appellant.
62 In his affidavit of 1 October 2004, which, of course, was sworn before McInnis FM made his orders in relation to the second notice, the appellant deposed:
'2. This bankruptcy notice was served on me on the 13 September 2004.
The Bankruptcy Notice is an Abuse of process
3. On the 13 September 2004 I was served with a bankruptcy notice and a cover letter from the respondent informing me that his client had ceased to proceed with b/n 91 of 2004 but elects to proceed with b/n 247 of 2004β¦
4. On the 15 September I wrote to the respondents solicitor objecting, and informing him that it was oppressive and in bad faith to issue a new notice without lodging a notice of discontinuance or obtaining leave from the Court to do soβ¦
5. I made enquiries to the Court as to whether a notice of discontinuance had been filed by the respondent. I was informed by the Registry that it wasn't. I was later informed that the file was no longer in Perth, that it was with Magistrate McInnis in Melbourne.
6. I thereafter wrote a letter to the Court asking for directions in respect to compliance with this notice given the uncertainty as described in the preceding paragraph. The respondent may have indeed filed a notice of discontinuance, unknown to me because the file was in Melbourneβ¦
The Bankruptcy Notice does not follow the terms of the judgment
7. The bankruptcy notice must follow the terms of the judgment. The applicant contends that the copy of the judgment, orders, and other proceedings attached to this notice is not a copy of a final judgment or order within the meaning of section 40 (1) (g) of the Bankruptcy Act 1966β¦
8. The applicant affirms that in the Local Court action he represented himself and Mr Buchan represented his client who claimed at all material times that he was known as Homestyle pty ltd. I was there on the 17 October 2003 when the consent judgment was entered. BGC Constructions pty ltd was not a party to the judgment that was merged. I contend that the copy of the CCJ submitted by the respondent in this application is not a true copy of the relevant judgment, but a document purporting to contain particulars of the judgment which are not clear.
9. The applicant has instituted proceedings for an appeal to set aside and quash the judgment in respect of which the bankruptcy notice was issued.
β¦
10. Bankruptcy notice invalid Section 41 sub law (5)
The bankruptcy notice does not accord with the terms of the judgment and the amounts claimed are erroneous. There is an interlocutory order that is not a final order that did not form part of the compromise of the consent judgmentβ¦
11. Cross demand
The applicant has full details of the cross demand which have been submitted in application WZ 57 and refers to his interlocutory order in this application for that file to be transferred onto the record of this application. The application WZ 57 is still under consideration by Federal Magistrate McInnis.
63 The last paragraphs of the appellant's affidavit must be a reference to the proceedings before McInnis FM which were decided on 5 October 2004.
64 In that affidavit the appellant appears to have taken three issues with the validity of the third notice.
65 First, he claimed that it was an abuse of the Court's processes because it issued while the first notice was still on foot and under consideration by McInnis FM. No election was made by the respondent until 13 September 2004 and no discontinuance was ever entered.
66 Secondly, the appellant claimed that the second notice was not fairly based on the Certified Copy of Judgment of the Local Court and that the Certified Copy of Judgment was not, in any event, an accurate record of the judgment entered on 17 October 2003.
67 Thirdly, the appellant argued that the creditor issuing the bankruptcy notice was not the entity in whose favour the judgment in the Local Court was awarded.
68 His second affidavit was sworn on 11 October 2004. In that affidavit the appellant has descended into argument. He has reiterated his claim that the second notice was an abuse of process. He argued that the decision of the Full Court of the Federal Court in Abignano v Wenkart supported this proposition. He further argued that the decision of the English Court of Appeal in Re a Debtor; Ex parte the Debtor v National Westminster Bank Plc [1983] 3 All ER 545 was authority for the proposition that it was improper to issue two bankruptcy notices with respect to the same debt without first electing not to prosecute the first issued notice.
69 He reasserted his argument that the second notice did not follow the terms of the judgment and 'β¦relies on the merger of the first judgment first recovered of the right to the remedy thereby given', citing Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. This argument seemed to be a subset of his third argument identified above.
70 On 19 October 2004 the respondent's solicitors wrote to the appellant in the following terms:
'We refer to your application to set aside the bankruptcy notice which was heard by McInnis FM on 28 July 2004.
Federal Magistrate McInnis delivered his judgment and published his reasons on 5 October 2004. We confirm that your application was dismissed and you were ordered to pay the respondent's costs of the application.
Our client has incurred costs of $6,160.00 in relation [sic] this application, however it is prepared to accept $5,500.00 to avoid the need to submit the questions of costs to taxation.
Please make payment of the sum of $5,500.00 in settlement of our client's costs within 7 days. If we do not hear from you within 7 days of the date of this letter we will assume that you are not prepared to agree costs and will file our client's Bill of Costs with the Federal Magistrates Court for taxation. The taxation will incur our client additional costs which it will seek to cover [sic] from you in the event that costs cannot be agreed.'
71 The appellant's evidence was that he responded to that letter on 20 October 2004 in the following terms:
'I refer to your letter dated 10 October 2004 asking for your clients costs.
I am not prepared to pay anything because you told me your client abandoned the above matter and did not wish to proceed with it.
On the 5 October 2004 I told FM McInnis you withdrew in the above matter and issued me a new bankruptcy notice. He said he didn't know anything about it at all. He asked your Ms Gogoulis for an explanation and she told him she new [sic] nothing either. It would appear you were the only person who knew, and you weren't telling anybody else.
I advise that by letter dated 10 September 2004 prior to judgment, you wrote to me and asserted that your client did not wish to proceed in the above matter, had changed its name and elected to proceed in a new matter under that name.
By further letter to me dated 22 October 2004 you reiterated that your client clearly did not wish to proceed in the above matter but wished to proceed in its new name BGC Constructions pty ltd under a new bankruptcy notice which was served on me 13 September 2004.
Your client has exercised his choice of not proceeding in the former matter B/N 91 WZ 57 prior to its determination, and proceeded with a new matter B/N 247 of 2004. He is bound by election estoppel and thus barred from any of the fruits of the judgment of that action.'
72 The letter serves to confirm that McInnis FM was unaware of the contents of the previous letter written by the appellant.
73 If what the letter says is right, it would seem that the respondent's solicitor was unaware of the election which had been made.
74 The appellant's reference to the letter of 22 October 2004 is a mistake. Clearly enough, he was referring there to the respondent's solicitor's letter of 22 September 2004.
75 At some stage, on 5 October 2004, McInnis FM was aware that the further bankruptcy notice had issued but he would not have been aware, unless he had received the appellant's letter of 27 September, that the respondent had elected to proceed on the third notice and not to proceed on the second.
76 On 26 October 2004 the respondent filed its Bill of Costs in the matter WZ57 of 2004 in relation to the second notice for taxation.
77 The second application was heard by McInnis FM on 9 November 2004 and was dismissed. The Federal Magistrate delivered ex tempore reasons.
78 McInnis FM identified the claims made by the appellant and addressed his argument that the issue of the second notice was an abuse of process. He said:
'6. In one sense the arguments raised in the amended application to set aside filed 12 October 2004 have a superficial attractiveness in the sense that what the applicant claims is that the second notice is an abuse of process. He otherwise argues that it doesn't follow the terms of the judgment and should be struck out. It is clear to me that on a proper analysis of the two bankruptcy notices that they are in fact almost identical, save and except that what appears to have occurred is that the certified judgment now relied upon has been corrected or regularised so that the name of the plaintiff relied upon in the certified copy of the judgment in support of the second bankruptcy notice is now the changed name, that is, "BGC Constructions Pty Ltd".
7. Likewise the second notice itself reflects that change of name and refers to the creditor as "BGC Constructions Pty Ltd" ACN 008 783 248, formerly known as "Homestyle Pty Ltd" ACN 008 783 248. What is perfectly clear to me on a proper reading of the documentation is that there has simply been a change of name. It is important to understand a change of name of creditor is not the same as an entirely different entity with an entirely different ACN number.'
79 Although McInnis FM was somewhat critical of the respondent's conduct in issuing the third notice without informing the Court of its election not to proceed with the second notice, he was satisfied that the procedure was adopted to address the appellant's argument that the second notice was bad because the creditor was described by its former name of Homestyle Pty Ltd. He said:
'12. In this case I accept that the second notice has been issued in an attempt to regularise the issues which were then of concern to the creditor notwithstanding that this court had reserved its judgment. It is not a practice to be encouraged and whilst I am not prepared to find it is an abuse of process it seems to me that where a court has reserved its decision in a pending application seeking to set aside one bankruptcy notice it is not desirable for a creditor to then issue, without advice to the court, a second bankruptcy notice and by correspondence indicate that it elects to rely upon the second bankruptcy notice and to no longer rely upon the first bankruptcy notice.
13. Whilst that may not be an abuse of process in one sense, given that the application which was the subject of a reserved decision was an application by the debtor to set aside the first bankruptcy notice it nevertheless in my view is desirable that creditors who make an election of that kind permissible by law should at the very least advise the court accordingly and perhaps the matter could then have been resolved without the need for a formal decision being delivered.
14. Nevertheless, the chronology of events that has occurred does not of itself preclude the creditor from issuing the second bankruptcy notice issued out of an abundance of caution and perhaps what might be described as a 'fallback position' should the first decision of the court be in favour of the applicant debtor to set aside the first notice.
15. However, the correspondence indicating that an election has been made goes beyond creating a fallback position but rather indicates that a second bankruptcy notice having been issued the creditor then elected to rely upon that notice and not the first notice which was the subject of the reserved decision. As I have made clear I am not prepared to find that that is an abuse of process or that other steps necessarily as a matter of law should have been taken by the creditor in relation to that first notice and the proceedings then the subject of a reserved decision.
16. Nevertheless it is my view undesirable for the creditor to conduct itself in that manner. This is a particularly difficult process for unrepresented parties and whilst I have made a decision unfavourable to the applicant debtor it is clear to me that there is at least a potential for a degree of confusion in his mind as to what may or may not be permissible by a creditor under the Bankruptcy Act in relation to issuing more than one bankruptcy notice.
17. I should add that in fairness to the respondent creditor once having issued a second notice it would not be proper for it to then leave in abeyance the issue of which of those bankruptcy notices it elected to proceed with in order to ultimately take further action by way of a creditor's petition if that was thought appropriate and if necessary, having regard to the period of time allowed for in the second notice. It would in fact be an abuse of process to have two bankruptcy notices current and not elect to pursue one or other of those bankruptcy notices.
18. Hence as I have indicated I am not prepared to find that the process is an abuse of process and indeed the opposite would be true had an election not been made. My only concern is that where there is a pending application subject to a reserved decision it would be desirable for creditors to advise the court accordingly. In any event that did not occur. The current amended application in my view does not therefore have any basis on which this court can act in terms of setting aside the second notice as I have found there is no abuse of process.'
80 There is no doubt that the respondent informed the appellant that it did not intend to proceed on the second notice and that it elected to proceed on the third notice.
81 The real question in this case is whether its subsequent conduct in failing to advise the Court and obtaining an order for costs in relation to that second notice was consistent with the election which it said it had made.
82 The respondent also sought the costs of the appellant's application to set aside the third notice.
83 The Federal Magistrate said:
'21. β¦It is not appropriate that I should revoke an earlier order for costs in my view. However, the existence of those proceedings and the fact that they were pending at the time when the second notice was issued and an election made in relation to that second notice in my view is a relevant matter to take into account.
22. In my view there is some force in the submission made by the applicant debtor as to the undesirability of two sets of costs in all the circumstances. The issue of costs is a matter of discretion. I am mindful of the fact that they normally follow the event. In an application to set aside the second notice which has been unsuccessful it would normally be the case that those costs would follow the event with the applicant being required to pay the respondent's costs of and incidental to the application to set aside.
23. However, having regard to the undesirability of the lack of notice to the court of the issuing of a second notice and an election to rely upon that notice it seems to me that as a matter of fairness between the parties the court should make no order as to costsβ¦'
84 The Federal Magistrate's reasons, in my opinion, highlight the difficulty which the respondent's conduct caused by purporting to elect to proceed on the third notice but, at the same time, seeking orders in respect of the second notice.
85 The respondent did not file any affidavits in the proceedings before the Federal Magistrate. In those circumstances, the respondent did not further explain the reasons why the third bankruptcy notice was issued.
86 Initially, when this appeal was called on, the only information before me was contained in the two affidavits relied upon by the appellant in the Federal Magistrates Court.
87 During the hearing of this appeal I raised with Mr Buchan the status of the order for costs made in relation to the appellant's proceedings to set aside the second notice.
88 I was advised not only that the order for costs made in relation to those proceedings not been discharged but that in fact the respondent had taxed its costs and had taken steps to recover those costs from the appellant.
89 I adjourned the hearing of the appeal so that the appellant could establish the facts necessary to prove what steps the respondent had taken subsequent to the order of McInnis FM on 5 October 2004.
90 The respondent did not object to the Court receiving a further affidavit of the appellant in which he exhibited a number of documents to which I have referred in these reasons, which establish some of the events on 5 October 2004 and the events subsequent to that date.
91 In fact, the respondent also filed and read two affidavits, one of Mr Buchan and the other of the solicitor who attended the hearing on 5 October when McInnis FM made the orders to which I have already referred.
92 Mr Buchan says in his affidavit:
'8. The Respondent's decision to pursue its costs on application WZ 57/2004 was based solely on the fact that a costs order had been made in the Respondent's favour and the Respondent considered it was entitled to recover those costs. I did not consider that pursuing the costs order made in respect of WZ 57/2004, after the Respondent had elected to proceed with Bankruptcy Notice 247 of 2004 by its letter of 10 September 2004 (annexed to the affidavit of the Appellant sworn 1 October 2004 and marked HPG1) in any way affected its election to proceed with Bankruptcy Notice 247 of 2004.'
93 Mr Buchan does not depose to why his client did not advise or cause the Federal Magistrate to be advised that the respondent was not proceeding with the second notice and had elected to proceed on the third notice.
94 The appellant, of course, requested me to have regard to the further matters contained in his third affidavit filed on this appeal. He did not object to me having regard to the matters contained in the respondent's affidavits.
95 The respondent conceded that I should have regard to the facts contained in the appellant's affidavit leading up to the Federal Magistrate's decision on 9 November 2004.
96 This appeal is an appeal by way of rehearing and the Court can receive further evidence: Farrington v Deputy Commissioner of Taxation [2002] FCA 1013.
97 I do not intend to accept evidence of events which occurred after the Federal Magistrate's decision because those facts could not have impacted upon that decision.
THE APPEAL TO THIS COURT
98 On 1 December 2004, the appellant filed a notice of appeal in this Court. On 13 December 2004, an amended notice of appeal was filed. In summary, the appellant claims that McInnis FM erred in that:
Β· The Certified Copy of Judgment of 25 August 2004 does not accurately reflect the original judgment and therefore, the third notice does not follow the terms of the judgment.
Β· The issue of a third notice whilst determination of the validity of the second notice was reserved amounted to an abuse of process.
Β· The respondent ought not have been entitled to prosecute proceedings under whatever name it saw fit, having changed its name in July 2003.
Β· The costs order made in respect of the application to set aside the second notice should have been set aside because it was those proceedings that the respondent chose not to pursue.
99 A creditor is entitled to issue a second bankruptcy notice to cure a defect in a previous bankruptcy notice: Abignano & Anor v Wenkart [1998] FCA 1468; In re Fredericke and Whitworth; Ex parte Hibbard [1927] 1 Ch 253. The authority to which the appellant referred Re a Debtor; Ex parte the Debtor v National Westminster Bank Plc is not to the contrary.
100 If a creditor adopts such a course the creditor must elect as to which bankruptcy notice the creditor intends to proceed so that the debtor knows with which bankruptcy notice he or she must comply: Abignano v Wenkart.
101 In that case, the Full Court of this Court (Ryan, Heerey and Tamberlin JJ) said at 4:
'We also consider that, where the same creditor issues two bankruptcy notices, one after the other, the creditor is required to make an election as to which bankruptcy notice it is with which the debtor is required to comply.'
102 The respondent says that it did what it was obliged to do when it advised the appellant on 10 September and 22 September that it was electing to proceed on the third bankruptcy notice.
103 I think the notice given to the appellant was unequivocal in that the respondent intended to rely upon the third bankruptcy notice and no longer proceed with the second bankruptcy notice.
104 However, the respondent's subsequent actions were inconsistent with the claimed election. First, it did not notify the Court that it no longer wished to proceed upon the second bankruptcy notice. Secondly, it allowed the Court to make orders dismissing the appellant's proceedings to set aside the second bankruptcy notice and ordering the appellant to pay the respondent's costs. If the respondent had notified the Court that it no longer wished to proceed with the bankruptcy notice then, clearly, the Court would not have made orders dismissing the appellant's proceedings to set aside the second notice, nor would the Court have awarded the respondent its costs. Thirdly, the respondent has tried to recover those costs. It seems to me that the respondent's conduct is inconsistent with its claimed election.
105 The purpose of a bankruptcy notice is to put the debtor clearly on notice of the identity of the judgment creditor and the amount of the judgment so that the debtor can meet that judgment and avoid committing an act of bankruptcy. In other words, its purpose is to inform the debtor who and what he/she must pay to avoid an act of bankruptcy.
106 In those circumstances, the judgment creditor must avoid creating confusion in the debtor's mind which might lead the debtor to either pay an incorrect amount or a correct amount to an incorrect party.
107 It is for that reason that the Full Court of this Court concluded that the judgment creditor must elect as to which bankruptcy notice it requires the debtor to comply.
108 In my opinion, the respondent's conduct in this case was to create the confusion which an unequivocal election would have avoided. On the one hand, it told the appellant that it was relying upon the third notice but, on the other hand, proceeded in the Court to obtain orders in respect of the second notice including orders for costs. The order it obtained dismissing the appellant's application to set side the second notice meant that the second notice was held to be valid at the same time as the respondent disavowed any reliance upon it.
109 The respondent argued that the abuse of process would only be complete when the order for costs was enforced.
110 I do not agree with that argument. The abuse of process was complete when the respondent allowed the Federal Magistrate to give his decision on 5 October 2004. The respondent did not intend to rely upon that notice and it was an abuse of process to allow the Court to think it was still relying on the notice and obtaining the Court's opinion on the validity of that notice. More particularly, from the appellant's point of view, the further abuse was obtaining an order for costs in circumstances where the appellant had been told that the respondent had no intention of relying upon the second notice.
111 During the hearing of the appeal, Mr Buchan advised me that the respondent would not seek to enforce the order for costs made by the Federal Magistrate.
112 For the reasons already given, I think that is appropriate. Indeed, I think the respondent should apply to the Federal Magistrate to have the order revoked.
113 However, I do not think that the respondent's acknowledgement that it would not enforce the order for costs is a factor which ought to be taken into account in favour of the respondent on this appeal.
114 For the reasons already given, I think the abuse of process was complete on 5 October 2004 when the respondent acted inconsistently with its claimed election.
115 The respondent also argued that its conduct in failing to advise the Federal Magistrate that it did not intend to rely upon the second notice and obtaining the order for costs was not inconsistent with its election because it was not thereby, in obtaining those orders, pursuing or proceeding upon the second notice insofar as it was not relying upon the second notice as an act of bankruptcy.
116 In my opinion, that is not a matter upon which the respondent can rely in defence of the appellant's claim that the respondent has abused the Court processes.
117 Indeed, when analysed, that argument only supports the appellant's contention. If the respondent was not relying upon the second notice, as indeed it was not, why did it allow the Magistrate to pronounce upon the validity of the notice and order the appellant to pay the respondent's costs?
118 In my opinion, that argument rather highlights the inappropriateness of the respondent's conduct.
119 In my opinion, the respondent's conduct does amount to an abuse of process and the appellant should be entitled to succeed on that ground.
120 The appellant also argued that the third notice is invalid because the original judgment in the Local Court was entered in favour of the respondent under its previous name. The appellant argues that he never had any dealings with the appellant under the name of BGC Constructions Pty Ltd.
121 The respondent is the same entity which obtained a judgment against the appellant, albeit under a different name. Its change of name did not in any way affect the validity of the judgment it obtained under its previous name. That argument is misconceived.
122 The appellant admitted during argument that he was aware that Homestyle Pty Ltd had changed its name to BGC Constructions Pty Ltd on 9 July 2003. Indeed, that was one of the grounds of challenge to the second notice.
123 It follows, of course, that he was aware of the change of name of the respondent prior to receiving the third notice.
124 If he had not been aware of that matter he might have been entitled to say that the notice was invalid because the judgment creditor was styled under a different name to the judgment creditor which obtained judgment on 17 October 2003. In Re Hansen; Ex parte Hansen (1985) 4 FCR 590, a bankruptcy notice incorrectly described the judgment creditor by its former name when by the date of the notice its name had been changed.
125 In that case, Beaumont J concluded that the notice was bad because it did not bring to the debtor's attention that the judgment creditor, described in the notice, was the same judgment creditor who had obtained judgment against the judgment debtor.
126 In this case, the notice does properly describe the judgment creditor's previous name, Homestyle Pty Ltd.
127 Again, that argument highlights the inappropriateness of the respondent's conduct.
128 However, as I have already said, the debtor in this case was not misled by the description of the respondent in the notice because he was well aware that the respondent had changed its name on 9 July 2003 prior to receipt of the third notice.
129 As I have already observed, the respondent is incorrectly described in the third notice as 'BGC Construction Pty Ltd' rather than 'BGC Constructions Pty Ltd'.
130 The appellant did not rely upon that misdescription, I think only because he did not notice it. Bankruptcy notices are to be construed strictly because of the consequences that flow from debtors' failure to comply with a notice: In re a Judgment Debtor [1908] 2 KB 474.
131 However, if the misdescription of the respondent's name by the use of the word 'Construction' rather than 'Constructions' had been the only matter relied upon, I would not have allowed the appeal.
132 The appellant also argued that the bankruptcy notice is for a greater amount than judgment was given. The bankruptcy notice reflects the amount shown in the certified copy of the judgment. There is nothing in that point.
133 In my opinion, the Federal Magistrate should have found that, notwithstanding the respondent's claimed election to rely on the third notice, in fact, the respondent had, by its conduct, purported to rely on both the second and third notices and in those circumstances the issue of the third notice was an abuse of process.
134 The third notice should be set aside.
135 In my opinion, the appeal should be allowed and there be an order that the third notice is set aside.
I certify that the preceding one hundred and thirty five (135) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander.
Associate:
Dated: 11 March 2005
Counsel for the Appellant: The Appellant appeared in person
Counsel for the Respondent: Mr A Buchan
Solicitor for the Respondent: Hotchkin Hanly
Date of Hearing: 28 February 2005; 4 March 2005
Date of Judgment: 11 March 2005
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federal_court_of_australia:fca/single/1997/1997fca1261
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Greenhalgh, Edward Rex & Anor v D'Emilio, Vincent & Anor [1997] FCA 1261
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/1997/1997fca1261
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2024-09-13T22:45:45.290047+10:00
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IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY QG 201 of 1987
BETWEEN: EDWARD REX GREENHALGH and BARBARA ANNE GREENHALGH
Applicants
AND: VINCENT D'EMILIO and MARGARET ANNE D'EMILIo
RespondentS
JUDGE: COOPER J
DATE OF ORDER: 11 NOVEMBER 1997
WHERE MADE: BRISBANE
THE COURT ORDERS THAT:
1. The application is dismissed.
2. Costs of this application are reserved.
On the notice of motion filed by leave by the applicants in court on 11 November 1997 THE COURT ORDERS THAT:
1. Until further order, the respondents and each of them whether by themselves, their servants, agents or otherwise howsoever be restrained from removing from the jurisdiction, disposing of, mortgaging, assigning, charging, in any way diminishing the value of or otherwise dealing with any of the following :-
(a) real property being Lot 3 on RP 724177 County of Herbert Parish of Conway, Title Reference 20804166;
(b) a Mercedes Benz car registration number 706-CWW;
(c) a Toyota Prado car registration number 993-DTR;
(d) the vessel "Aquascope";
(e) the vessel "Dream Merchant";
(f) the vessel "Otello";
(g) the vessel "Apollo";
(h) any interest whether legal or equitable in the business "Leisure Sailing Whitsunday" or a business formerly known as "Leisure Sailing Whitsunday";
(i) any interest whether legal or equitable in the business "Apollo Charters" or a business formerly known as "Apollo Charters";
(j) any interest whether legal or equitable in the company "Apollo Charters Pty Ltd";
(k) the present net proceeds in the direct or indirect possession, power or control of either or both of them resulting from any dealing in respect of any of the abovementioned assets;
2. Costs of the notice of motion be reserved.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY QG 201 of 1987
BETWEEN: EDWARD REX GREENHALGH and BARBARA ANNE GREENHALGH
ApplicantS
AND: VINCENT D'EMILIO and MARGARET ANNE D'EMILIo
RespondentS
JUDGE: COOPER J
DATE: 11 NOVEMBER 1997
PLACE: BRISBANE
REASONS FOR JUDGMENT
(ex tempore)
This is an application by the respondents to vacate the trial dates which were set in September 1997, for a trial commencing 24 November 1997.
The original proceedings were brought by application and accompanying statement of claim, both filed in this court on 4 November 1987. A defence was filed in January 1988. The matter then seems to have languished until some action was taken in 1991.
By 1995 the respondents had changed solicitors and new solicitors were engaged in October 1995. In June 1996, a notice of termination of retainer was filed indicating that the respondents intended to act in person in relation to the matter thereafter.
On 17 May 1996, Spender J made orders which would have led to a trial of this action if mediation failed. A mediation was held before a Registrar of this Court on 10 June 1997. At that time, the respondents were acting on their own behalf, having on 15 May 1997 and 5 June 1997 filed notices to that effect.
The mediation process was unsuccessful and the matter was brought to my attention in early September 1997. On 2 September 1997 a member of my staff contacted the respondents by telephone and was advised that the matter was ready for trial and that any time during the week commencing 24 November 1997 would be a suitable time for trial. Mr D'Emilio advised that all affidavit material had been filed. This information was then confirmed to the respondents by facsimile of the same date. Mr D'Emilio agrees that the above conversation did in fact occur.
The first suggestion that the matter would not proceed to trial on the dates set was an approach made to the Court by Mr D'Emilio on or about 28 October 1997 when Mr D'Emilio advised a court officer that the respondents wished to engage legal representation which they could not afford at that time, and because they were then waiting for some documentation from the applicants. They were advised that a formal application would have to be made to the Court, supported by affidavit material. The affidavit in support puts the request for an adjournment on the basis that there has been a change of heart, and the respondents now wish to be legally represented on the trial of the action, but that they are not in a financial position to engage or pay for legal representation.
Mr D'Emilio also advises that a former solicitor is holding a lien over certain documents required at trial. In my view, that circumstance would not prevent the documents, if they are required, being produced upon trial by the issue of an appropriate subpoena to the solicitors.
The respondents say that in six months time they hope to be in a position to engage legal representation and litigate the matter, having, by that time, earned sufficient funds to pay an estimated $30,000 for the cost of trial.
The applicants have filed material which shows that there remains in the name of the respondents substantial property including vessels and real estate which prima facie ought to be available for the purpose of either obtaining credit or funds to conduct the litigation. Material has been filed by the respondents indicating that the property has been sold and that, it is asserted, there has been a default on the part of a solicitor which has led to the transfers not being registered. Be that as it may, there is on the material $300,000 not accounted for, other than Mr D'Emilio asserting that the money has been paid to a third party to pay out a loan.
If one accepts at face value what the respondents say, that is that they have no funds, then there is no real likelihood on the material that the position will be any different in six months time, nor is there any real prospect that the issues will change. The issues essentially are factual issues; there are no major questions of law involved. The issues in dispute have been known to the respondents for a considerable period of time, and they have previously been prepared to conduct their own litigation. I am not persuaded that they are unable to adequately represent their own interests, nor is there is any point in adjourning the matter over for a period of six months at this stage, simply weeks before trial.
Whether or not the assets are truly available to the respondents is a matter which I do not take into account in coming to this view. I am simply not satisfied that the respondents ought to be allowed now to resile from the position they took at the time when they were approached as to the setting down of the matter. Accordingly, the application is dismissed, and the trial will proceed on 24 November 1997
Costs of this application are reserved.
I certify that this and the preceding two (2) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Cooper
Associate:
Dated: 11 November 1997
Counsel for the Applicant: A B Crowe
Solicitor for the Applicant: Hunt & Hunt
Respondent in person (by telephone): Mr D'Emilio
Date of Hearing: 11 November 1997
Date of Judgment: 11 November 1997
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2010-04-01 00:00:00
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Police Federation of Australia v Nixon [2010] FCA 315
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2010/2010fca0315
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2024-09-13T22:45:45.809038+10:00
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FEDERAL COURT OF AUSTRALIA
Police Federation of Australia v Nixon [2010] FCA 315
Citation: Police Federation of Australia v Nixon [2010] FCA 315
Parties: POLICE FEDERATION OF AUSTRALIA and THE POLICE ASSOCIATION v CHRISTINE NIXON and STATE OF VICTORIA
File number(s): VID 1213 of 2007
Judge: RYAN J
Date of judgment: 1 April 2010
Catchwords: PRACTICE AND PROCEDURE β Discovery β statutory immunity from production β public interest immunity from production β factors to be weighed
PRACTICE AND PROCEDURE β Discovery β immune categories β editing and redaction β Jackson v Wells order
Legislation: Acts Interpretation Act 1901 (Cth) s 15AB
Interpretation of Legislation Act 1984 (Vic) s 35
Police Regulation Act 1958 (Vic) ss 86A, 86L, 86LA
Whistleblowers Protection Act 2001 (Vic) ss 3, 5, 6, 12, 22
Federal Court of Australia Rules, O 15
Cases cited: Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1955) 72 WN (NSW) 250
Commonwealth v John Fairfax & Sons Ltd & Ors (1980) 147 CLR 39
Commonwealth v Northern Land Council (1991) 30 FCR 1
Harman v Secretary of State for Home Department [1983] 1 AC 280
Jackson v Wells (1985) 5 FCR 296
Mackay Sugar Co-Operative Association Ltd v CSR Ltd (1996) 63 FCR 408
Police Federation of Australia v Nixon [2008] FCA 467
Police Federation of Australia v Nixon [2008] FCA 752
R v Chief Constable of West Midlands Police; Ex parte Wiley [1995] 1 AC 274
Royal Women's Hospital v Medical Practitioners Board of Victoria (2006) 15 VR 22
Sankey v Whitlam (1978) 142 CLR 1
Taylor v Anderton [1995] 2 All ER 420
Universal Salvage Pty Ltd v Louis Dreyfus Armateurs SNC [2006] FCA 116
UWA v Gray (No 8) [2007] FCA 89
WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175
Date of hearing: 9 September 2009
Place: Melbourne
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 40
Counsel for the Applicants: Mr H Borenstein SC with Ms F Gordon
Solicitor for the Applicants: Slater & Gordon
Counsel for the Respondents: Mr F Parry SC with Mr R Dalton
Solicitor for the Respondents: Freehills
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION VID 1213 of 2007
BETWEEN: POLICE FEDERATION OF AUSTRALIA
First Applicant
THE POLICE ASSOCIATION
Second Applicant
AND: CHRISTINE NIXON
First Respondent
STATE OF VICTORIA
Second Respondent
JUDGE: RYAN J
DATE OF ORDER: 1 APRIL 2010
WHERE MADE: MELBOURNE
THE COURT ORDERS THAT:
1. The first respondent by 16 April 2010 deliver to the Associate to Ryan J in a sealed envelope or other container a clear copy of each of the documents enumerated in Appendix A to the reasons of the Court published this day, other than the documents numbered 54 and 74.
2. The second respondent by 16 April 2010 deliver to the Associate to Ryan J in a sealed envelope or other container a clear copy of each of the documents enumerated in Appendix B to the reasons of the Court published this day.
3. The applicants' motion on notice dated 30 July 2009 be otherwise refused.
4. It be declared that the first respondent is not required to conduct further searches for electronic documents stored on Victoria Police "G drives".
5. Item 10 of the applicants' list of categories of documents to be discovered by the respondents be deleted and replaced with "The final signed version of the 2006 Agreement referred to in paragraph 76 of the second further amended statement of claim".
6. The respondents' motion on notice dated 30 July 2009 be otherwise refused.
7. There be a further directions hearing herein on a date to be fixed after the Court has completed its inspection of the documents ordered by paragraphs 1 and 2 above to be produced to it.
8. Liberty be reserved to any party to apply on not less than 48 hours' notice in writing to the other parties.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court's website.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION VID 1213 of 2007
BETWEEN: POLICE FEDERATION OF AUSTRALIA
First Applicant
THE POLICE ASSOCIATION
Second Applicant
AND: CHRISTINE NIXON
First Respondent
STATE OF VICTORIA
Second Respondent
JUDGE: RYAN J
DATE: 1 APRIL 2010
PLACE: MELBOURNE
REASONS FOR JUDGMENT
1 I have previously published two sets of reasons on interlocutory aspects of this application: Police Federation of Australia v Nixon [2008] FCA 467, and Police Federation of Australia v Nixon [2008] FCA 752. I intend that the present reasons should be read in conjunction with the earlier reasons, which will obviate the need to rehearse again the factual background to the proceedings.
2 Now before the Court are two motions on notice, each dated 30 July 2009. The applicants move the Court for orders, so far as is relevant:
1. That the First Respondent produce for inspection by the Applicants the documents listed in Part 2 of Schedule 1 of the First Respondent's Final List of Documents dated 27 July 2009.
2. That the Second Respondent produce for inspection by the Applicants the documents listed in Parts 2 and 3 of Schedule 1 of the Second Respondent's Final List of Documents dated 28 July 2009.
3. That the First Respondent file and serve a supplementary affidavit of documents providing further and better discovery in relation to the documents referred to in paragraphs 17 to 23 of the First Respondent's Final List of Documents dated 27 July 2009.
The respondents, in turn, move for orders, again, so far as are relevant, that;
1. The first respondent is not required to conduct further searches for electronic documents stored on "G drives";
2. Item 10 of the applicants' list of categories of documents be deleted and replaced with 'The final signed version of the 2006 Agreement referred to in paragraph 76 of the SFASOC';
3. On or before 11 September 2009, the applicants file and serve a supplementary list of documents in accordance with Order 15 rule 6 and Form 22 in respect of any documents upon which they intend to rely;
4. On or before 11 September 2009, the respondents file and serve a supplementary list of documents in accordance with Order 15 rule 6 and Form 22 in respect of any documents upon which they intend to rely, and in respect of any documents found by the first respondent in the remaining searches described in paragraphs 12 to 21 to the affidavit of Stuart Roy McKenzie sworn 27 July 2009;
5. On or before 21 September 2009, the parties make the discovered documents available for inspectionβ¦
3 Schedule 1 Part 2 of the first respondent's Final List of Documents is reproduced as Appendix A to these reasons and comprises documents to which I shall collectively refer as the Schedule 1 Part 2 Documents. Those documents have been described in an affidavit by Mr McKenzie of the Legal Services Department of the Victoria Police sworn 27 July 2009, as "various documents constituting part, or copies of a part, of a Victoria Police investigation file (including electronic copies of documents) contained on the investigation file and diary notes". Mr McKenzie, touching on several points to which it will be necessary to return, then deposes that;
7. The investigation file was established by the Ethical Standards Department in response to a complaint received by Assistant Commissioner Luke Cornelius in early 2006. The complaint related to alleged bullying in relation to a member of the Victoria Police. The allegations of bullying were capable of constituting breaches of discipline, which in turn fell within the definition of 'serious misconduct' within the Police Regulation Act 1958 (Vic) (PR Act). In June 2006, this investigation was expanded to investigate further allegations of serious misconduct relating to alleged victimisation.
8. Pursuant to s.86LA of the PR Act, if a member of the force makes a complaint to a member of the force, of a more senior rank, about the serious misconduct of another member (other than the Chief Commissioner), then the WP Act is taken to apply as if the complaint were a 'protected disclosure' made to the Chief Commissioner under Part 2 of the WP Act.
9. In the course of searching for relevant documents, I have caused to be reviewed the documents enumerated in Part 2 of Schedule 1, and I am advised that each of those documents is a document that contains information received in the course of or as a result of a protected disclosure under the WP Act.
10. In the present circumstances, in which the First Respondent is providing discovery of documents in the current Federal Court of Australia proceedings, there is no exception in s.22 of the WP Act that permits the First Respondent to disclose the documents enumerated in Part 2 of Schedule 1.
11. Further, there are documents enumerated in Part 2 of Schedule 1 which disclose the identity of, or are reasonably capable of disclosing the identity of, an internal informant/complainant or a witness to an internal Victoria Police investigation. These documents include records of the relevant complaints, witness statements and briefing notes regarding the status of the investigation. Aside from s.22 of the WP Act, documents of this type are precluded from discovery and inspection because they are subject to public interest immunity. This is because investigations of police misconduct would be seriously undermined and compromised if informants and witnesses did not have confidence that their identity could be protected if they provided information.
4 The second respondent, the State of Victoria, has also filed a final list of documents and has objected to producing documents enumerated in Parts 2 and 3 of Schedule 1 to that list. The documents in Part 2 of Schedule 1 to the second respondent's list are said to be subject to public interest immunity while those in Part 3 are said to be irrelevant. As well, documents in Part 3 numbered 24 to 40, and 43, 50, 51, 52 and 54 are claimed to be subject to public interest immunity. Parts 2 and 3 of Schedule 1 to the second respondent's list of documents are reproduced as Appendix B to these reasons.
5 The respondents' contention, foreshadowed in Mr McKenzie's affidavit and put in submissions, is that the Schedule 1 Documents are immune from discovery by s 22 of the Whistleblowers Protection Act 2001 (Vic) ("the W P Act"), and, if there be any which are not excluded from production by that provision, by public interest immunity afforded by the general law. It is convenient to consider first the operation of the W P Act.
The Whistleblowers Protection Act 2001 (Vic)
6 The purposes of the W P Act, are, by s 1, to encourage and facilitate disclosures of improper conduct by public officers and bodies, to provide protection to those who make disclosures or who may be affected by disclosures, and to provide for the matters disclosed to be investigated and dealt with. Of importance to the matter currently before the Court is s 22, which prohibits, subject to the exceptions in s 22(1)(a), the disclosure of information received in circumstances which constitute it a "protected disclosure", or where in the information is connected with the "investigation of a disclosed matter". The section provides, in relevant part:
22. Offence to reveal confidential information
(1) A person who obtains or receives information in the course of or as a result of a protected disclosure or the investigation of a disclosed matter under this Act must not disclose that information except for the purposes ofβ
(a) the exercise of the functions under this Act of the President of the Legislative Council, the Speaker of the Legislative Assembly, the Ombudsman, the Deputy Ombudsman, the Chief Commissioner of Police or a public body; or
(b) any report or recommendation to be made under this Act; or
(c) any report referred to in Part 9; or
(d) any proceedings in relation to an offence against section 60 or section 106 or this section or section 19 of the Evidence Act 1958; or
(e) any criminal or disciplinary proceedings taken against a member of the police force as a result of an investigation of a disclosed matter by the Chief Commissioner of Police under Part 7.
Penalty: 60 penalty units or 6 months imprisonment or both.
(emphasis added).
7 The term "protected disclosure" as used in s 22 is defined in ss 3 and 12 as a disclosure made in accordance with Part 2. Part 2 (ss 5-10), in turn, relevantly makes provision for who may make a disclosure about improper conduct (s 5) and to whom such a disclosure can be made (s 6). Section 6 provides, in relevant part:
6. To whom can a disclosure be made?
β¦
(4) A disclosure that relates to the Chief Commissioner of Police must be made to the Ombudsman or the Deputy Ombudsman.
(5) A disclosure that relates to any other member of the police force may be made toβ
(a) the Ombudsman; or
(b) the Deputy Ombudsman; or
(c) the Chief Commissioner of Police.
The operation of Part 2 of the W P Act is then broadened by s 86LA of the Police Regulation Act 1958 (Vic) ("the P R Act") which, in terms, expands the category of persons to whom a disclosure to which Part 2 of the W P Act applies may be made. That section provides:
86LA Whistleblowers Protection Act 2001 applies to certain complaints
(1) If a member of the force makes a complaint in accordance with section 86L(2A) to a member of the force of a more senior rank about a member other than the Chief Commissioner, the member receiving the complaint must refer the complaint to the Chief Commissioner.
(2) The Whistleblowers Protection Act 2001 applies to a complaint referred to in subsection (1) as if the complaint were a disclosure made to the Chief Commissioner in accordance with Part 2 of that Act.
(3) The Whistleblowers Protection Act 2001 applies to a complaint made by a member of the force in accordance with section 86L(2A), to the Director about the Chief Commissioner, as if the complaint were a disclosure made to the Director in accordance with Part 2 of that Act.
(4) The Whistleblowers Protection Act 2001 applies to a complaint made by a member for the force in accordance with section 86L(2A), to the Director about any other member of the force, as if the complaint were a disclosure made to the Director in accordance with Part 2 of that Act.
8 The combined effect of those statutory provisions is that, where a member of the Victoria Police makes a complaint about a more senior officer, that complaint is, by force of s 86LA of the P R Act, treated as if it were a complaint made under Pt 2 of the W P Act. The provisions of Pt 2 of the W P Act then operate, relevantly, to prohibit the disclosure of information received in the course of, or as a result of, a disclosure made under, or in the investigation of a matter disclosed pursuant to, the P R Act. That being the statutory scheme, it is now necessary to examine the events which have given rise to the present proceedings.
9 The initial information, furnished by way of complaint was, according to Assistant Commissioner Cornelius in his affidavit sworn 30 January 2008, related to "serious misconduct", which is defined in s 86A of the P R Act in these terms:
serious misconduct, in relation to a member of the force, means β
(a) conduct which constitutes an offence punishable by imprisonment; or
(b) conduct which is likely to bring the force into disrepute or diminish public confidence in it; or
(c) disgraceful or improper conduct (whether in the member's official capacity or otherwise).
On the view taken by Commissioner Cornelius, the initial complaint was thus of a type contemplated by s 86L(2A) of the P R Act, which provides:
(2A) A member of the force must make a complaint to a member of the force of a more senior rank to that member, or to the Director, about the conduct of another member of the force if he or she has reason to believe that the other member is guilty of serious misconduct.
10 It follows that the disclosure made in the course of making the subject complaint was a "protected disclosure" for the purposes of s 22 of the W P Act, and thereby attracted the application of that section, including its provisions going to penalty.
11 The affidavit of Assistant Commissioner Cornelius also reveals that information related to the complaint has been received by himself and Superintendents Tony Biggin and Tim Cartwright, the officers assigned to investigate the matter, and by the first respondent, in her then capacity as Chief Commissioner. By operation of the mechanism for delegation contemplated by ss 5β6A of the P R Act, Assistant Commissioner Cornelius received the information on behalf of Chief Commissioner Nixon. It is not disputed, as I understand it, that, pursuant to the same mechanism, the Superintendents just mentioned also received the disclosed information as if it had been received by the Chief Commissioner.
12 It follows, I consider, that the Schedule 1 Part 2 Documents are protected from production by force of s 22 of the W P Act. The plain meaning of s 86LA of the W P Act, read with Part 2 of the P R Act, entails that conclusion. If it matters, the same conclusion is reinforced by s 35 of the Interpretation of Legislation Act 1984 (Vic), which is partly analogous to s 15AB of the Acts Interpretation Act 1901 (Cth). Section 35(a) of the Victorian Act provides that a Victorian statute is to be read so as to "promote the purpose or object underlying the Act". Here, the purpose, discernible from s 22(1) of the W P Act, noted at [6] of these reasons, is to protect both persons who make disclosures and persons "who may suffer reprisals in relation to those disclosures": see s 1(b)(ii). A reading of s 22 of the W P Act which restricts its operation so as not to protect from disclosure documents produced, or identities disclosed, during or in consequence of an investigation of "serious misconduct" by a "public officer" would not conduce to the achievement of the express objects of the W P Act. Such considerations are subsidiary, however, to what I regard as the clearly preferable interpretation of s 22, which is that it protects from disclosure information brought into existence or gathered in the course of making, receiving or investigating a complaint of the kind outlined at [9]-[11] above.
13 It will be apparent that the interpretation of the W P Act which I favour has the consequence that some of the Schedule 1 Part 2 documents are of such a character, as evidenced simply by their description, that s 22 precludes their production. That applies self-obviously to the written complaint numbered 54 and the witness statements numbered 73 in Appendix A to these reasons. (I assume the witness statements to have been compiled in the course of investigating the original complaint). However, the remaining Schedule 1 Part 2 documents do not necessarily appear from their description to be confined to information obtained or received in the course of, or as a result of, a protected disclosure or the investigation of a disclosed matter within the meaning of s 22(1) of the W P Act. In that sense, assuming that each such document would otherwise be relevant and production of it necessary as provided by O 15 r 15 of the Rules of this Court, it may be appropriate for the Court to consider each of the remaining Schedule 1 Part 2 documents for the purpose of deciding whether, in whole or in part, the document is not subject to production because it contains information of the kind described in s 22(1) of the W P Act.
14 That course is frequently taken where some sensitivity attaches to the documents in question as happened with the documents considered by Wilcox J in Jackson v Wells (1985) 5 FCR 296; see esp. at 308. The circumstances of the present case were said by Mr Parry SC, who appeared with Mr Richard Dalton of Counsel for the respondents, to be of the kind indicated by Wilcox J. Mr Parry went on to note that:
In the circumstances of the case, the apparent breadth of s.22 of the WP Act and the sensitivity of information regarding the identity of complainants and witnesses, the respondents' counsel and solicitors have not had access to the documents.
Because some of the Schedule 1 Part 2 documents are also subject to a claim of public interest immunity, I shall return, after examining that ground of exemption from production, to consider how each of the Schedule 1 Part 2 documents should be treated.
General Law Public Interest Immunity
15 It may be accepted that s 22 of the W P Act, read with the other provisions to which I have referred,is of broad application and, for the reasons outlined above, precludes the production of the whole or part of many of the Schedule 1 Part 2 Documents. There may be some, however, which on examination will not obviously be caught by s 22, but which are still protected from production by application of the common law doctrine of public interest immunity which is recognised by O 15 r 17 of the Rules of this Court.
16 It is convenient to set out the statements of principle which bind the Court in giving effect to this claim of immunity. They are to be found in Sankey v Whitlam (1978) 142 CLR 1, where Gibbs ACJ said, at 38-9, that:
The general rule is that the court will not order the production of a document, although relevant and otherwise admissible, if it would be injurious to the public interest to disclose it. However the public interest has two aspects which may conflict. These were described by Lord Reid in Conway v Rimmer [[1968] AC 910 at 940] as follows:
"There is the public interest that harm shall not be done to the nation or the public service by disclosure of certain documents, and there is the public interest that the administration of justice shall not be frustrated by the withholding of documents which must be produced if justice is to be done."
It is in all cases the duty of the court, and not the privilege of the executive government, to decide whether a document will be produced or may be withheld. The court must decide which aspect of the public interest predominates, or in other words whether the public interest which requires that the document should not be produced outweighs the public interest that a court of justice in performing its functions should not be denied access to relevant evidence. In some cases, therefore, the court must weigh the one competing aspect of the public interest against the other, and decide where the balance lies. In other cases, however, as Lord Reid said in Conway v Rimmer [[1968] AC 910 at 940], "the nature of the injury which would or might be done to the nation or the public service is of so grave a character that no other interest, public or private, can be allowed to prevail over it". In such cases once the court has decided that "to order production of the document in evidence would put the interest of the state in jeopardy", it must decline to order production.
In a similar vein, Stephen J said, at 48-9:
Crown privilege involves two principles which are of quite general importance to our system of government and of justice. Such is the vigour and breadth of these principles that each, given its fullest extent of operation, will at its margins encounter and conflict with the other. This case involves just such a conflict and it is with its resolution that the Court has to concern itself.
These principles, stated in their broadest form, each reflect different aspects of the public weal. Because disclosure to the world at large of some information concerning sensitive areas of government and administration may prejudice the national interest there exists a public interest in preventing the curial process from being made the means of any such disclosure. At the same time the proper administration of justice, of prime importance in the national interest, requires that evidence necessary if justice is to be done should be freely available to those who litigate in our courts.
See also, generally, the authorities collected in Cross on Evidence (7th Aust. Ed.) at 872 [27025], et seq.
17 The immunity is claimed on behalf of the respondents in two ways. The first, a "contents claim" is made in relation to the investigation file, on the footing that it would be against the public interest to disclose its contents. The second, a "class claim" is made generally over the various Schedule 1 Part 2 documents on the basis, as it was put in written submissions, that;
β¦ there is a strong public interest in ensuring that improper conduct of members of the police force can be exposed. This can only occur if people feel that they can make complaints about such improper conduct and/or provide witness accounts of such conduct without reprisals. To the extent that there is information in the documents in Part 2 of Schedule 1 that could identify a complainant or witness, or lead to the identification of such persons, then the Court should require that the contents of those documents not be disclosed.
18 As I understand it, the "investigation file" is no more than a collation in a single file of the Schedule 1 Part 2 documents. Accordingly, it is unnecessary to consider it separately from the "class claim" made by the respondents in respect of the Schedule 1 Part 2 documents and the documents enumerated in Parts 2 and 3 of the Schedule to the second respondent's list of documents which is reproduced as Annexure B to these reasons.
19 The primary contention of the second respondent is that the documents listed in Appendix B as indicated by the description of each of them are immune from production by reason of their relation to "matters of state", i.e. that they are:
β¦subject to public interest immunity on grounds including that they contain information relating to, or are concerned with, deliberations at the highest levels of government in the State of Victoria, they are drafts whose release would inhibit the exchange of frank and candid information and advice within government, they would disclose preliminary or draft views which are not determinative of the government's final position, and they may mislead or create confusion in debate in the publicarena.
20 Particular emphasis in that connexion is placed upon the words of Gibbs ACJ in Sankey v Whitlam, supra, at 40, where his Honour said:
Of course, the object of the protection is to ensure the proper working of government, and not to protect Ministers and other servants of the Crown from criticism, however intemperate and unfairly based. Nevertheless, it is inherent in the nature of things that government at a high level cannot function without some degree of secrecy. No Minister, or senior public servant, could effectively discharge the responsibilities of his office if every document prepared to enable policies to be formulated was liable to be made public. The public interest therefore requires that some protection be afforded by the law to documents of that kind. It does not follow that all such documents should be absolutely protected from disclosure, irrespective of the subject matter with which they deal.
21 The second respondent then relies upon an affidavit of Lissa Ruth Zass, sworn on 17 August 2009. Ms Zass is the Assistant Director, Projects and Research, Justice Policy, in the Department of Justice in the Victorian Government. The thrust of that affidavit is that documents 14 to 22 in Part 2 of the list reproduced in Appendix B were made for the internal use of the Victorian Government in considering issues surrounding the Victoria Police Bill, or, as she says at paragraph 34 of her affidavit:
Documents numbered 14 to 22β¦ are all documents relating to proposed amendments to the PR Act that were being considered by the government at the time. They include documents that record the outcomes of the stakeholder consultation process, including options for the Minister to consider regarding future legislative models.
Document 23, she deposes, was created for similar purposes by Rachel Dapiran, an adviser to the then Premier of Victoria.
22 In the light of those assertions, it is necessary for the Court to strike a balance between the public interest in disclosure and the public interest in the preservation by non-disclosure of a government's ability to function effectively. That is the balance identified by Gibbs ACJ and Stephen J in the passages from Sankey v Whitlam set out above at [16]. As well as in Sankey, the factors which bear on striking the relevant balance have been enumerated by a Full Court of this Court in Commonwealth v Northern Land Council (1991) 30 FCR 1 at 38, as;
1. where the contents of the documents are relied upon, the interests affected by their disclosure eg national security, relationships with foreign governments and unfair prejudice to other parties by disclosure of confidential information; where the impact of disclosure on the public interest is peculiarly within the knowledge of the Executive, its contentions will be given particular weight;
2. where the class of documents is invoked, the public interest which immunity for the class is said to protect eg political conventions and governmental processes; in this connection the importance of the convention of collective responsibility and the confidentiality required to support it, particularly in areas of current political debate, will be accorded a high degree of respect;
3. the extent to which the interests referred to have become attenuated by the passage of time or the occurrence of intervening events since the matters contained in the documents or the documents themselves came into existence;
4. the seriousness of the issues in relation to which production is sought eg innocence of a criminal charge or governmental misconduct bearing upon the case;
5. the likelihood that production of the documents will affect the outcome of the case;
6. the likelihood of injustice if the documents are not produced.
23 Mere exposure of government action to public discussion and criticism will not enliven the immunity, as Mason J made clear in Commonwealth v John Fairfax & Sons Ltd (1980) 147 CLR 39, where he observed, at 52;
It can scarcely be a relevant detriment to the government that publication of material concerning its actions will merely expose it to public discussion and criticism. It is unacceptable in our democratic society that there should be a restraint on the publication of information relating to government when the only vice of that information is that it enables the public to discuss, review and criticize government action.
Accordingly, the court will determine the government's claim to confidentiality by reference to the public interest. Unless disclosure is likely to injure the public interest, it will not be protected.
I consider that, in the circumstances of the present case, his Honour's observation applies with equal force where the discovery of a government document (rather than its publication in the media) is at issue.
24 The second respondent has stressed, both in submissions and in the affidavits of its solicitors, that this Court ought not to order production of documents where that would inhibit its ability to function as a government, by communicating freely and openly with its public servants about policy issues. Mr Parry SC referred, on this point, to Taylor v Anderton [1995] 2 All ER 420, R v Chief Constable of West Midlands Police; Ex parte Wiley [1995] 1 AC 274, and, in particular, Royal Women's Hospital v Medical Practitioners Board of Victoria (2006) 15 VR 22. In the last-mentioned case, after an extensive review of the authorities, Charles JA said, at 52;
β¦ in my view public interest immunity is restricted to what must be kept secret for the protection of government at the highest levels and in sensitive areas of executive responsibility, governmental function in this context being defined to include the courts and bodies exercising statutory duties and functions in circumstances analogous to the police informer immunity.
I respectfully adopt his Honour's words as correctly reflecting the principle.
When the Court may inspect documents for itself
25 In the light of all the formulations of the principle which I have noted, it is necessary to decide on which side of the line a particular document falls. In the absence of any more specific information than is afforded by the description of the documents catalogued in Appendix A and Appendix B to these reasons, it may be appropriate to have recourse to the technique proposed by Wilcox J in Jackson v Wells, supra. In that case, his Honour was dealing with an application for review of decisions by two judges of this Court, acting as personae designatae to issue warrants under s 20 of the Telecommunications (Interception) Act 1979 (Cth). A claim to public interest immunity was advanced and supported by affidavits described by his Honour at 305-306. In the course of his reasons, his Honour went on to make what he called, at 307, "four final comments" about the proper approach to be adopted to such a claim for immunity. Three of those "comments" are relevant here, and may be summarised as follows:
Β· A party to a proceeding is not, where there is a clear legislative indication to the contrary, entitled as of right to see documents which have been discovered under cover of a claim of public interest immunity. A submission to the contrary, his Honour considered, was based on an inapt analogy with what occurs when documents have been seized pursuant to a search warrant which was the case in Inland Revenue Commissioners v Rossminster Ltd [1980] AC 952, to which his Honour had been referred;
Β· When a claim of public interest immunity is made, it will not ordinarily be appropriate to reveal the contents of the subject documents to a party's legal representatives, because (at 307-8);
It involves a number of problems. Without reflecting in any way upon the integrity of any counsel or solicitor, difficulties are likely to arise where counsel appearing in, and advising their clients in respect of, protracted and complex proceedings acquire information which they are not free to use or to pass on to their clients. During the heat of battle an unwitting disclosure may occur. Frank and full advice becomes impossible. I am aware of cases in which, for reasons such as these, experienced counsel have declined to receive information which they are not free to share with their clients. It seems to me merely commonsense to conclude that the fewer people who have access to confidential information the less is the risk of unauthorised disclosure.
Β· A claim of public interest immunity need not be accepted in full; a proper approach, in the appropriate case, is for the Judge before whom the claim is made to peruse for himself or herself the documents for which immunity is claimed. His Honour considered, at 308, that, in carrying out this exercise, the Judge should;
consider for [himself or her]self whether it extended unnecessarily widely, if necessary re-editing the material so as to reduce the extent of restriction on access
26 In my view, it is appropriate to take, in this case, the approach suggested by Wilcox J in Jackson. I shall therefore direct that each of the documents enumerated in Appendix A to these reasons other than those numbered 54 and 74 be delivered to my Associate in a sealed envelope or other container to allow me to examine each document to determine whether it is precluded from production by application of s 22(1) of the W P Actor by operation of the doctrine of public interest immunity. Where it is feasible in respect of a particular document, I shall edit or redact it to preserve the confidentiality of the part or parts which it would be inimical to the public interest to disclose or which contain information which is the subject of a protected disclosure or is connected with the investigation of a disclosed matter within the meaning of s 22(1) of the W P Act.
27 A similar course commends itself in respect of the documents enumerated in Appendix B to these reasons, which comprises Parts 2 and 3 of Schedule 1 to the second respondent's list of documents. Most of those documents, if immune from production at all, will, it seems from their description, derive that character from the doctrine of public interest immunity. In respect of some, particularly those in Part 3, the Court may decline to order production on the ground that it is not necessary in the sense explained at [34]-[38] below. I shall, accordingly, examine each of the documents listed in Appendix B to determine whether the second respondent should be ordered to produce it in its original, or in some edited or redacted, form. Those documents ought also, therefore, be delivered to my Associate in the same fashion as the Appendix A documents.
28 In light of the course which I have just indicated is to be taken, in respect of most of the documents enumerated in Appendix A and Appendix B to these reasons, it is unnecessary to consider the relief claimed by the applicants in paragraph 3 of their motion on notice dated 30 July 2009.
The respondents' motion
29 It is convenient now to turn to the relief sought by the respondents in their notice of motion.
30 The order which is sought at paragraph 1 of that notice is effectively a declaration that the first respondent does not need to conduct further searches of the "G drives" of Victoria Police. The respondents' written submissions sought to justify the making of such an order in this way:
The basis for the respondent seeking such an order is that this item is oppressive and unnecessary for that drive to be searched. At paragraph 22 of the FRL, as confirmed by the accompanying affidavit of Stuart McKenzie's sworn 28 July 2009, the "G drive" is a storage area for electronic files widely used by Victoria Police. The task of pursuing searches of that drive is very problematic and there is unlikely to be anyrelevant documentation in it.
The relevant passages of Mr McKenzie's affidavit, to which reference is there made, are as follows:
22 I am informed by Mr Spencer Smith, Leading Senior Constable, and verily believe that:
(a) Victoria Police staff are also able to store emails and documents on a shared drive (known as the 'G drive');
(b) Data stored on a G drive is usually shared and accessible to a number of authorised users within a work area;
(c) Searching for data on the G drive is very complex, difficult and time consuming because each individual member of Victoria Police has the potential to have multiple G drives (as a member's allocated G drive changes upon transfer or secondment to a different area within Victoria Police);
(d) On average, a member is likely to have had access to at least 5 different G drives;
(e) G drives are also physically located in various locations throughout the state;
(f) Therefore, identifying the location of a G drive for an individual member at any relevant time will require extensive inquiry. As the List of Categories spans a period of approximately five years, these inquiries could take many weeks;
(g) Past experience in relation to G drive data recovery has demonstrated that there are often no records kept in relation to which G drive a particular member has had access to;
β¦
(i) Victoria Police has been advised by IBM, its information technology service provider, that between 2002 and 2009 there have been approximately 4 different computer operating systems used by Victoria Police (including the current operating system). As a consequence, information stored on backup tapes is encoded differently for each operating system;
β¦
(k) β¦in order to restore information from the G drives, Victoria Police would need to purchase computer hardware and software that was consistent with the appropriate operating system that was in place at the relevant time;
β¦
31 In deciding whether or not to order production of a particular class of documents or other evidentiary material, the Court is required to have regard, when exercising the discretion conferred by O 15, to the trouble and possible oppression which would be caused to a party required to give production and the detriment to the other side if the documents or evidence of the relevant class are not produced. As Tamberlin J pointed out in Universal Salvage Pty Ltd v Louis Dreyfus Armateurs SNC [2006] FCA 116, at [3];
On a discovery application, the Court has a broad discretion and will balance the costs, time and possible oppression to the producing party against the importance and likely benefits which arise to the requesting party from production of the documents: Australian Broadcasting Commission v Parish(1981) 41 FLR 292 at 295. The Court will ensure that in all the circumstances, the litigation is conducted fairly in the interests of both parties, and care must be taken to make sure that there is no excessive or unnecessary discovery: see Index Group of Companies Pty Ltd v Nolan[2002] FCA 608. This Court has made it clear in Practice Note 14 that it will take a restrictive approach to discovery to ensure that excessive and wasteful discovery does not occur.
Practice Note 14 has since been superseded by Practice Note CM 5. However, notwithstanding that change I regard his Honour's observations as applying with equal force to the question of whether the first respondent should be compelled to carry out a further search of the Victoria Police "G drives".
32 An additional consideration militating in favour of the relief sought in this respect by the first respondent is that the applicants have not so far given any clear indication of what they hope to obtain from the further interrogation of the "G drives". Courts are traditionally reluctant to encourage, by orders for discovery, "fishing expeditions" in which "a person who has no evidence that fish of a particular kind are in a pool desires to be at liberty to drag it for the purpose of finding out whether there are any there or not": Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1955) 72 WN (NSW) 250, per Owen J, at 254. See also WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175, at 181-2 and 191.
33 As presently advised, I suspect that a similar reluctance would incline this Court not to require the first respondent to conduct further searches of the Victoria Police "G drives". However, had the applicants pressed for such further searches, I would have acceded to the first respondent's request for an order in the terms of paragraph 1 of her notice of motion because I am persuaded the expense and trouble which would be incurred would far outweigh any potential assistance to the applicants' case which they might derive from further searches of the "G drives". Though it may ultimately prove superfluous, I therefore propose to make that order, notwithstanding that it was not pressed.
34 I turn next to the relief sought by paragraph 2 of the respondents' notice of motion in relation to item 10 of the applicant's list of categories of documents to be discovered by the respondents. Item 10 seeks discovery of the following category of documents;
All documents of
(i) Steve Bracks;
(ii) Tim Holding;
(iii) The Office of the Premier of Victoria and the Office of the Victorian Minister for Police and Emergency Services; and
(iv) Tim Pallas
In the period 1 October 2006 to 30 November 2006 (inclusive) relating to:
(a) the 2006 Discussions referred to in paragraph 74 of the SFASOC; or
(b) the 2006 Agreement referred to in paragraph 76 of the SFASOC.
In his oral submissions, Mr Parry characterised as a "sideshow" the matter to which documents in that category are related. He contended that an order for production of such documents was not "necessary", in terms of O 15 r 15. The written submissions on behalf of the respondents approached the matter in this way;
This item is unnecessary. Drafts and documents recording pre-agreement discussions add nothing to the applicants' case beyond what the 2006 Agreement might achieve. The relevant allegation implicit in the applicants' pleadings is that over time the first respondent came to resent Mr Mullett and his activities as a union official and that accordingly her decisions to instigate and later recommence the bullying investigation was at least partly driven by the alleged animosity she held towards Mr Mullett. Part of the relevant factual matrix from which the applicants apparently wish to build their case is that in late 2006 an agreement was made between the ALP and TPA without the involvement of the first respondent. This was the 2006 Agreement. The facts that the 2006 Agreement was made and made without the first respondent's involvement are admitted by the respondents. Documents recording drafts and/or claims and negotiating positions between the TPA and those in Government do not advance that line any further. Indeed, in the absence of any suggestion that [before] she engaged in the alleged prohibited conduct, the first respondent became aware of these documents or the communications contained in them, then the documents fundamentally lack relevance.
On that basis, it will be recalled, the respondents' offered in paragraph 2 of their notice of motion to produce, in lieu of documents in the applicant's Category 10, "the final signed version of the 2006 Agreement".
35 In resisting the making of the order sought by paragraph 2 of the respondents' notice of motion, Mr Borenstein SC, who appeared with Ms F Gordon for the applicants, sought to refine the notion of "necessity" as it is expressed in O 15 r 15. He referred to UWA v Gray (No 8) [2007] FCA 89, where French J said, at [18];
In Trade Practices Commission v CC (New South Wales) Pty Ltd (1995) 58 FCR 426 Lindgren J said that O 15 r 15 requires that the Court to be satisfied that an order of the kind referred to in that rule is, at the time when the order is made, necessary "in the interests of a fair trial". He cited Percy v General Motors-Holden's Pty Ltd [1975] 1 NSWLR 289 at 292. He also referred to Boyle v Downes [1979] 1 NSWLR 192 dealing with a similarly expressed constraint in the Supreme Court Rules 1970 (NSW) relating to interrogatories. The criterion adopted in the latter case was whether the order sought was "reasonably necessary for the disposing fairly of the cause or matter". Lindgren J said (at 437):
'The notion of the "interests of a fair trial" and of the "fair disposition of a case" encompasses, in my view, the opening up of a train of inquiry of the kind referred to above which is part of the proper function of discovery.'
His Honour was referring to discovery rather than the production of discovered documents. Nevertheless, O 15 r 15 applies the same criterion to orders for production of documents. It was so applied by Branson J in Gray v Associated Book Publishers (Aust) Pty Ltd [2002] FCA 1045 in which her Honour said (at [9]):
'β¦ it is clear that the power of the Court to order that a discovered document be produced for inspection by another party is a discretionary power (see O 15 r 11).'
And added (at [9]):
'What is "necessary" within the meaning of O 15 r 15 is that which is reasonably necessary in the interests of a fair trial and of the fair disposition of the caseβ¦'
She cited Lindgren J in Trade Practices Commission v CC (New South Wales) Pty Ltd.
36 In the applicant's written submissions it was contended that the notion of "necessity" conveyed by O 15 r 15 does not require the applicants to demonstrate that production of the Category 10 documents is necessary to prove some part of their case. Rather, the concept is designed to ensure that discovery and production does not impose on a litigant any harsher or more oppressive burden than is required to secure that justice is done; see Harman v Secretary of State for Home Department [1983] 1 AC 280, at 308, which was cited by Spender J in Mackay Sugar Co-Operative Association Ltd v CSR Ltd (1996) 63 FCR 408, at 412.
37 I do not regard the authorities invoked by Counsel for the respondents as establishing that, in exercising its discretion to order discovery or production of documents, a court is entitled to have regard to matters going beyond the proof or disproof of some issue which the pleadings reveal as remaining in dispute between the parties.
38 In the present case, I cannot discern from paragraphs 74 to 76 of the Second Further Amended Statement of Claim how knowledge by Ms Nixon of any documents brought into existence by the persons identified as concerned in the negotiation of the 2006 Agreement could assist in proving the allegations there pleaded and particularised, or avail the applicants' case more generally. I therefore accede to the respondents' motion that item 10 of the applicants' list of categories of documents be amended to read "The final signed version of the 2006 Agreement referred to in paragraph 76 of the Second Further Amended Statement of Claim".
Conclusion
39 In light of the reasons explained above in relation to the application of the W P Act and the doctrine of public interest immunity, I shall order, on the applicants' motion, that the first respondent, by 16 April 2010, deliver to my Associate in a sealed envelope or container a clear copy of each of the documents enumerated in Appendix A to these reasons other than the documents numbered 54 and 74. There will be a similar order directed to the second respondent in respect of the documents listed in Appendix B to these reasons. On the respondents' motion, I shall order that the first respondent is not required to conduct further searches for electronic documents stored on Victoria Police "G drives" and that item 10 of the applicants' list of categories of documents be deleted and replaced with "The final signed version of the 2006 Agreement referred to in paragraph 76 of the second further amended statement of claim". The respondents' motion will be otherwise refused.
40 There will be a directions hearing herein on a date to be fixed after the Court has completed its examination of the documents ordered to be produced to it. There will also be liberty to any party to apply on not less than 48 hours' notice in writing to the other parties.
I certify that the preceding forty (40) numbered paragraphs and Appendices A and B thereto are a true copy of the Reasons for Judgment herein of the Honourable Justice Ryan.
Associate:
Dated: 1 April 2010
APPENDIX A
Number Date Description
54. 23/02/06 Written copy of the complaint received from the complainants [subject also to PII]
55. 23/02/06 Briefing prepared for the Chief Commissioner
56. 14/03/06 Advice received from VGSO
57. 14/03/06 Electronic copy of legal advice received from VGSO
58. 16/03/06 Further briefing for the Chief Commissioner
59. 10/05/06 Copy letter from Assistant Commissioner Cornelius to thePresident and Executive of TPA
60. 18/05/06 Electronic copy of draft investigation plan
61. 23/05/06 Draft investigation plan
62. 31/05/06 Investigation progress report
63. 31/05/06 Electronic copy of investigation progress report
64. 09/06/06 Electronic copy of investigation progress report
65. 10/06/06 Further investigation report
66. 10/06/06 Electronic copy of investigation progress report
67. 16/06/06 Further investigation report
68. 16/06/06 Electronic copy of investigation progress report
69. 23/06/06 Further investigation report
70. 23/06/06 Electronic copy of investigation progress report
71. 30/06/06 Further investigation report
72. 30/06/06 Electronic copy of investigation progress report
73. Various Witness statements [subject also to PII]
74. 07/07/06 Further briefings from the investigators
75. 28/07/06 Further briefings from the investigators
76. 28/07/06 Electronic copy of investigation progress report
77. 09/08/06 Electronic copy of investigation progress report
78. 11/08/06 Email from Assistant Commissioner Cornelius
79. 06/09/06 Draft initial investigation report
80. 07/09/06 Email from Assistant Commissioner Cornelius with handwritten notes
81. 08/09/06 Finalised initial investigation report
82. 08/09/06 Initial Investigation Report
83. 08/09/06 Finalised initial investigation report forwarded to the Director of OPI on 14 September 2006
84. 14/09/06 Letter from Assistant Director OPI
85. 21/09/06 Letter to Ms Susan Allen of WorkSafe
86. 25/09/06 Letter from Mr Merritt of WorkSafe
87. 10/11/06 Letter from Ms Allen of WorkSafe
88. 16/01/07 Letter from Deputy Ombudsman to Chief Commissioner
89. 25/01/07 Letter from Chief Commissioner to Ombudsman
90. 23/02/07 Further draft report provided to Chief Commissioner
91. 05/03/07 Chief Commissioner's further reply comment
92. 17/0/06 ? Covering letter from Ombudsman to Chief Commissioner
93. 03/05/07 Letters from Assistant Commissioner Cornelius to the complainants and other witnesses [subject also to P11]
94. 11/07/07 Letter from Mr Greg Tweedly, CEO of WorkSafe
95. 11/09/07 Letter from Mr Krpan of WorkSafe
96. 09/11/07 Further outline of the investigation plan
97. 09/11/07 Electronic copy of further outline of investigation plan
98. 27/11/07 Letter received from Assistant Director of OPI
99. 10/12/07 Status report/update from Superintendent Cartwright
100. 10/12/07 Email from Mr Tim Cartwright to Mr Luke Cornelius regarding status of investigation
101. 24/12/07 Email from Superintendent Cartwright
102. 31/12/07 Copy final draft briefing sent by Superintended Cartwright
103. 01/01/08 Electronic copy of final draft briefing
104. 31/12/07 Copy final draft briefing sent by Superintended Cartwright signed by Chief Commissioner
105. 01/01/08 Electronic copy of briefing paper presented to Chief Commissioner
106. Undated Electronic copy of draft letter to TPA President and Executive
107. 08/01/08 Draft letter to TPA President and Executive
108. 23/02/06 Issues cover sheets
109. 23/02/06 Electronic copy of issue cover sheet prepared by Assistant Commissioner Cornelius
110. 10/03/06 Typed note of Assistant Commissioner Cornelius
111. 14/03/06 Advice received from VGSO
112. 16/03/06 Issue cover sheet
113. 16/03/06 Electronic copy of issue cover sheet prepared by Assistant Commissioner Cornelius
114. 16/03/06 Electronic copy of email from Assistant Commissioner Cornelius
115. 17/03/06 Email of Assistant Commissioner Cornelius
116. 17/03/06 Email of Assistant Commissioner Cornelius with handwritten notes of Assistant Commissioner Cornelius
117. Various Email trail from Assistant Commissioner Cornelius
118. Various Email trail from Assistant Commissioner Cornelius with handwritten notes of Assistant Commissioner Cornelius
119. 03/05/06 Copy letter with handwritten notes
120. 10/05/06 Letter from Assistant Commissioner Cornelius
121. 18/05/06 Email regarding meeting with Director OPI
122. 18/05/06 Email of Assistant Commissioner Cornelius with handwritten notes of Assistant Commissioner Cornelius
123. 18/05/06 Copy of bundle of diary notes of Findlay McRae regarding meeting with Greg Carroll and Luke Cornelius
124. 23/05/06 Major investigation plan
125. 23/05/06 Email of Assistant Commissioner Cornelius with handwritten notes of Assistant Commissioner Cornelius
126. 23/05/06 Copy of extract of handwritten diary note of Superintendent Biggin
127. 23/05/06 Copy of extracted handwritten diary notes of Assistant Commissioner Tim Cartwright.
128. 24/05/06 Copy of major investigation plan with hand written note of Assistant Commissioner Cornelius
129. 24/05/06 Draft letter to Mr Watt
130. 24/05/06 Draft letter to Mr Watt
131. 24/05/06 Copy of email regarding draft letter to Mr Watt
132. 24/05/06 Email from Assistant Commissioner Cornelius regarding draft letter to Mr Watt
133. 24/08/06 Email of Assistant Commissioner Cornelius with handwritten notes of Assistant Commissioner Cornelius
134. 24/08/06 Copy of diary notes of Findlay McRae regarding meeting with Luke Cornelius, David Stevens, John Merritt and Susan Allen.
135. 24/08/06 Copy of hand written diary notes of Assistant Commissioner Cornelius
136. 14/09/06 Letter from OPI
137. 16/11/06 Summons to produce documents
138. 16/11/06 Email of Assistant Commissioner Cornelius with handwritten notes of Assistant Commissioner Cornelius
139. 16/11/06 Email of Assistant Commissioner Cornelius with handwritten notes of Assistant Commissioner Cornelius
140. Various 3 Statements [subject also to P11]
141. 01/06/07 Copy letter to Mr Tweedly
142. 14/07/07 Letter to Mr Krpan [subject also to P11]
143. 11/09/07 Email of Assistant Commissioner Cornelius with handwritten notes of Assistant Commissioner Cornelius
144. 11/09/07 Letter from Mr Krpan regarding investigation
145. 11/09/07 Copy of extracted handwritten diary notes of Assistant Commissioner Tim Cartwright
146. 11/12/07 Copy of email of Assistant Commissioner Cornelius
147. 11/12/07 Copy of email from Assistant Commissioner Cornelius to Assistant Director of OPI
148. 19/12/07 Copy of email of Assistant Commissioner Cornelius
149. 19/12/07 Copy of extracted handwritten diary notes of Assistant Commissioner Tim Cartwright
150. 02/01/08 Copy of email of Assistant Commissioner Cornelius
151. 02/01/08 Copy of email from Assistant Commissioner Cornelius to Assistant Commissioner Cartwright
152. 08/01/08 Issues cover sheet
153. 8/01/08 Copy of extracted handwritten diary notes of Assistant Commissioner Tim Cartwright
154. 06/05/08 Copy of email trail involving Assistant Commissioner Cornelius
155. 29/11/06 Copy of email from Peter Kos
156. 29/11/06 Copy of email from Superintendent Biggin
157. 30/11/06 Copy of email from Superintendent Biggin
158. 30/11/06 Copy of email from Superintendent Biggin
159. 03/05/06 Copy of draft letter from Christine Nixon to the President and Executive, The Police Association
160. 2006 Copy of bundle of diary notes of Luke Cornelius
161. 10/04/07 Document entitled 'TPA Investigation Chronology'
162. Undated Electronic copy of investigation time line prepared by Superintendent Biggin
APPENDIX B
Part 2
Number Date Description
14. 18/01/05 File copy 'Minister's Office', bundle of documents entitled `Victoria Police Bill - Stakeholder Consultation' with attached 'with complements' slip.
15. 19/01/05 Copy of draft document entitled 'Minister's Speaking Notes [DRAFT]'.
16. 24/01/05 Copy of draft letter, not yet sent, to Mr Paul Mullett from Ms Marisa De Cicco regarding 'Victoria Police Bill - Stakeholder Consultation'.
17. 24/01/05 Copy of draft letter, not yet sent, to Mr Paul Mullett from Ms Marisa De Cicco regarding 'Victoria Police Bill - Stakeholder Consultation'.
18. 24/01/05 Copy of draft letter, not yet sent, to Ms Christine Nixon from Ms Marisa De Cicco regarding 'Victoria Police Bill - Stakeholder Consultation'.
19. 24/01/05 Copy of draft letter, not yet sent, to Ms Christine Nixon from Ms Marisa De Cicco regarding 'Victoria Police Bill - Stakeholder Consultation'.
20. 3/02/05 Copy Memorandum and bundle of documents addressed to Minister for Police and Emergency Services regarding 'Victoria Police Bill: Status, outstanding issues and timing'.
21. 8/02/05 Copy Memorandum and bundle of documents addressed to Minister for Police and Emergency Services regarding 'Meeting with representatives of The Police Association'.
22. 05/04/05 Copy email from Lissa Zass to Angela Hart and Stephen Leane regarding 'issues list' with attachment.
23. 28/09/06 Copy memorandum from the Premier's Justice Adviser to the Premier.
Part 3
Number Date Description
24. Undated Copy document containing draft clauses for consideration in 'Record of Commitments' letter
25. Undated Copy document containing draft clauses for consideration in 'Record of Commitments' letter
26. Undated Copy document containing draft clauses for consideration in 'Record of Commitments' letter
27. Undated Copy document containing draft clauses for consideration in 'Record of Commitments' letter
28. Undated Copy document containing draft clauses for consideration in 'Record of Commitments' letter
29. Undated Copy document containing draft clauses for consideration in 'Record of Commitments' letter
30. Undated Copy document containing draft clauses for consideration in 'Record of Commitments' letter
31. Undated Copy document containing draft clauses for consideration in 'Record of Commitments' letter
32. Undated Copy draft Letter from Mr Bracks and Mr Holding to Mr Mullett regarding 'Record of Commitments'
33. Undated Copy draft Letter from Mr Bracks and Mr Holding to Mr Mullett regarding 'Record of Commitments'
34. Undated Copy draft Letter from Mr Bracks and Mr Holding to Mr Mullett regarding 'Record of Commitments'
35. Undated Copy draft Letter from Mr Bracks and Mr Holding to Mr Mullett regarding 'Record of Commitments'
36. Undated Copy draft Letter from Mr Bracks and Mr Holding to Mr Mullett regarding 'Record of Commitments'
37. Undated Copy draft Letter from Mr Bracks and Mr Holding to Mr Mullett regarding `Record of Commitments'
38. Undated Copy draft Letter from Mr Bracks and Mr Holding to Mr Mullett regarding 'Record of Commitments'
39. Undated Copy draft Letter from Mr Bracks and Mr Holding to Mr Mullett regarding 'Record of Commitments'
40. Undated Copy draft Letter from Mr Bracks and Mr Holding to Mr Mullett regarding 'Record of Commitments'
41. 12/10/06 Copy electronic calendar entry entitled 'Meeting with Paul Mullett re: Police issues'
42. 23/10/06 Copy electronic calendar entry entitled 'Meeting with Premier re Police Matters (+ Min Holding)'
43. 23/10/06 Copy memorandum from the Premier's Justice Adviser to the Premier
44. 26/10/06 Copy electronic calendar entry entitled 'Mtg with Paul Mullett + Chris Kennedy (+ Rachel + Matt Kennedy)'
45. 26/10/06 Copy electronic meeting acceptance from Matt Kennedy regarding meeting entitled 'Mtg with Paul Mullett + Chris Kennedy (+ Rachel + Matt Kennedy)'
46. 26/10/06 Copy electronic meeting acceptance from Rachel Dapiran regarding meeting entitled 'Mtg with Paul Mullett + Chris Kennedy (+ Rachel + Matt Kennedy)'
47. 30/10/06 Copy electronic calendar entry entitled 'Pre-brief with P Mullett & Rachel prior to Mullett/Premier mtg at 4:30pm'
48. 30/10/06 Copy electronic meeting acceptance from Rachel Dapiran regarding meeting entitled 'Pre-brief with P Mullett & Rachel prior to Mullett/Premier mtg at 4:30pm'
49. 30/10/06 Copy electronic calendar entry entitled 'For noting only Premier mtg with Paul Mullett 1:1'
50. 30/10/06 Copy memorandum from the Premier's Justice Adviser to the Premier
51. 30/10/06 Copy memorandum from the Premier's Justice Adviser to the Premier
52. 30/10/06 Copy memorandum from the Premier's Justice Adviser to the Premier
53. 06/11/06 Copy electronic calendar entry entitled 'Mtg with Premier & Paul Mullett (Holding)'
54. Various Copy document containing draft clauses for consideration in 'Record of Commitments' letter and/or EBA
| 14,668 |
federal_court_of_australia:fca/single/1996/1996fca0280
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decision
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commonwealth
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text/html
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1996-04-26 00:00:00
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Re Tait, Jon R Ex Parte Deputy Commissioner of Taxation [1996] FCA 280
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/1996/1996fca0280
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2024-09-13T22:45:46.355055+10:00
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CATCHWORDS
BANKRUPTCY - creditor's petition - conditions on which a creditor may petition - amendment to petition - debt - income tax - whether debts due and payable after issue of notice of assessment can be substituted for amount in petition already paid by debtor - debt must exist at date of relevant act of bankruptcy
INCOME TAX - bankruptcy - income tax not due until assessed and notice of assessment served
Bankruptcy Act 1966: ss. 44(1), 52, 82, 115
Income Tax Assessment Act 1936: ss. 207(2), 208B
RE JON R TAIT; EX PARTE DEPUTY COMMISSIONER OF TAXATION
NP 1080 of 1995
LOCKHART J.
26 APRIL 1996
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA)
)
NEW SOUTH WALES DISTRICT REGISTRY) No. NP 1080 of 1995
)
GENERAL DIVISION )
RE: JON R TAIT
Debtor
EX PARTE: DEPUTY COMMISSIONER OF TAXATION
Petitioner
JUDGE MAKING ORDER: LOCKHART J.
WHERE ORDER MADE: SYDNEY
DATE ORDER MADE: 26 APRIL 1996
MINUTE OF ORDER
THE COURT ORDERS THAT:
1. The motion by the petitioning creditor to amend paragraph 2 of the petition is dismissed.
2. The petition is dismissed.
3. The debtor shall pay the costs of the petitioning creditor of the petition up to and including 31 October 1995; and the petitioning creditor shall pay the costs of the debtor of the petition after that date; in each case including reserved costs, if any.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA)
)
NEW SOUTH WALES DISTRICT REGISTRY) No. NP 1080 of 1995
)
GENERAL DIVISION )
RE: JON R TAIT
Debtor
EX PARTE: DEPUTY COMMISSIONER OF TAXATION
Petitioner
26 APRIL 1996
REASONS FOR JUDGMENT
LOCKHART J.
The question in this case is whether the petitioning creditor, the Deputy Commissioner of Taxation, is entitled to amend the petition which he presented on 29 May 1995, seeking sequestration of the estate of the debtor, Jon R Tait.
The petition asserts that the debtor is indebted to the Deputy Commissioner in the sum of $77,822.30, being (a) the amount due under a final judgment ($8,444.70 for income tax and $184.63 interest); and (b) a further $36,181.45 as a judgment debt for tax instalment deductions and additional amounts for late payment and relevant penalties less certain remissions.
The act of bankruptcy on which the petition is based is the failure of the debtor, on or before 31 January 1995, to comply with the requirements of a bankruptcy notice served on
him on 10 January 1995, or to satisfy the Court that he has the requisite counter-claim, set-off or cross-demand.
After the presentation of the petition the debtor paid to the Deputy Commissioner the amount of $77,822.30 claimed in the petition.
When the petition was called on for hearing, counsel for the Deputy Commissioner sought leave to amend paragraph 2 of the petition in the following terms:
'2. The debtor is justly and truly indebted to the petitioner in the sum of $161,437.26 being:-
The amount due under the final judgment recovered in the Local Court of New South Wales at Church Street, Newcastle on the 16th day of November, 1994 ($8,444.70) for income tax and ($184.63) interest thereon to 31 January 1995.
Together with ($36,181.45) further Judgment debt for Tax Instalments Deductions, ($29,595.00) tax instalment deductions due, ($1392.99) additional amounts for late payment and ($2023.53) relevant penalties less remission thereon to the 2nd day of May, 1995.
Less the sum of $77,822.37 remitted to the creditor on 30 October 1995.
Together with an amount of $25,349.25 comprising of further non-remitted tax instalment deductions of $20,844.05 for the period 1 April 1995 to 31 August 1995, together with $1310.35 relevant penalty less remission, and $3194.85 additional amounts for late payment thereon to the 17th day of April, 1996.
Together with an amount of $28,178.36 which comprises of Income Tax for the year ending 30 June 1994 issued on the 24th day of July, 1995 which detailed an amount of $106,153.44 as payable, less $84,888.46 credited, $2786.34 additional amount for late payment, $4127.04 penalty interest thereon to the 17th day of April 1996.
Together with an amount of $80,575.63 which comprises Provision Tax for the year ending 30 June 1995 issued on the 24th day of July, 1995 which detailed an amount of $102,241.00 as payable, less $30,684.00 credited, $3 649.68 additional amount for late payment, $5368.95 penalty interest thereon to the 17th day of April 1996.
Together with an amount of $27,334.09 first Quarterly Provisional Tax Instalment for the year of Income ending 30 June 1996 issued on 1 August 1995 for an amount of $25,560.00 which became due and payable on 1 September 1995 less $1238.00 credited, $1219.19 additional amount for late payment, $1792.90 penalty interest thereon to 17 April 1996.'
The additional claims of the Deputy Commissioner arise in the following circumstances. A notice of assessment of income tax for the year ending 30 June 1994 was issued by the Deputy Commissioner to the debtor on 24 July 1995, stating that an amount of $106,153.44 was payable on 28 August 1995. Amendments were made to the assessments for the financial years ended 30 June 1993 and 30 June 1994, resulting in total credits in favour of the debtor of $35,090.79; they were employed to reduce the amount of $106,153.44. A credit of $49,797.50, resulting from the 1995 assessment, further reduced that amount. The outstanding balance of $21,265.15 remains unpaid and was not included in the petition.
A provisional tax notice for the year of income ended 30 June 1995 was issued by the Deputy Commissioner on 24 July 1995 and stated that an amount of $102,241 was payable. An adjustment to provisional tax calculations on 25 January 1996 resulted in a credit in favour of the debtor of $30,684. The outstanding balance of $71,557 remains unpaid and was not included in the petition.
Group tax due by the debtor to the Deputy Commissioner for the period of 1 April 1995 to 31 May 1995 amounts to $20,844.05. This amount remains unpaid and was not included in the petition.
Quarterly provisional tax in the amount of $24,322 for the 1996 year of income remains unpaid and was not included in the petition.
The present indebtedness of the debtor to the Deputy Commissioner is $268,847.60, consisting of tax the liability for which, the Deputy Commissioner asserts, arose prior to the presentation of the petition, although the assessment was issued after the date of presentation of the petition, and the liability to pay the tax arose after that date.
The debtor opposes the amendments to the petition.
The Deputy Commissioner asserts that he is entitled to have the amendments made to the petition for the following reasons.
Section 44(1) of the Bankruptcy Act 1966 ('the Act') is in the following terms:
"44(1) A creditor's petition shall not be presented against a debtor unless:
(a) there is owing by the debtor to the petitioning creditor a debt that amounts to $1,500 or 2 or more debts that amount in the aggregate to $1,500, or, where 2 or more creditors join in the petition, there is owing by the debtor to the several petitioning creditors debts that amount in the aggregate to $1,500;
(b) that debt, or each of those debts, as the case may be:
(i) is a liquidated sum due at law or in equity or partly at law and partly in equity; and
(ii)is payable either immediately or at a certain future time; and
(c) the act of bankruptcy on which the petition is founded was committed within 6 months before the presentation of the petition.'
Section 52(1) of the Act provides that the Court shall require proof of the fact that the debts on which the petitioning creditor relies are still owing. Section 204 of the Income Tax Assessment Act 1936 ('the Assessment Act')
provides that tax is due and payable on the date specified in the notice of assessment. Thus, so it was argued, although none of the later tax was due and payable at the time the petition was presented, the liability to pay income tax arises at the end of each financial year. Hence, so the argument proceeded, on the date of presentation of the petition the liability to pay the tax had already arisen, although the tax was not due and payable until August 1995.
Counsel for the Deputy Commissioner then turned to s. 207(2) which provides that the Commissioner may sue for the recovery of unpaid tax immediately when it becomes due and payable. By this reasoning, the liability to pay the 1994 tax arose prior to the presentation of the petition, and the later tax is now a liquidated sum and is immediately payable.
Counsel for the Deputy Commissioner laid emphasis on s. 208B of the Act (the terms of which I shall set out later). It was said that the section entitles him to apply any payment by a debtor as he sees fit, including the reduction of the total debt outstanding and then proceeding for the balance. In these circumstances, if the full present indebtedness of the debtor is considered, the debts upon which the Commissioner wishes to rely are still due and owing. However, the solicitor for the debtor observed that, when the debtor paid the Commissioner $77,822.30 after the presentation of the petition, the Commissioner applied that amount in discharge of the debtor's indebtedness as claimed in the petition. He did not apply it towards the tax which later fell due and became payable.
Counsel for the Deputy Commissioner relied upon the fact that, when considering a debtor's solvency for the purposes of s. 52(2)(a) of the Act, the Court looks at solvency at the time of the hearing, not at the time of presentation of the petition or at the earlier date of commission of the relevant act of bankruptcy. It was submitted that each of the debts sought to be relied upon by way of amendment to the petition would be a provable debt if a sequestration order were to be made on the petition, since bankruptcy is deemed to commence at the date of the commission of the first available act of bankruptcy (s. 115), whereas the relevant date for determining what debts are provable in the bankruptcy is the date of the bankruptcy (s. 82).
The solicitor who appeared for the debtor argued that tax did not become due and payable until the date for payment specified in the relevant notices of assessment, and accordingly, that each of the debts relied on by the Commissioner to support the amendment must have been in existence in the sense that they must satisfy the provisions of s. 44(1) of the Act; at the date of the presentation of the petition, each of the debts must be not only a liquidated sum due at law or in equity, but also payable either immediately or at a certain future time - at the date of the commission of the act of bankruptcy or at the date of presentation of the petition. Even if there were a liability, he argued, there were no debts due at any relevant time. In these circumstances, therefore, these further and later debts cannot be substituted for the amount set out in the creditor's petition and paid by the debtor to the Deputy Commissioner.
It is well established that the debt, upon which a petition and a sequestration order are based, must be a debt which existed at the date of the relevant act of bankruptcy: Moss v Smith (1808) 1 Camp 489; 170 ER 1031; Ex parte Hayward; In re Hayward (1871) LR 6 Ch App 546; Re Payten; Ex parte d'Arcy & Co (1890) 1 BC(NSW) 53; In re Debtors [1927] 1 Ch 19; McNamara v Langford (1931) 45 CLR 267; In re a Debtor; Ex parte the Debtor v Scott [1954] 1 WLR 1190; Re Mendonca; Ex parte Commissioner of Taxation (1969) 15 FLR 256 per Gibbs J. at 257; Hyams v Elder Smith Goldsborough Mort Limited (1976) 133 CLR 637 at 639; Dean v Q.U.F. Industries Limited (1981) 51 FLR 317 at 323.
The question in this case is whether the debts due by the debtor to the Commissioner, which are sought to be substituted as the debts to found a sequestration order, were in existence at the time of the relevant act of bankruptcy, namely, 31 January 1995. Certain monies due by the debtor to the Deputy Commissioner answered that description; but those debts were discharged when the Commissioner accepted payment from the debtor of $77,822.30, after the presentation of the petition.
In this regard, the critical section is s. 44(1) of the Act, which is set out earlier.
It is well settled that liability to income tax is imposed by the Assessment Act itself. But there is some divergence of opinion over whether income tax becomes due before the assessment of tax has been made, or upon assessment and service of notice of the assessment. In Re Mendonca, Gibbs J. said at 259-260:
'It is now settled that the effect of these and similar provisions [a reference to ss. 17, 204, 208 and 209 of the Assessment Act in the form which it took in 1969] is that the liability to income tax is imposed by the statute itself and that assessment is only a method of ascertaining the extent of the liability, so that the tax is a debt due and owing, although not payable, notwithstanding that no assessment has been made ... . At the dates of the acts of bankruptcy in the present case the tax in respect of the years 1962 to 1967 was therefore due and owing, and since, at those dates the notices of assessment had been issued, fixing both the time for payment and the amount payable, the debt was for a liquidated sum payable at a certain future time. The tax was not payable at the dates of the acts of bankruptcy, but, as I have said, that is immaterial. ... The Commissioner was therefore entitled to present the present petition.
In the case of the tax in respect of the year 1968, no assessment had been issued at the dates of the acts of bankruptcy,
and it seems to me that, although the tax was owing at those dates, it was then neither liquidated nor payable either immediately or at a certain future time. As at present advised, therefore, I would hold that the Commissioner is not entitled to petition in respect of the debt representing that tax, but the erroneous inclusion of this debt does not render the petition invalid.'
In Taylor v Commissioner of Taxation (1987) 16 FCR 212 Woodward and Northrop JJ. in a joint judgment, after referring to the judgment of Gibbs J. in Mendonca, said at 217:
'A consideration of decisions by the High Court shows that income tax does not become due until it is assessed and notice of the assessment is served. This is made clear by what was said in Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1.'
In Clyne's Case, Gibbs C.J., after referring to s. 17 of the Assessment Act, said at 9:
'These provisions suggest that the tax is due, in the sense of owing, once the taxable income during a year of income has been derived because there then arises a legal liability to pay it, notwithstanding that the extent of the liability remains to be ascertained and that payment is to be made in the future. ...'
His Honour continued at 9-10 (in a passage also cited by Woodward and Northrop JJ. in Taylor):
'This may be the correct view for most practical purposes. Certainly a notice under s. 218 could not be given before the taxpayer had been assessed, for until that time "the amount due by the taxpayer" could not be ascertained. However, all the authorities to which I have referred are opposed to the view which Williams J. expressed in Gordon Edgell and Sons Pty Ltd v Federal Commissioner of Taxation [(1949) 9 ATD 43 at 46] and seems to have repeated in Deputy Federal Commissioner of Taxation v Brown [(1958) 100 CLR 32 at 50], that tax becomes due only when it is payable. At the latest when tax is assessed it becomes a debt due to the Crown although it is not payable until the later date specified in the notice of assessment. For these reasons when the word "due" is used in the Act, without the accompanying words "and payable", it will prima facie mean simply owing.'
Also in Clyne, Mason J., with whose reasons for judgment Aickin and Wilson JJ. agreed, said at 16-17:
'However the correct view in my opinion is that income tax is due when it is assessed and notice is served of that assessment and that the tax does not become payable before the date fixed by s. 204. Dixon C.J., McTiernan, Williams, Webb and Fullagar JJ. in George v Federal Commissioner of Taxation [(1952) 86 CLR 183 at 207] said that "tax is only due after it is 'assessed' (see, for example, s. 204)". I recognise that on other occasions members of this Court have said that "tax is a debt due and owing, although not payable, notwithstanding that no assessment has been made", in the words of Gibbs J. in Re Mendonca; Ex parte Federal Commissioner of Taxation [(1969) 15 FLR 256 at 259]. This approach can be traced back to the majority decision of this Court in Commissioner of Stamps (WA) v West Australian Trustee, Executor and Agency Co Ltd (Mortimer Kelly's Case) [(1925) 36 CLR 98 esp. at pp. 105, 116 and 118]. I think that the decision is to be explained on the footing that it was held that a debt for income tax not assessed until after the deceased's death was a "debt due by the deceased" for the purposes of Acts imposing death and probate duties. The decision was so explained by Taylor J. (dissenting) in Deputy Federal Commissioner of Taxation v Brown [(1958) 100 CLR 32 at 63-64] and this explanation derives support from the judgments of Higgins and Starke JJ., if not from the judgment of the third member of the majority, Knox C.J., in Mortimer Kelly's Case.'
It was this review of the authorities which led Woodward and Northrop JJ. to say in Taylor at 217 that a consideration of the High Court's decisions revealed that income tax does not become due until it is assessed and notice of the assessment is served.
Whether income tax is due before it is assessed, or only after it is assessed and notice is served of that assessment, is not a matter which I need consider further in this case, because none of the debts which the Commissioner relies on to found the proposed amendment to the petition can be said to have been on 31 January 1995 a liquidated sum payable either immediately or at a certain future time. The cases to which I have referred, including Mendonca, are clear authority for this conclusion. The debts which the Deputy Commissioner asks to be substituted include income tax and provisional tax payable in respect of the years ending 30 June 1994, 30 June 1995 and 30 June 1996. The assessments in respect of those amounts were not issued until 24 July 1995 and 1 August 1995, and the relevant amounts became due and payable on 28 August 1995 and 1 September 1995 - all dates later than 31 January 1995. Similarly, the nonβremitted tax instalment deductions, relevant penalties less remission, and additional amounts for late payment relate to periods after 31 January 1995.
It follows that a sequestration order cannot be founded on any of these debts; hence the amendment must be refused.
Counsel for the Deputy Commissioner relied on s. 208B of the Assessment Act in support of his argument that the debts the subject of the proposed amendment can found the making of a sequestration order. Section 208B reads as follows:
'208B(1) In this section, "debt to which this section applies" means a debt owing to the Commonwealth under section 208.
208B(2) Where:
(a) 2 or more debts to which this section applies are owing by a person;
(b) an amount is paid to or credited by the Commissioner, or an amount is paid to and an amount is credited by the Commissioner, in respect of all or any of the debts; and
(c) the total amount of the debts exceeds the amount so paid or credited or the sum of the amounts so paid and credited, as the case may be,
the Commissioner may, notwithstanding any directions given to him by or on behalf of the person by whom the debts are owed, apply the payment or the credit, or the payment and the credit, in partial discharge of the total amount of the debts and recover the amount by which the total amount of the debts exceeds the amount of the payment or credit, or the sum of the amount of the payment and the amount of the credit, as the case may be, without allocating the payment or the credit, or the payment and the credit, towards the discharge of any particular debt or debts.'
In my opinion s. 208B has no relevance to the present question, if only because the Deputy Commissioner in fact applied the payment of $77,822.30, made by the debtor after the presentation of the petition, in discharge of the debts on which the petition was initially founded. It is not necessary, therefore, to give any further consideration to s. 208B in this case.
The application to amend the petition and the petition itself must be dismissed.
On the question of costs, the parties do not dispute that the Deputy Commissioner is entitled to his costs of the petition up to and including 31 October 1995, when the debtor paid the Deputy Commissioner $77,822.30. As the debtor has succeeded in resisting the petition after that date, in my opinion, the Deputy Commissioner should be ordered to pay the debtor's subsequent costs.
The orders of the Court are as follows:
1. The motion by the petitioning creditor to amend paragraph 2 of the petition is dismissed.
2. The petition is dismissed.
3. The debtor shall pay the costs of the petitioning creditor of the petition up to and including 31 October 1995; and the petitioning creditor shall pay the costs of the debtor of the petition after that date; in each case including reserved costs, if any.
I certify that this and the preceding fourteen (14) pages are a true copy of the reasons for judgment herein of the Honourable Justice Lockhart.
Associate
Dated: 26 April 1996
Solicitors for the Debtor : L W Adams & Associates
Counsel for the Petitioner : Mr M R Aldridge
Solicitors for the Petitioner : Australian Government Solicitor
Date of Hearing : 18 April 1996
Date of Judgment : 26 April 1996
| 5,170 |
federal_court_of_australia:fca/single/2016/2016fca0462
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decision
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commonwealth
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federal_court_of_australia
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text/html
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2016-05-03 00:00:00
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PC on behalf of the Njamal People v State of Western Australia [2016] FCA 462
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2016/2016fca0462
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2024-09-13T22:45:46.445843+10:00
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FEDERAL COURT OF AUSTRALIA
PC on behalf of the Njamal People v State of Western Australia [2016] FCA 462
File number: WAD 6003 of 2000
Judge: BARKER J
Date of judgment: 3 May 2016
Catchwords: NATIVE TITLE β application to replace current applicant under s 66B of the Native Title Act 1993 (Cth) β whether replacement applicant comprised of members of claim group β whether circumstances in s 66B(1)(a) established β whether replacement applicant authorised by claim group β discretion to make order under s 66B
Legislation: Native Title Act 1993 (Cth) s 66B, s 66B(1), s 66B(1)(a), s 66B(2), s 251B, s 251B(b)
Cases cited: Butterworth on behalf of the Wiri Core Country Claim v State of Queensland (No 2) [2014] FCA 590
Daniel and Others v Western Australia and Others (2002) 194 ALR 278; [2002] FCA 1147
Jurruru People v State of Western Australia [2012] FCA 2
Stock v State of Western Australia [2014] FCA 179
TJ v State of Western Australia [2015] FCA 818
Date of hearing: Determined on the papers
Registry: Western Australia
Division: General Division
National Practice Area: Native Title
Category: Catchwords
Number of paragraphs: 18
Counsel for the Applicant: Mr M Fort
Solicitor for the Applicant: Yamatji Marlpa Aboriginal Corporation
ORDERS
WAD 6003 of 2000
BETWEEN: PC & ORS ON BEHALF OF THE NJAMAL PEOPLE
Applicant
AND: STATE OF WESTERN AUSTRALIA & ORS
Respondents
JUDGE: BARKER J
DATE OF ORDER: 3 MAY 2016
THE COURT ORDERS THAT:
1. Pursuant to s 66B of the Native Title Act 1993 (Cth) (NTA), Doris Eaton, Alice Mitchell and Doris Monaghan (collectively the replacement applicant) replace the current applicant in this matter on the grounds that:
(a) CG, PC and TA (names withheld for cultural reasons) are deceased (s 66B(1)(a)(ii));
(b) the current applicant is no longer authorised by the claim group to make the claimant application and to deal with matters arising in relation to it (s 66B(1)(a)(iii)); and
(c) the persons who comprise the new applicant are authorised by the claim group to make this interlocutory application under s 66B of the NTA and are authorised to bring the claimant application and to deal with matters arising in relation to it.
2. The heading of the claimant application be amended to reflect the names of the replacement applicant.
3. Service of the interlocutory application filed 15 April 2016 and supporting documentation on any respondent other than the State be dispensed with.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
BARKER J:
1 Doris Eaton, Alice Mitchell and Doris Monaghan (collectively the replacement applicant) apply to jointly replace Doris Eaton, Alice Mitchell, Doris Monaghan, TA (deceased), PC (deceased) and CG (deceased) (collectively the current applicant) in this claimant application under the Native Title Act 1993 (Cth) (NTA).
2 An interlocutory application to this end was filed 15 April 2016 and, all other parties having indicated they did not object to the orders sought, was dealt with on the papers.
3 The replacement applicant seeks to replace the current applicant on the basis that the last three named applicants at [1] are deceased.
4 The Court's power to make such an order arises under s 66B of the NTA. By s 66B(2), the Court may make the order if it is satisfied that the grounds set out in subs (1) are established. Section 66B(1) provides that:
(1) One or more members of the native title claim group (the claim group) in relation to a claimant application, or of the compensation claim group (also the claim group) in relation to a compensation application, may apply to the Federal Court for an order that the member, or the members jointly, replace the current applicant for the application on the grounds that:
(a) one or more of the following applies to a person who is, either alone or jointly with one or more other persons, the current applicant:
(i) the person consents to his or her replacement or removal;
(ii) the person has died or become incapacitated;
(iii) the person is no longer authorised by the claim group to make the application and to deal with matters arising in relation to it;
(iv) the person has exceeded the authority given to him or her by the claim group to make the application and to deal with matters arising in relation to it; and
(b) the member or members are authorised by the claim group to make the application and to deal with matters arising in relation to it.
Note: Section 251B states what it means for a person or persons to be authorised by all the persons in the claim group to deal with matters in relation to a claimant application or a compensation application.
5 The issues that arise on the determination of the interlocutory application are therefore:
(1) Whether the replacement applicant is comprised of members of the claim group in this matter.
(2) Whether the relevant current applicants are deceased.
(3) Whether the replacement applicant is authorised by the claim group to make the claimant application and deal with matters arising in relation to it.
(4) Whether it is appropriate that such order be made.
IS THE REPLACEMENT APPLICANT COMPRISED OF MEMBERS OF THE CLAIM GROUP?
6 I am satisfied that the replacement applicant, which makes the interlocutory application, is comprised of persons who are members of the claim group.
ARE THE RELEVANT CURRENT APPLICANTS DEAD?
7 The relevant circumstance in this case under s 66B(1)(a), is whether TA (deceased), PC (deceased) and CG (deceased) are dead.
8 I accept the evidence contained in the affidavit of Marcus Benjamin Fort affirmed 14 April 2016 at [19], that they are.
IS THE REPLACEMENT APPLICANT AUTHORISED?
9 The reference to "authorised" in s 66B is a reference to authorisation, and withdrawal of authorisation, in accordance with a decision-making process under s 251B of the NTA. See the note to s 66B(1) and Daniel and Others v Western Australia and Others (2002) 194 ALR 278 at [10] and [14]; [2002] FCA 1147.
10 Under s 251B(b), if there is no traditional decision-making process, then authorisation must be given in accordance with a decision-making process agreed to and adopted by the persons in the claim group. This does not import a requirement that all members of the claim group be involved in making the decision, or that the vote be a unanimous vote of every member; rather, it requires giving to persons whose whereabouts are known, and have capacity to authorise, a reasonable opportunity to participate in the adoption of a particular process and the making of decisions pursuant to that process. See, for example, Butterworth on behalf of the Wiri Core Country Claim v State of Queensland (No 2) [2014] FCA 590 at [13], and Jurruru People v State of Western Australia [2012] FCA 2 at [30]-[31].
11 The applicant relies on the evidence contained in the affidavits of Marcus Benjamin Fort affirmed 14 April 2016 and Doris Eaton affirmed 13 April 2016, concerning resolution 1 made at a community meeting on 1 and 2 March 2016.
12 A community meeting on 1 and 2 March 2016 authorised changes to the list of named applicants. The meeting had the usual attendance of Njamal claim group members. I find those claim group members present were an appropriate representation of the families that comprised the Njamal claim group, including cultural elders.
13 I accept the meeting was originally convened by way of notice posted on 12 October 2015 to all members of the Njamal claim group whose contact details were known by Yamatji Marlpa Aboriginal Corporation, in its capacity as the representative body. Additionally, further notices were posted to the same persons on 23 October 2015 and 11 February 2016, to notify them of the meeting being rescheduled.
14 I accept that, on the evidence, there is no traditional decision-making process that must be used in order for the claim group to make decisions in relation to interlocutory applications of this nature. Accordingly, authorisation could be given by way of a process that was agreed and adopted at the meeting.
15 I further accept that at the meeting, by way of a decision-making process agreed and adopted at that same meeting, the Njamal claim group resolved to make resolution 1, one of the consequences of which is this interlocutory application to replace the current applicant.
16 In the circumstances, I accept the replacement applicant is authorised by the claim group to make the claimant application and deal with matters arising in relation to it.
IS IT APPROPRIATE TO MAKE THE ORDER?
17 Finally, s 66B(2) gives the Court a discretion as to whether or not in any case an order replacing an applicant should be made. See TJ v State of Western Australia [2015] FCA 818 at [107]; Stock v State of Western Australia [2014] FCA 179 at [25]. There is, in my view, no reason why the orders sought should not be made.
18 In these circumstances, the Court will make the orders set out in the interlocutory application filed 15 April 2016 at [1], [2] and [3].
(1) Pursuant to s 66B of the Native Title Act 1993 (Cth) (NTA), Doris Eaton, Alice Mitchell and Doris Monaghan (collectively the replacement applicant) replace the current applicant in this matter on the grounds that:
(a) CG, PC and TA (names withheld for cultural reasons) are deceased (s 66B(1)(a)(ii));
(b) the current applicant is no longer authorised by the claim group to make the claimant application and to deal with matters arising in relation to it (s 66B(1)(a)(iii)); and
(c) the persons who comprise the new applicant are authorised by the claim group to make this interlocutory application under s 66B of the NTA and are authorised to bring the claimant application and to deal with matters arising in relation to it.
(2) The heading of the claimant application be amended to reflect the names of the replacement applicant.
(3) Service of the interlocutory application filed 15 April 2016 and supporting documentation on any respondent other than the State, be dispensed with.
I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker.
Associate:
Dated: 3 May 2016
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federal_court_of_australia:fca/single/1998/1998fca0890
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1998-07-31 00:00:00
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Graham, Shirley Christine v Dunnyhire (Vic) Pty Ltd [1998] FCA 890
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/1998/1998fca0890
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2024-09-13T22:45:47.340427+10:00
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FEDERAL COURT OF AUSTRALIA
INDUSTRIAL LAW β termination of employment β jurisdiction - whether applicant an employee employed by the respondent
Workplace Relations and Other Legislation Amendment Act 1996 (No. 60 of 1996)
Industrial Relations Act 1988 (Cth) β s 170ED(1)
Workplace Relations Act 1996 (Cth) - ss 170EA, 347
Jones v Dunkel (1959) 101 CLR 298 - cited
Stevens v Brodribb Sawmilling Company Proprietary Limited (1986) 160 CLR 16 - considered
Montreal v Montreal Locomotive Works (1947) 1 DLR 161 - cited
Zuijs v Wirth Bros. Pty. Ltd. (1955) 93 CLR 561 - cited
Bank Voor Handel en Scheepvaart N.V. v Slatford (1953) 1 QB 248 - cited
SHIRLEY CHRISTINE GRAHAM v DUNNYHIRE (VIC) PTY LTD
VI 2768 of 1996
Judicial Registrar Ryan
Melbourne
31 July 1998
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY VI 2768 of 1996
BETWEEN: Shirley Christine Graham
Applicant
AND: Dunnyhire (Vic) Pty Ltd
Respondent
JUdicial registrar: RYAN
DATE OF ORDER: 31 JULY 1998
WHERE MADE: MELBOURNE
THE COURT:
(1) declares that the applicant was employed by the respondent from 1 July 1995 to 31 October 1996
(2) orders the matter be set down for hearing of submissions on
(a) the second jurisdictional issue of presence or absence of termination at the initiative of the employer
(b) the further conduct of the proceeding if the proceeding continues
(c) the substantive issue of valid reasons for termination if such are asserted
(d) whether the proceeding if continued is by way of further evidence and submissions or by submissions only and reliance on evidence already given.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY VI 2768 of 1996
BETWEEN: Shirley Christine Graham
Applicant
AND: Dunnyhire (Vic) Pty Ltd
Respondent
JUDicial registrar: RYAN
DATE: 31 JULY 1998
PLACE: MELBOURNE
REASONS FOR JUDGMENT
THE APPLICATION
These are Reasons for Judgment on a preliminary jurisdictional issue in an application for relief in respect of termination of employment. The application was lodged in the Australian Industrial Relations Commission on 18 November 1996. For reasons outlined below, the matter was not listed for a substantive hearing prior to 26 May 1997. The Workplace Relations and Other Legislation Amendment Act 1996 (No. 60 of 1996) amended the Industrial Relations Act 1988 (Cth). The transitional provisions from schedule 6 of the Act provide that the Workplace Relations Act 1996 as amended by the schedule does not apply to a termination of employment occurring before the commencement of the schedule if an application was made in respect to that termination under s 170EA of the Workplace Relations Act as enforced at any time before that commencement. This application for relief in respect of termination of employment is therefore being heard by the Federal Court of Australia under the Workplace Relations Act as in force prior to the commencement of the schedule.
BACKGROUND TO THE APPLICATION
On 12 November 1996, Ronald Graham lodged an application for relief in respect of termination of employment. The application:
Β· identified the employer as Dunnyhire (Vic) Pty Ltd
Β· indicated an authorised representative namely Mr Tim Morris of Hannebury Boyle & Partners
Β· described the applicant's occupation as Manager/Driver
Β· referred to the employment as starting on 1 July 1995 and ending on 31 October 1996
Β· listed the remedies sought as "reinstatement, compensation and damages for wrongful termination of employment".
Soon after, on 16 November 1996, Shirley Graham lodged an application for relief in respect of termination of employment. The application:
Β· identified the same employer
Β· indicated the same solicitor as authorised representative
Β· referred to the same period of employment
Β· listed similar remedies sought, namely "reinstatement, compensation and damages"
Β· described the work performed as "secretarial β clerical".
On 26 November 1996 Gerald Peter Davis of the firm, Wilder Moses Bengasino, filed Notices of Employer's Appearance in respect of each application.
On 10 December 1996 Commissioner Deegan issued separate certificates certifying that the Australian Industrial Relations Commission had been unable to settle either matter by conciliation and that the parties had not elected to have either matter dealt with by consent arbitration. As a result, on 16 December 1996, a Deputy Industrial Registrar in the Victoria Registry of the Australian Industrial Registry referred both applications to the Industrial Relations Court of Australia under sub-section 170ED(1) of the Industrial Relations Act 1988.
Both applications were listed for Directions Hearing in the Industrial Relations Court of Australia on 4 February 1997. Mr Morris appeared for both applicants and Mr Davis appeared for the employer. Both matters were adjourned by consent to a date to be fixed on the understanding that police action was pending.
By letter dated 2 June 1998 Mr Morris, now of the firm Berry & Maloney, successor to Hannebury Boyle & Partners, advised the District Registrar of the Industrial Relations Court of Australia that police action had been completed and he requested both matters be relisted for hearing.
On 19 June Mr Brian Maloney of Berry & Maloney wrote to the Listings Manager of the Federal Court advising that "police action has been completed by the withdrawal of the charges". He also requested that the matters be relisted for hearing. The District Registrar had already acted on the earlier letter of 2 June and Mr Maloney's letter of 19 June crossed with Federal Court letters of that date which advised the solicitors of all parties of a Directions Hearing in the Federal Court on 6 July. On 24 June Secombs, solicitors, advised that they now acted for the respondent. By affidavit sworn 30 June Mr Roger Batrouney of Secombs deposed that his firm had no knowledge of the Federal Court proceedings until advised by facsimile on 22 June by the solicitors on the record, Wilder Moses Bengasino.
On 6 July Mr Lennon appeared as counsel for both applicants and Mr Goldblatt as counsel for the respondent in both applications. Both applications were set down to be heard together on 27, 28 and 29 July and mutual discovery of documents on which the parties proposed to rely was directed to take place by 22 July.
During the hearing, commencing 27 July, it became apparent that the respondent had substantially complied with the order for discovery but that the applicants were a little late in providing discovery. Messrs Lennon and Goldblatt appeared again for the respective parties. Counsel sought and were granted a little time prior to trial during which discussions as to possible settlement and as to the issues in contest presumably took place.
The matters remained unresolved and when both matters were called on for hearing Mr Lennon advised that the application of Ronald Charles Graham would not be proceeding and "would be withdrawn". The Court indicated that a Notice of Discontinuance should be filed in respect of the application but rejected an application for costs made on behalf of the respondent under s 347 of the Workplace Relations Act 1996.
The Court of its own motion and with the support of counsel for the respondent also considered whether Mr Graham as a party to the proceeding had caused the respondent as another party to the proceeding to incur costs because of an unreasonable act or omission in connection with the conduct of proceeding following the referral to the Industrial Relations Court of Australia. The only possible unreasonable act or omission, in my view, was the very late withdrawal of Mr Graham's application. However, counsel's assurance was accepted that detailed conferences had taken place with Mr and Mrs Graham on Wednesday 22 July and Saturday 25 July and, in the circumstances, the Court was not satisfied that the very late notice of withdrawal of Mr Graham's application amounted to an unreasonable act or omission in the conduct of the proceeding.
INITIAL HEARING CONFINED TO JURISDICTION β WAS THE APPLICANT EMPLOYED BY THE RESPONDENT?
The respondent has conceded that Mr Graham was employed from the inception of the company on 1 July 1995 until 31 October 1996 and that he was responsible for the day to day operations of the company. The respondent asserts that the employment of Mr Graham was terminated for valid reasons relating to misconduct. However, the respondent has never conceded that Mrs Graham was employed and Mr Davis as the solicitor then acting for the respondent stated in the Notice of Employer's Appearance filed in the Commission on 26 November 1996 that "on the basis of instructions from a Director of the employer β¦ the employee is not actually employed to perform any services to the employer and is only recorded as an employee to allow her husband, RC Graham, to split his income".
The jurisdictional issue of employment is the only issue dealt with in these Reasons for Judgment. The Court was concerned that splitting the jurisdictional and substantive issues might be an inefficient use of Court time given the likelihood that a decision in favour of jurisdiction, and therefore in favour of the applicant, might lead to a recall of some or all of the witnesses called for a further hearing of any substantive issues which might remain on foot. This concern was exacerbated when it became apparent that there may be a second jurisdictional issue as to the absence or presence of termination at the initiative of the employer.
However, counsel for the applicant objected to the admission into the hearing of the first preliminary issue of any evidence which might be relevant to substantive issues but could not be sustained as relevant to any preliminary issue. Given the position taken on behalf of the applicant the hearing has been confined to the preliminary jurisdictional issue of employment.
EMPLOYMENT HISTORY PRIOR TO ESTABLISHMENT OF DUNNYHIRE (VIC) PTY LTD
The applicant and her daughter, Ms Tammy Graham, gave evidence for the applicant. Mrs Joan Parker, Mr Brian Wallis and Mr John Whineray gave evidence for the respondent.
The evidence establishes that Ms Tammy Graham was employed on secretarial, bookkeeping and office management duties, first by the predecessor to Dunnyhire (Vic) Pty Ltd and then by Dunnyhire (Vic) Pty Ltd. The predecessor to Dunnyhire (Vic) was Graham Whineray Pty Ltd trading as Dunnyhire. Mr Graham and Mr Whineray were the Directors and hence the name Graham Whineray.
The company, Dunnyhire (Vic) Pty Ltd was formed on and from 1 July 1995. The Directors were Mr Graham, Mr Wallis and Mr Whineray. The evidence suggests that Mr Wallis's wife, Marie, also played some part in the business conducted by Dunnyhire (Vic).
Mrs Joan Parker was employed as a replacement for Ms Tammy Graham. Ms Graham gave evidence that she was dismissed by her father and was the recipient of an order for compensation in an action for unlawful termination of employment. Mrs Parker is the mother of Mrs Marie Wallis and mother-in-law of Mr Brian Wallis.
This somewhat tangled web of family relationships may have led to certain informalities in the documentation of employment and business relationship. The vagueness and uncertainty of the evidence of Mrs Graham (and to a lesser extent Ms Graham) as to when and how either or both entered an employment relationship with Graham Whineray Pty Ltd trading as Dunnyhire and as to the formality of any possible employer/employee relationship between Mrs Graham and Dunnyhire (Vic) may be in part the result of these family relationships and in part the result of family disputes which appear to have arisen.
THE FAILURE TO CALL MR GRAHAM
Mr Lennon did not call Mr Graham to give evidence as to the employment of Mrs Graham. Mr Graham was not called to give evidence and Mr Goldblatt asserts that an inference should be drawn that he would not have given evidence favourable to the applicant and indeed would have given evidence adverse to the applicant.
I have concluded that the failure to call Mr Graham in respect of the preliminary issue leads to a reasonable inference that, if called, he may have given some evidence adverse to the overall interests of the applicant. I am not satisfied that the failure to call Mr Graham on the preliminary issue leads to a reasonable inference that he would have given evidence adverse to the applicant on that preliminary issue. It is possible, perhaps not probable but possible, that Mr Graham, if called, might have given evidence which was neither favourable nor adverse on the preliminary issue but adverse on some other jurisdictional or substantive issue. It is possible that potential adverse evidence on another issue was seen to outweigh potential favourable evidence on the employment issue. It is possible that Mr Graham might give adverse evidence on any or all issues but I am not satisfied that it is reasonable to draw an inference, adverse or favourable, in respect of the preliminary issue because of a decision not to call Mr Graham at this stage of the proceeding: Jones v Dunkel (1959) 101 CLR 298.
EVIDENCE OF ACTIVITIES UNDERTAKEN BY MRS GRAHAM
Mrs Graham stated that her duties included:
Β· taking telephone calls when her daughter was unavailable
Β· taking telephone calls before or after her daughter and later Mrs Parker were on duty especially before 9.00 am and after 3.00 pm
Β· collecting mail from Altona
Β· running errands
Β· sometimes doing the banking
Β· travelling once a week to get cheques signed
Β· giving quotations
Β· taking orders.
Ms Graham stated that her duties included:
Β· acting as office manager
Β· answering telephones
Β· invoicing
Β· filling out bank forms
Β· "anything I was asked to do"
Β· SEC paperwork
Β· orders
Β· quotes
Β· superannuation and salaries.
Ms Graham describes her mother as her assistant and stated that Mrs Graham's duties included:
Β· answering telephones
Β· paperwork after hours and when Ms Graham was unavailable
Β· faxing paperwork after hours and when Ms Graham was unavailable
Β· collecting mail
Β· obtaining cheques.
Ms Graham also stated that she "used Mum to make decisions with" (i.e. she used her mother as a sounding board and adviser on certain matters).
Mrs Parker was a direct and impressive witness. She stated that:
Β· she was only aware of Shirley Graham being employed "by the wages' book"
Β· Mrs Graham would have answered the phone out of hours (i.e. Mrs Parker's hours of 9.00 am to 3.30 pm) except when one phone was diverted to the truck at the direction of Mr Graham
Β· the two telephone lines could be accessed from both the house and the office and rang in both the house and the office
Β· the mail was usually on her desk when she arrived and she could not say who collected it but it was possible that it was collected by Mrs Graham.
Mrs Parker's evidence included the following "I paid wages and superannuation. There was no criteria. I worked it out myself. I paid Shirley Graham a wage. I just followed on from what Tammy had been doing. I always put it in an envelope marked "Shirley and Ron" once a week and left it on the desk or gave it to Ron."
I just followed on Tammy's wages' book. I just copied what Tammy did. I carried on the same system as Tammy. I am aware that superannuation and tax was taken out. Mrs Graham was treated on paper as an employee. I do not know if Shirley Graham was an employee".
Certain quite discrete and limited extracts from affidavits sworn by Mr Brian Wallis were admitted as evidence. The extracts were from an affidavit filed in proceedings described by Mr Batrouney in his later affidavit of 30 June 1998 as "Supreme Court proceedings issued by Ronald Charles Graham in relation to the affairs of the company" (i.e. the company being Dunnyhire (Vic) Pty Ltd).
The extract tendered by the respondent (Exhibit R9) reads as follows:
"I, BRIAN THOMAS WALLIS of 793 Sayers Road, Hoppers Crossing in the State of Victoria, Director, MAKE OATH AND SAY as follows:
7. Immediately before the Company began to trade Graham, JW and I agreed as follows:
(a) first, Graham would be responsible for the day to day operations of the Company's business and the day to day management of the Company's financial affairs. I was to continue operating BMW;
(b) secondly, the Company would employ Frank Keeshan ("Keeshan") as a driver to deliver and collect hired equipment, and to act as a general roustabout;
(c) thirdly, for income splitting purposes, Graham's wife would be recorded as an employee of the Company, and Graham's salary would be split between the two of them;
(d) fourthly, the telephone number 9369 7320 ("the telephone number") which was then connected to the Graham property and had previously been used by Whineray, but which was in Graham's name, would be paid for by the Company and would become the property of the Company;
8. I make the following further comments in relation to Graham's affidavit:
(a)
Insofar as Company cheques are concerned:
(i) On many occasions, I was asked by Graham and by his daughter Tammy ("Tammy"), who was responsible for the Company's office administration between July 1995 and July 1996, to sign cheques:
(x) which were blank; and/or
(y) which had no accompanying statement or invoice; and/or
(z) which were payments for Graham's personal accounts, as for example, private telephone bills;
8(e) Paragraph 26:
Tammy was formerly employed by the Company as an office manager/secretary. In that capacity, she carried out all of the secretarial and other office duties, save for a small number of duties which Graham's wife Shirley carried out, namely answering some telephone calls and occasionally doing the Company's banking."
The extract tendered by the applicant (Exhibit A6) also contains the extract above from paragraph 8(e) of the Wallace affidavit. The extract also contains paragraph 16(a) of the affidavit which reads:
"16. I make the following further comments in relation to Graham's affidavit:
(a) Paragraphs 30 and 31
Mr. Merry has never been an employee of the Company. He is in fact an employee of BMW. Since 31 October 1996 Mr. Merry and other employees of BMW have, at my request and at no cost to the Company, performed work, and in particular physical tasks for the Company."
The general tenor of the oral evidence given by Mr Wallis was that of a man who had adopted a position. That position was that Mrs Graham was recorded on the books of the company as an employee but really was not an employee and that the whole arrangement was one in which a sum of money going to Mr Graham in salary was notionally halved for the purposes of reducing his recorded taxable income.
I have listed below from my notes a summary of certain aspects of the oral evidence of Mr Wallis. These are not verbatim extracts from transcript. Transcript of the second day of the hearing was not available when these Reasons for Judgment were prepared. Nevertheless, the notes below are, in my view, a reasonably accurate summary of certain parts of the evidence.
" agreement was an income splitting exercise by which Shirley came on the books. Previous events had set it up. The same system was in operation in Graham Whineray.
As far as I can ascertain Shirley basically helped out in the family business. It was coincidental that she brought the mail back.
Shirley Graham's wage was created by Ron Graham's wage. If Ron Graham had no wage, Shirley Graham had no wage. There was no specific work or assistance designated, no designated tasks, no designated role. Shirley Graham benefited by half of Ron Graham's wage to reduce Ron's tax.
Ron Graham was dismissed on 31 October 1996 at a meeting. There was no role for Shirley Graham after the meeting. In my mind there was no job there for her, no work for her. Shirley Graham was not practically employed. There was no job for Shirley Graham in the company. There was no physical job."
However, Mr Wallis also gave evidence which suggests that the trappings of employment were erected for Mrs Graham and some of his evidence is open to a conclusion that Mrs Graham was employed, albeit on an informal, flexible basis. These aspects of his evidence support evidence from Shirley Graham, Tammy Graham and Joan Parker, which evidence is clearly open to the conclusion that the applicant, Mrs Graham, was employed by the respondent, Dunnyhire (Vic).
First, there are the following comments from the Wallis affidavit:
"For income splitting purposes, Graham's wife would be recorded as an employee of the company. The telephone number 9369 7320 which was then connected to the Graham property had been previously used by Whineray, but which was in Graham's name, would be paid for by the company and would become the property of the company.
Shirley carried out a small number of duties, namely answering some telephone calls and occasionally doing the company's banking."
Secondly, there is the following summary of oral evidence, again it is not verbatim but from my notes.
"She did answer the phone on occasions β it is in the house. I know Shirley sometimes did the banking. Turner prepared a Group Certificate. I assume he took out tax and yes superannuation was paid. We did everything that was necessary, legally, while she was on the books, to pay superannuation and tax.
Shirley Graham did the banking before Joan Parker. I can recall this on occasions. She got cheques signed. She came in her own car. She was not compensated for the wear and tear of the vehicle.
We stopped Ron's salary. We did not stop Shirley's salary. The instruction was to stop Ron Graham's salary. In my view, Shirley Graham did not have a job. I have not seen the wage records. I do not go into wages' books."
The evidence of Mr Whineray supports the proposition that any arrangement reached with Mr Graham which involved Mrs Graham was primarily an arrangement to split income. His evidence included the following. Again, the extract below is not verbatim. It is a summary taken from notes.
"When Ron Graham and I started I would put out the toilets. I had nothing to do with office work. I have had nothing to do with the company for the last four years. Graham Whineray comes from an amalgamation of our names. We were paid the same, we cleared $500 each. Later, Steve Wilson suggested that Ron split his wage with Shirley. Shirley got the other half. Shirley did the banking, she answered phones. The whole idea was to split the wage. I would say that she did that (answer the phones) before and after the splitting of the income. There was no discussion with Ron about employing Shirley. We just discussed splitting income.
I was party to the discussions leading to the sacking of Mr Graham. Shirley was never mentioned in the discussions. She was never advised of these discussions by me. She could have turned up the next day and said "what have I got to do?"."
CONCLUSION
Mr Goldblatt sought comfort in Stevens v Brodribb Sawmilling Company Proprietary Limited (1986) 160 CLR 16. Although Brodribb involved negligence, vicarious liability and the distinction between employee and independent contractor, there is much therein which is of assistance in determining whether a particular relationship is that of employer and employee. However, the distinctions there outlined can be no more than signposts to guide a determination as to the nature of any particular relationship. It is always prudent to commence such an assessment with the following comment of Wilson and Dawson JJ at 37:
"β¦ any attempt to list the relevant matters, however incompletely, may mislead because they can be no more than a guide to the existence of the relationship of master and servant. The ultimate question will always be whether a person is acting as the servant of another or on his own behalf and the answer to that question may be indicated in ways which are not always the same and which do not always have the same significance."
Attention then can usefully be given to the earlier comment at 36:
"β¦ the control test β¦ is not now a sufficient or even an appropriate test in its traditional form in all cases because in modern conditions a person may exercise personal skills so as to prevent control over the manner of doing his work and yet nevertheless be a servant: Montreal v. Montreal Locomotive Works [1947] 1 D.L.R. 161, at p.169. This has led to the observation that it is the right to control rather than its actual exercise which is the important thing (Zuijs v. Wirth Bros. Pty. Ltd.) [1955] 93 C.L.R. 561, at p.571."
Traversing Brodribb in reverse order Wilson and Dawson JJ at 35 refer to Denning LJ in Bank Voor Handel en Scheepvaart N.V. v Slatford (1953) 1 QB 248 at 295 and to the observation that "the test of being a servant does not rest nowadays on submission to orders but "depends on whether the person is part and parcel of the organization".
In Montreal Lord Wright said:
"β¦ it is in some cases possible to decide the issue by raising as the crucial question whose business it is, or in other words by asking whether the party is carrying on the business, in the sense of carrying it on for himself or on his own behalf and not merely for a superior."
I have no doubt that in this case at this time the business was that of the respondent and that Mrs Graham was not carrying on business for herself or acting in a voluntary capacity as some voluntary, independent, unpaid assistant to her husband.
In Brodribb at 24 Mason J referred to a number of indicia including but not limited to:
Β· the mode of remuneration
Β· the provision and maintenance of equipment
Β· the obligation to work
Β· the hours of work
Β· provision for holidays
Β· deduction of income tax
Β· delegation of work by the putative employee.
In assessing the existence or non-existence of a relationship of employer and employee it is common to measure the actual circumstances against such indicia and to classify the indicia as favourable, adverse or neutral to the prevailing circumstances. However, it is not a numbers game. It is not a matter in a particular set of circumstances of classifying or assessing indicia as, for example, "3 against, 2 for and 3 neutral ergo no employment". In this case, I would classify the criteria of remuneration and taxation as significantly in favour of an employment relationship especially with deductions or payments of superannuation. The criteria of equipment, hours of work and holidays might well be neutral but at the end of the day I have no doubt that this was an employment relationship albeit a flexible, informal one.
I have concluded that:
1. Mrs Graham was an employee of Dunnyhire (Vic) Pty Ltd from 1 July 1995 to 31 October 1996 and she had become an employee of Graham Whineray Pty Ltd trading as Dunnyhire at some date I am unable to determine, a date some time prior to 30 June 1995.
2. The arrangements agreed by Messrs Wallis, Whineray and Graham when Dunnyhire (Vic) was established led to a somewhat flexible employment arrangement but one nevertheless in which Mrs Graham was paid a salary in cash equal to the salary paid to Mr Graham.
3. A key motivation, perhaps even the primary motivation, in employing Mrs Graham was to reduce the income of Mr Graham for income taxation purposes.
4. Superannuation payments were recorded and made on behalf of Mrs Graham as an employee.
5. A wages' record was kept in the name of Mrs Graham.
6. A Group Certificate was issued in the name of Mrs Graham as an employee.
I have reached these conclusions on the general weight of the oral and documentary evidence and despite the fact that I found Mrs Graham an unimpressive, inconsistent and at times contradictory witness.
I do not accept the assertion of counsel for the respondent that the affidavit statement of Mr Wallis in respect of an agreement with Mr Graham and Mr Whineray when the respondent company was established demonstrates an absence of privity of contract between the applicant as employee and the respondent as employer.
The description of the "agreement" in paragraph 7 of the Wallis affidavit is neither evidence for or against a contract of employment with Mrs Graham. Employment contracts are often oral, flexible and informal.
Having decided the first jurisdictional issue in favour of the applicant, I will now take submissions on:
1. the second jurisdictional issue of presence or absence of termination at the initiative of the employer
2. the further conduct of the proceeding if the proceeding continues
3. the substantive issue of valid reasons for termination if such are asserted
4. whether the proceeding if continued is by way of further evidence and submissions or by submissions only and reliance on evidence already given.
I certify that this and the preceding thirteen (13) pages are a true copy of the Reasons for Judgment herein of Judicial Registrar Ryan
Associate:
Dated: 31 July 1998
Counsel for the Applicant: Mr D Lennon
Solicitor for the Applicant: Berry & Maloney
Counsel for the Respondent: Mr M Goldblatt
Solicitor for the Respondent: Secombs
Date of Hearing: Melbourne, 27 and 28 July 1998
Date of Judgment: 31 July 1998
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Borg, Frank v South Pacific Tyres [1997] FCA 808
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2024-09-13T22:45:47.502485+10:00
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FEDERAL COURT OF AUSTRALIA
INDUSTRIAL LAW - UNLAWFUL TERMINATION - CONDUCT AND PERFORMANCE - SERIOUS MISCONDUCT - VALID REASON - OPPORTUNITY TO RESPOND - employee dismissed for biting another employee.
Workplace Relations Act 1996 (Cth) ss 170EA
Workplace Relations & Other Legislation Amendment Act 1996 (Cth) Sch 16.
Wadey v Y.W.C.A Canberra (unreported, Industrial Relations Court of Australia, Moore J, 12 November 1996)
Westen v Union Des Assurances De Paris (unreported, Industrial Relations Court of Australia, Madgwick J, 17 December 1996)
Cosco Holdings Pty Ltd v Thu Thi Van Do (unreported, Industrial Relations Court of Australia, Madgwick J, 30 June 1997)
The State of Victoria and Ors. v The Commonwealth of Australia (1996) 138 ALR 129
Ferry v Minister for Health, Western Australia (1995) 64 IR 28; affirmed on appeal (unreported, Industrial Relations Court of Australia, Wilcox CJ, North and Madgwick JJ, 4 April 1996)
BORG v SOUTH PACIFIC TYRES
VI 1200 of 1997
BEFORE: MURPHY JR
PLACE: MELBOURNE
DATE: 20 AUGUST 1997.
IN THE FEDERAL COURT OF AUSTRALIA )
)
VICTORIA DISTRICT REGISTRY ) VI 1200 of 1997
)
GENERAL DIVISION )
BETWEEN: FRANK BORG
Applicant
AND: SOUTH PACIFIC TYRES
Respondent
JUDGE: MURPHY JR
PLACE: MELBOURNE
DATED: 20 AUGUST 1997
MINUTES OF ORDER
THE COURT ORDERS THAT:
1. The application is dismissed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
)
VICTORIA DISTRICT REGISTRY ) VI 1200 of 1997
)
GENERAL DIVISION )
BETWEEN: FRANK BORG
Applicant
AND: SOUTH PACIFIC TYRES
Respondent
JUDGE: MURPHY JR
PLACE: MELBOURNE
DATED: 20 AUGUST 1997
REASONS FOR JUDGMENT
Introduction.
This is an application under s 170EA of the Workplace Relations Act 1996 (Cth) (formerly the Industrial Relations Act 1988 (Cth)) ("the Act"). It comes before the Court under the transitional provisions of Schedule 16 of the Workplace Relations and Other Legislation Amendment Act 1996 (Cth). On 5 December 1996 the applicant was dismissed from his position as a Banbury operator at the respondent's Somerton plant. He seeks reinstatement. The respondent alleged that it had a valid reason to dismiss the applicant because he was guilty of misconduct, namely biting another employee, Mr Elton-Bott. It was the applicant's case that he had not bitten Mr Elton-Bott, and that he had been dismissed as a result of an unfair and arbitrary application of the respondent's "no fighting in the workplace" policy.
The respondent's "no fighting" policy.
Mr Scerri, the business centre manager of the respondent, gave evidence that the respondent has a policy that there is to be no fighting in the workplace. It is reinforced in various documents available to employees: see Exhibits R1 and R10. If there is an incident of physical violence between employees and the respondent is able to identify the aggressor, then that employee is dismissed. A key factor in determining which party is at fault is the presence of witnesses. Representatives of the National Union of Workers ("the union") are often involved in workplace incidents. On some occasions an incident may occur and the shop stewards intervene and discuss the matter with the participants. When the matter is brought to the attention of management, and neither party wishes to take the matter further, an incident becomes a "non incident". This did not occur here.
The competing accounts of the incident.
The applicant was a health and safety representative at the respondent's plant. On the morning of 4 December 1996 he attended a meeting at 7.00 am. He normally works on a Banbury machine, and is assisted by a batch builder, Mr Elton-Bott. The two had been working on the same machine for about twelve months. Although the applicant had more experience, the skills of the two individuals were essentially interchangeable and when the applicant was not present Mr Elton-Bott operated the machine. Mr Elton-Bott was operating the machine that morning when the applicant returned from his meeting at approximately 9.00 am. Mr Elton-Bott was being assisted by another batch builder, Mr Vince Degori, who, in the absence of the applicant, had been assigned to assist him by the supervisor, Mr Sam Symeoy. The machine's output is forwarded to another section of the plant. In response to quality testing of the output, adjustments are often made to the machine's controls. On that morning Mr Symeoy had advised Mr Elton-Bott to decrease the temperature to ensure that the product was being produced at the appropriate quality.
Mr Elton-Bott's version of the incident commences when the applicant returned to the machine after the meeting. The applicant, without discussing the performance of the machine, proceeded to decrease the ram pressure and increase the temperature. Mr Elton-Bott asked him what he was doing. He received no response. The two were in the confined space close to the control panel. Mr Elton-Bott then pushed the applicant with his left hand. In evidence he said the two struggled in the sense of him trying to push the applicant out of the way to reset the controls. The applicant then "bit (him) on the nose". Mr Elton-Bott said he felt a very sharp pain.
The applicant's version was that he returned from the meeting and proceeded to check that the machine was set up correctly. He noticed that the pressure was too high and the temperature was too low, and adjusted the controls. He said at that point Mr Elton-Bott started abusing him. The applicant referred to an incident the day before when the rubber had been cold. Mr Elton-Bott then pushed him with two hands. He told Mr Elton-Bott to go and have a cup of coffee. The applicant moved away. Mr Elton-Bott took a few steps, came back and grabbed the applicant by the neck and put his head against his. He then did it again. The applicant put his head back so it would not get hit. Mr Elton-Bott's head then hit his mouth. Mr Elton-Bott then screamed "why did you bite me?" The applicant also described what had happened as Mr Elton-Bott head-butting him twice. He denied biting Mr Elton-Bott. In a statement the same day (Exhibit R8) the applicant said that Mr Elton-Bott "put his face right up against mine then repeated and he contacted my teeth".
Mr Degori's version was that the applicant came back from his meeting and proceeded to set up the machine differently. Mr Elton-Bott asked the applicant what he was doing and pushed the applicant aside to set it up the way it was. The applicant bit Mr Elton-Bott and then Mr Elton-Bott grabbed him around the neck to push him away. In cross-examination he was unable to recall whether the applicant was grabbed with one or two hands. Mr Degori also gave conflicting versions as to whether the grabbing by the neck occurred before or after he observed the bite. Mr Scerri gave evidence that Mr Degori told him that after the applicant "bit, that's when (Mr Elton-Bott) grabbed him by the throat and moved away".
Events following the incident.
After the incident Mr Elton-Bott went to the supervisor, Mr Symeoy. He told him that the applicant had bitten him. Mr Symeoy sent him to the medical centre. When he attended at the centre he told the nurse, Ms Jenkins, that he had been bitten. He was upset and distressed. On examination red marks were observed on the righthand side of his nose and there were two small abrasions near the opening of the right nostril (see exhibit R11).
After the incident the applicant approached Mr Scerri and told him that he was in trouble. The applicant appeared upset and said he had been in a fight with Mr Elton-Bott. Mr Scerri told him to calm down and then arranged for the respondent's internal auditor, Mr Zahra, to obtain statements from the participants. Mr Zahra then proceeded to take statements from the applicant, Mr Elton-Bott and Mr Degori. While Mr Elton-Bott was making his statement the senior union shop steward, Mr El-Hussan, became involved and asked to see him and Mr Degori. Both attended the union office where a number of shop stewards were present. Later Mr Elton-Bott completed his statement (Exhibit R7).
When Mr Degori gave his statement to Mr Zahra, Mr El-Hussan and another shop steward, Mr Muleta, were present, as was Mr Scerri. Mr Degori told Mr Zahra what had happened, and he wrote it down. In cross-examination Mr Degori, who does not write English, said that what was written down and read out was what he had told Mr Zahra. Mr Scerri said that questions were asked by the participants during the taking of Mr Degori's statement. After these statements were taken both the applicant and Mr Elton-Bott were sent home.
Later that afternoon an organiser from the union, Ms Simone Hunt, arrived at the plant and met with the shop stewards, the applicant, Mr Elton-Bott and Mr Degori. She had copies of the statements. After this she had a meeting with Mr Scerri. She was accompanied by the shop stewards. At that meeting Ms Hunt put to Mr Scerri the proposition that the events had not occurred in the way that Mr Degori had previously indicated. She said that it: "was not actually a bite but unintentional contact was made". Notes of the meeting (Exhibit R9) record that she suggested that there was no aggressor and that warnings be issued to both parties. Mr Scerri stated his view that from the statements there appeared only one aggressor - the applicant.
After Ms Hunt cast doubt on the version previously given by Mr Degori, Mr Scerri decided to clarify matters with him. Mr Scerri, with Mr Symeoy present, spoke again to Mr Degori. Mr Scerri demonstrated to Mr Degori what a bite looks like. He said: "I shirtfronted Sam Symeoy and I lunged at his face". Mr Degori agreed this was what happened. Mr Scerri wrote a note of this conversation stating: "previous statement correct - Frank bit Richard" (Exhibit R5). Later Mr Scerri spoke to Mr Muleta. Mr Muleta agreed that the statement of Mr Degori contained what he said at the meeting with Mr Zahra. Mr Muleta said that he didn't know why Ms Hunt had gone the way she had. Mr Scerri also had a similar discussion with Mr El-Hussan.
Mr Scerri then reflected on the events of the day with the acting Plant Manager, Mr Rowley. He reached the conclusion that the events pointed quite clearly that the applicant had been the aggressor. He took the decision that the applicant be dismissed. His evidence was:
"[i]t was a view that the bite was a very serious thing. The person was injured, a bite, and its my responsibility to make sure that people can be working in a very safe environment. In this case it was a bite."
The next morning he attended at the applicant's home and advised him that he was terminated. The applicant had asked whether Mr Elton-Bott had also been dismissed. A few days later Mr Scerri had a meeting with an elected official from the union, Mr Drago Ilich. Mr Degori was present. At that meeting Mr Degori said that he: "didn't see the bites". He further told Mr Scerri that he saw Mr Elton-Bott grab the applicant by the throat. At that time industrial action had occurred. Mr Scerri declined to reconsider the matter.
The issues to be resolved.
The Court heard evidence from Mr Scerri, Mr Elton-Bott, Mr Degori, the applicant, Mr Zahra, Mr Sam Symeoy, Ms Jenkins, and shop stewards Messrs Muleta, El-Hussan, Louis Karatzas and Chris Nikolakis.
The evidence presented at the trial was directed to two different forensic questions by each of the parties. The respondent led evidence to support its case that it had validly concluded on the material before it that the applicant was the aggressor in the incident, and that pursuant to its policy in relation to fighting in the workplace, it was entitled to dismiss him.
The applicant's case was directed to the question whether the respondent could or should have come to the conclusion that the applicant was the aggressor. The primary thrust of the applicant's case was that the applicant had not been the aggressor, and in particular did not bite Mr Elton-Bott. There was no basis for the respondent to dismiss him. At its highest the respondent believed that the applicant was the aggressor. It was submitted that this was not sufficient to discharge the onus of proof imposed on it. The second basis of the applicant's case was that the respondent had not properly investigated the matter. It thus could not reasonably come to the conclusion that the applicant had been the aggressor and terminate him. Rather, the applicant submitted that this incident had sprung from Mr Elton-Bott taking the matter to management via the visit to the medical centre. Then management had to act, and contrary to what had happened on other occasions, the incident was not the subject of a negotiated resolution that involved both parties remaining employed.
The applicant relied on evidence from the shop stewards Messrs Muleta, El-Hussan, Karatzas, and Nikolakis that Mr Degori had, in a meeting in their presence, accused the applicant of starting the fight. These witnesses also corroborated the applicant's version that he had a red mark on his neck that was a result of Mr Elton-Bott's grabbing him. The respondent's witnesses, and in particular Mr Scerri, denied that they observed any red mark on the applicant's neck or had one brought to their attention. Further, Mr Scerri and Mr Symeoy confirmed with Mr Degori that in fact the applicant had bitten Mr Elton-Bott. This formed the basis of the conclusion that the applicant was the aggressor and thus was to be terminated.
Each party was relying on prior statements, consistent and inconsistent, as the basis to attack the credit of the respective witnesses. It is axiomatic that contemporaneous statement have strong probative weight. Events are likely to be fresh in the participant's mind. Mr Degori, who was a very confused witness, conceded this. His account in Court was so contradictory that I place little weight on what he said. What I do accept, however, is the credible evidence of Messrs Scerri and Symeoy as to Mr Degori's confirmation to them on the day of the account that Mr Zahra took from him.
Mr Elton-Bott's statement is that he pushed the applicant. He further maintained that the applicant bit him. Mr Degori in his statement had Mr Elton-Bott also pushing the applicant and the applicant biting him. The applicant's version was that Mr Elton-Bott had put his face up close to him twice and that Mr Elton-Bott's head had contacted his teeth. In a statement written by his wife accompanying his application, but signed by him, the applicant said that "Mr Elton-Bott headbutted (me) repeatedly". The applicant said that he told Mr Zahra that Mr Elton-Bott had headbutted him but Mr Zahra had said the description used sounded better. It is a matter of surprise that if the applicant did assert to Mr Zahra that Mr Elton-Bott had headbutted him that this was not recorded. Similar considerations apply to the applicant's assertion that he had a red mark on his throat as a result of Mr Elton-Bott grabbing him. It was not recorded by Mr Zahra, and Mr Scerri denied that it was brought to his attention. It is a matter of surprise that if it did feature in the applicant's account of his innocence in the exchange that it was not brought forcefully to the attention of Mr Scerri by Ms Hunt. I am satisfied that there was no red mark on the applicant's neck.
In Court the applicant demonstrated how the incident occurred. He said that he had his head back with his mouth open and as Mr Elton-Bott attempted to headbutt him for a second time, Mr Elton-Bott's nose came into contact with the applicant's open mouth. The account was unconvincing. In his evidence Mr Elton-Bott denied that he had headbutted the applicant. He further denied grabbing the applicant by the throat. He said that he may have pushed him in the neck or chest area.
Respondent's version preferred.
The respondent's self-imposed policy, as articulated by Mr Scerri, requires it to satisfy the Court on the balance of probabilities that the applicant was the aggressor in this incident. That requires it, in the context of what occurred between the two protagonists, to prove that it was more likely than not that the applicant bit Mr Elton-Bott. As the allegation is serious the evidence must allow for comfortable satisfaction that the allegation is made out. The two protagonists each respectively denied the central allegation that he was the aggressor. Mr Degori was the only eye witness. The observations of the nurse, Ms Jenkins, were that the injury to Mr Elton-Bott's nose was consistent with a bite. Resolution of the matter requires an assessment of the credibility of the witnesses and a conclusion as to the inherent likelihood of the competing accounts, with the onus always remaining on the respondent to prove its valid reason.
In determining the more probable version of what happened I give considerable weight to the evidence of both Mr Scerri and Mr Symeoy. Mr Degori, in their presence, confirmed that the applicant had bitten Mr Elton-Bott. Mr Degori had earlier given this version to Mr Zahra in the presence of Mr El-Hussan and Mr Muleta. Mr El-Hussan and Mr Muleta had been present when Mr Degori had allegedly recanted that version. They did not chose to corroborate his alleged recantation of that version when they had conversations with Mr Scerri later that day. On the contrary, the unchallenged evidence of Mr Scerri was that they expressed surprise as to the tack that Ms Hunt took in the meeting with Mr Scerri. A clear inference from their conduct on the day, unchallenged in evidence, was that they accepted the conclusion reached by Mr Scerri that on the account of Mr Degori, the applicant had bitten Mr Elton-Bott and thus was the aggressor in the incident.
The credit of both Mr Elton-Bott and the applicant suffered in cross-examination. The applicant suffered greater damage. Mr Elton-Bott has always maintained that he was bitten. It is an accusation that is not lightly made, but it was made at the time. He was supported by Mr Degori, who corroborated his contemporaneous assertion.
The applicant has given inconsistent accounts of what happened. The account written on his instructions by his wife is much more elaborate than what is recorded by Mr Zahra. He was forced to retreat from it in cross-examination. Further, his explanation in Court was unconvincing. It amounted to Mr Elton-Bott, in effect, jamming his nose into the open mouth of the applicant while in the act of headbutting him a second time. This account is inherently improbable and at variance with the comment made by Ms Hunt to Mr Scerri that "it was not actually a bite but unintentional contact was made". The applicant's explanation that the contact between himself and Mr Elton-Bott was accidental does not sit easily with Mr Scerri's account that the applicant was upset when he saw him after the incident. The applicant denied this was his demeanour. Mr Scerri, however, was a credible witness who while obviously anxious to defend his own decision, was prepared to frankly acknowledge the sensitive industrial relations environment that accompanies incidents of this type.
Another consideration is the explanation given by the applicant as to why he was adjusting the controls of the machine. Although Mr Elton-Bott had been in charge of the machine that morning I accept Mr Elton-Bott's version that the applicant proceeded to immediately adjust the controls when he returned from the meeting. He had no basis to do that without discussing the machine's settings with Mr Elton-Bott. That he did so is consistent with Mr Elton-Bott's evidence that the applicant had in the past adjusted the machine in order to reduce production levels. Mr Elton-Bott thus had some justification in pushing the applicant in order to reset the machine to the correct level in the course of what was then production of a batch of product.
I accept that Mr Elton-Bott pushed aside the applicant in an attempt to reset the controls, but it was the applicant who reacted to this justifiable action by an aggressive act in biting Mr Elton-Bott. I am unable to accept the applicant's account that Mr Elton-Bott headbutted him twice, and that the damage to Mr Elton-Bott's nose was as a result of accidental contact. Mr Degori observed this incident. He told Mr Symeoy that the applicant had bitten Mr Elton-Bott and made a statement to that effect. When Ms Hunt indicated to Mr Scerri that Mr Degori was recanting from that version, Mr Scerri reconfirmed with Mr Degori his version of events. In the witness box he also confirmed that he thought he saw the applicant bite Mr Elton-Bott. I am satisfied that the applicant did bite Mr Elton-Bott.
Was the respondent entitled to dismiss the applicant?
There was a volume of evidence as to the application of the respondent's "no fighting" policy. I am satisfied that in the past there has been considerable informal resolution of incidents without the need for managerial intervention. The respondent did, however, have a policy that it applied when it was able to identify the aggressor in a fight. That policy was that the aggressor be terminated. Here the respondent concluded that the applicant had bitten Mr Elton-Bott, he was the aggressor in the fight and that the policy required that he should be dismissed.
Counsel for the applicant submitted that on the evidence the applicant was not the aggressor. My findings above as to the circumstances in the incident do not support this submission. It follows from Mr Elton-Bott's version that the applicant engaged in an aggressive act which was disproportionate to what Mr Elton-Bott was doing. The respondent investigated the matter and involved the union. When the union raised the possibility that Mr Degori's version was different from his earlier statement, Mr Scerri further checked with Mr Degori, who confirmed that statement. I am satisfied that Mr Degori's statement was true. It confirmed Mr Elton-Bott's account and provided a proper basis on which the respondent could act.
In Wadey v Y.W.C.A Canberra (unreported, Industrial Relations Court of Australia, Moore J, 12 November 1996) Moore J said:
"It is not for this Court to approach the matter as if it is to make a decision whether termination should occur or not. A range of rational and reasonable views may exist as to whether particular conduct warrants termination. If the view adopted by, or on behalf of, the employer is rational and reasonable then, in my opinion, the employer has established a valid reason for the purposes of s 170DE(1). In putting it this way I am not attempting to depart from the views expressed by Northrop J in Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 at 373 which have been referred to, with approval, on a number of occasions since. Lehmann was entitled to view Wadey's conduct with the gravity she did. Her decision to terminate was for a valid reason."
An employer's decision to terminate employment that is within "a range of rational and reasonable views" of particular conduct arguably refers to a band of unreviewable managerial prerogative that has been the subject of relatively little discussion in the application of the Act: cf Westen v Union Des Assurances De Paris (unreported, Industrial Relations Court of Australia, Madgwick J, 17 December 1996); Cosco Holdings Pty Ltd v Thu Thi Van Do (unreported, Industrial Relations Court of Australia, Madgwick J, 30 June 1997).
Counsel for the applicant relied on AWU-FIME Amalgamated Union v Queensland Alumina Ltd. (1995) 62 IR 305 and Yew v ACI Glass Packaging Pty Ltd (1996) 71 IR 201 in support of the submission that dismissal of an employee based on a "no fighting" policy required that all the circumstances of the incident be investigated. That happened here. The union, the representative of the applicant in this workplace, was involved. Mr Scerri took up the matter that Ms Hunt raised. He confirmed his further inquiry with Messrs Muleta and El-Hussan.
Looking at the overall circumstances, the respondent has satisfied me that the applicant was the aggressor in the incident. He bit Mr Elton-Bott. The latter did not do anything that could be characterised as provocation because it was the applicant who I am satisfied unilaterally adjusted the controls of the machine which was then operating satisfactorily. The respondent applied a policy that was not the subject of real dispute in the evidence. The policy was that where the respondent was able to identify the aggressor in an incident that, after discussions involving the parties and the union, was not to become a "non incident", the aggressor was terminated.
Counsel for the applicant raised a further argument based on an award provision binding the respondent that the termination of employment by an employer "shall not be harsh, unjust or unreasonable": cl 22.6 of the Rubber, Plastic and Cable Industry - General Award 1996. Counsel argued that the termination of the applicant's employment here contravened that criterion and was therefore unlawful. An unlawful termination could not be characterised as valid for the purposes of the Act. Counsel relied on Ferry v Minister for Health, Western Australia (1995) 64 IR 28; affirmed on appeal (unreported, Industrial Relations Court of Australia, Wilcox CJ, North and Madgwick JJ, 4 April 1996).
I doubt, in the light of the line of authority in the Industrial Relations Court of Australia since The State of Victoria and Ors. v The Commonwealth of Australia (1996) 138 ALR 129, whether the award criterion assists the applicant here by adding anything to the concept "valid". In Cosco (above) Madgwick J said:
"Prima facie, it would be odd if an unjust or unreasonable reason for terminating an employee's means of livelihood could be regarded as a valid reason."
Here, the conduct of the applicant fell within the conduct proscribed by the respondent's no fighting in the workplace policy. A termination for that reason is valid. For the same reason the termination cannot be said to be "harsh, unjust or unreasonable".
I am satisfied that the respondent has discharged its onus of proof that it had a valid reason to dismiss the applicant. Further, the respondent had accorded the applicant the opportunity to respond. There is no breach of the Act. The application must be dismissed.
ORDER:
1. The application is dismissed.
I certify that this and the preceding nine (9) pages are a true copy of the Reasons for Judgment herein of JUDICIAL REGISTRAR MURPHY.
Associate: KAREN HALSE
Dated: 20 AUGUST 1997
Counsel for the Applicant: MS R DOYLE
Solicitor for the Applicant: MAURICE BLACKBURN & CO
Counsel for the Respondent: MR P BURCHARDT
Respondent's representative: METAL TRADES INDUSTRY ASSOCIATION
Date of Hearing: 5 & 6 JUNE 1997
Date of Judgment: 20 AUGUST 1997
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ALM22 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2024] FCAFC 7
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/full/2024/2024fcafc0007
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2024-09-13T22:45:49.878833+10:00
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Federal Court of Australia
ALM22 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2024] FCAFC 7
Application for extension of time to appeal from: ALM22 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2023] FCA 506
File number: SAD 86 of 2023
Judgment of: SNADEN, ABRAHAM AND CHEESEMAN JJ
Date of judgment: 15 February 2024
Catchwords: MIGRATION β application for extension of time to file and serve notice of appeal β where primary judge dismissed application for judicial review of a decision by the Administrative Appeals Tribunal (AAT) rejecting an application for revocation of a visa cancellation β whether court can be satisfied that the interests of justice require extension β whether the AAT failed to consider what was advanced as "another reason" why a visa cancellation ought to be revoked β application for extension of time granted β appeal dismissed
Legislation: Federal Court Rules 2011 (Cth), r 36.03
Migration Act 1958 (Cth), ss 500, 501, 501CA
Cases cited: ALM22 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2023] FCA 506
AXT19 v Minister for Home Affairs [2020] FCAFC 32
Boensch v Pascoe (2019) 268 CLR 593
Dimitrovski v Boland [2023] FCAFC 86
Plaintiff M1/2021 v Minister for Home Affairs (2022) 96 ALJR 497
Division: General Division
Registry: South Australia
National Practice Area: Administrative and Constitutional Law and Human Rights
Number of paragraphs: 38
Date of hearing: 24 November 2023
Counsel for the Applicant: Mr A Aleksov
Solicitor for the Applicant: Estrin Saul Lawyers
Counsel for the First Respondent: Mr A F Solomon-Bridge
Solicitor for the First Respondent: Australian Government Solicitor
Counsel for the Second Respondent: The second respondent filed a submitting notice, save as to costs
ORDERS
SAD 86 of 2023
BETWEEN: ALM22
Applicant
AND: MINISTER FOR IMMIGRATION, CITIZENSHIP, MIGRANT SERVICES AND MULTICULTURAL AFFAIRS
First Respondent
ADMINISTRATIVE APPEALS TRIBUNAL
Second Respondent
order made by: SNADEN, ABRAHAM AND CHEESEMAN JJ
DATE OF ORDER: 15 february 2024
THE COURT ORDERS THAT:
1. The time for filing and serving the notice of appeal annexed to the affidavit of Alice Louise Graziotti affirmed herein on 29 June 2023 (hereafter, the "Notice of Appeal") be extended nunc pro tunc so as to expire on 4 July 2023.
2. The Notice of Appeal be deemed to have been filed on 4 July 2023.
3. The appeal so commenced be dismissed.
4. The appellant pay the first respondent's costs of the appeal, to be assessed in default of agreement in accordance with the court's Costs Practice Note (GPN-COSTS).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
THE COURT:
1 The applicant came to Australia in January 2009 as the holder of a Class XB Subclass 202 Global Special Humanitarian visa that had been issued to him pursuant to the Migration Act 1958 (Cth) (the "Act"). He was then a citizen of Sudan. On 22 October 2020, his visa was cancelled pursuant to s 501(3A) of the Act (the "Cancellation"). That was brought about in consequence of his having been convicted of numerous criminal offences (the particulars of which needn't here be rehearsed).
2 By a written request made on 27 October 2020, the applicant applied to the first respondent (the "Minister") under s 501CA of the Act to have the Cancellation revoked (the "Revocation Application"). On 21 October 2021, a delegate of the Minister rejected that application. The applicant then applied to the second respondent (the "Tribunal") for a review of that rejection (the "Review Application"). By a decision dated 12 January 2022, the Tribunal affirmed the decision of the Minister's delegate not to revoke the Cancellation (the "Tribunal Decision").
3 The applicant then applied to this court for judicial review of the Tribunal Decision. He sought prerogative relief to have the Tribunal Decision set aside as a product of jurisdictional error and to require that his Review Application be determined according to law. That application was dismissed with costs: ALM22 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2023] FCA 506.
4 An appeal from that judgment lay as of right for a period of 28 days from its pronouncement: r 36.03 of the Federal Court Rules 2011 (Cth). That deadline expired on 21 June 2023, by which time no appeal had been commenced. Instead, the applicant filed an application on 4 July 2023 for an extension of the 28-day time limit. In the usual way, an affidavit was filed in support of that application, to which was exhibited a draft notice of appeal that he proposed to file in the event that he were granted the extension for which he moved. That document records the relief that the applicant hopes to persuade the court to grant: namely, orders to set the primary judgment aside, and, in lieu of it, to effect relief in the nature of certiorari and mandamus to quash the Tribunal Decision and require that the Tribunal redetermine the Review Application.
5 The court resolved to hear and determine the extension application together with the proposed appeal. Both were the subject of a hearing that took place before the full court on 24 November 2023. For the reasons that follow, the applicant should be granted the extension requested; but the substantive appeal should be dismissed. There is no reason why the normal order requiring payment of the Minister's costs ought not to be made and it will be.
6 In light of those conclusions, it is convenient to refer to the applicant hereafter as "the appellant".
The legislative scheme
7 Section 501(3A) of the Act mandates the cancellation of visas in certain circumstances. It is uncontroversial to record that, at the time of the Cancellation, the appellant's circumstances sufficed to enliven that requirement.
8 Section 501CA of the Act concerns the revocation of visa cancellations effected under s 501(3A). Relevantly, it requires that a former visa holder be invited to make submissions as to why the cancellation of his or her visa ought to be revoked and confers upon the responsible Minister a discretion to revoke it: the Act, ss 501CA(3)(b) and (4). As to that latter discretion, s 501CA(4) provides as follows:
(4) The Minister may revoke the original decision if:
(a) the person makes representations in accordance with the invitation; and
(b) the Minister is satisfied:
(i) that the person passes the character test (as defined by section 501); or
(ii) that there is another reason why the original decision should be revoked.
9 Presently, it is not in contest that the appellant did not fall within what s 501CA(4)(b)(i) of the Act contemplates. At issue now is whether the state of satisfaction to which s 501CA(4)(b)(ii) of the Act alludes was formed in the manner that the Act requires.
10 Section 500 of the Act concerns the jurisdiction of the Tribunal to review certain administrative decisions, including decisions made by the Minister's delegate under s 501CA. Subsection 6J assumes some significance to the present matter. It provides (and, at material times, provided) as follows:
(6J) If:
(a) an application is made to the Tribunal for a review of a decision under section 501 or a decision under subsection 501CA(4) not to revoke a decision to cancel a visa; and
(b) the decision relates to a person in the migration zone;
the Tribunal must not have regard to any document submitted in support of the person's case unless a copy of the document was given to the Minister at least 2 business days before the Tribunal holds a hearing (other than a directions hearing) in relation to the decision under review. However, this does not apply to documents given to the person or Tribunal under subsection 501G(2) or subsection (6F) of this section.
The applicant's submissions concerning revocation
11 Since the Cancellation, the appellant has had occasion to make various submissions in favour of its revocation under s 501CA of the Act. For reasons that might be apparent, it is necessary for present purposes to consider only those that were advanced before the Tribunal. The analysis that follows is limited in that regard.
12 As is customary, the appellant made submissions as to why there was "another reason" under s 501CA(4)(b)(ii) of the Act as to why the Cancellation ought to have been revoked. Amongst other things, those submissions were directed to the possibility that he would be subjected to harm upon his return to Sudan (or, perhaps more accurately, his removal to South Sudan, which he submitted was likely to be the country from which he had a claim to citizenship), such that his removal would offend against Australia's international non-refoulement obligations. He submitted that South Sudan was "mired in conflict" and that:
There is a possibility of the [appellant] suffering harm in Sudan, which might include persecution or discrimination on the basis of his Dinka ethnicity and/or Christian religion.
The [appellant]'s removal to Sudan may potentially breach Australia's non-refoulement obligations and there is no known [prospect] of removing the [appellant] to any other country.
13 Also customary, the Review Application was the subject of a hearing. During that hearing, the Tribunal entertained the following exchange with the appellant's representative about the submission extracted above:
[SENIOR MEMBER:] Now, I gather from what we've been talking about yesterday and today that whatever might be said of the Republic of Sudan in South Sudan being a Dinka person is not an absurd or a difficult or an unusual thing.
[APELLANT'S LAWYER]: No. No. It's not. It's not. The only known issues in South Sudan are (indistinct) civil conflict which is well known to - I'm pretty sure will be well known to my friend between different tribes and all that.
SENIOR MEMBER: Yes. Yes.
[APELLANT'S LAWYER]: It's not an absurd thing for you to be a Dinka person, you know, in South Sudan. And that's - but what we're saying is that if he were to be returned to South Sudan then he will have to remain in areas that are - they're (indistinct) Australia to South Sudan, maybe a (indistinct) or something. And that means he may not have to travel to his birthplace...
SENIOR MEMBER: Okay. But, I know I'm jumping around here and I apologise but I sort of know where the hot spots are in this already. You know, you don't have to be a wizard to work that out. So - and this is one of them. So, the question I've got really is this: Let's work on the basis that - let's assume he can be, he is a citizen of South Sudan, or he's entitled to obtain that citizenship and let's assume he's removed there, there is no particular problem about him being a Dinka person in South Sudan.
[APELLANT'S LAWYER]: No.
SENIOR MEMBER: So, whilst South Sudan may be a problematic place to live, for any number of reasons - - -
[APELLANT'S LAWYER]: Yes. Yes.
SENIOR MEMBER: - - - and they go to questions about the not so much refoulement but as to impediments if removed - - -
[APELLANT'S LAWYER]: Impediments.
SENIOR MEMBER: - - - and I don't for a moment have any difficult[y] in understanding what you might be telling me about that, but on the refoulement proposition, which is a different thing and where the question seems to me to be more about whether or not there is [any] particular characteristic that [the appellant] has which would make him a target for some form of oppression or persecution in South Sudan, given that the [thrust] of the submission that's been made in writing is that it's directing itself at Sudan, I'm wondering whether we continue to have that problem about South Sudan, and I'm not for a moment attempting to minimize the impediment issue which is a completely separate and very important issue. I'm just trying to get to grips with this particular issue first because the two don't necessarily have to depend upon one another.
[APELLANT'S LAWYER]: Yes. Yes. Yes. That's accepted. That's agreed, Senior Member. There's nothing that could expose him to discrimination or persecution as a Dinka person in South Sudan, unless there is something else I do not know about.
SENIOR MEMBER: No.
[APELLANT'S LAWYER]: But being a Dinka person, there's nothing.
SENIOR MEMBER: Okay. So, am I able to proceed then on the basis that both parties agree, assuming that the applicant is a person who is entitled to obtain citizenship of South Sudan by reason of the matters we've just discussed, that the issue of refoulement as presently framed up in the documents isn't, doesn't continue to be an issue because we're dealing now with a different country?
[APELLANT'S LAWYER]: It's a difficult position for me, Senior Member. What my response to that remark is the tribunal - - -
SENIOR MEMBER: It's a question. It's a question. It's not a remark. I'm asking - - -
[APELLANT'S LAWYER]: Yes, I mean, to that question.
SENIOR MEMBER: Yes.
[APELLANT'S LAWYER]: My response is the tribunal is open to finding that he can be (indistinct words). That's not a matter for me or the applicant. But it's very difficult for me to come into a - - -
SENIOR MEMBER: Okay, I'll put it another way. Can you, on behalf of the applicant, identify for me the personal characteristics of your client which would expose him to persecution, or oppression or being singled out for unusual treatment, if he were in South Sudan?
[APELLANT'S LAWYER]: There's nothing.
SENIOR MEMBER: There's nothing?
[APELLANT'S LAWYER]: There's nothing known to me, Senior Member, and nothing as a Dinka person. I'm quite sure, as a Dinka person, there's nothing.
SENIOR MEMBER: Okay.
14 At the conclusion of the hearing before the Tribunal, the parties were invited to furnish further written submissions regarding an issue that is not presently relevant. In the case of the appellant, that was done the following day by means of an email from the appellant's lawyer. What was furnished in fact extended beyond the issue that was the subject of the invitation and delved further into the realm of non-refoulement. It is prudent to replicate what was relevantly submitted on the appellant's behalf (paragraph numbering original):
International non-refoulement obligations
6. If it is accepted that the [appellant]'s receiving country is South Sudan, the [appellant] is owed non-refoulement obligations.
7. In XDJD v Minister for Immigration and Border Protection (Migration) [2021] AATA 2882 ("XDJD"), the applicant faced deportation to South Sudan and the Tribunal had accepted that the applicant was owed non-refoulement obligations, it was stated at [90] β [91]:
[90] The applicant contends that he would face harm if returned to South Sudan and that the Tribunal needs to consider Australia's international non-refoulement obligations. I accept this contention. The applicant's life would be threatened as a result of his mixed Nuer and Dinka ethnicity, his past involvement with the SPLA, his status as a returnee from a western country and his disabilities in the context of the deteriorating security situation and ongoing civil war.
[91] I will not repeat the matters considered separately under risk of harm, but they are relevant to nonrefoulement. I find that the risk of harm found above gives rise to a non-refoulement obligation such that Australia would be in breach of that obligation if the applicant were to be returned to South Sudan. This is a factor that weighs in favour of revoking the cancellation decision.
8. Similarly, to the applicant in XDJD, the [appellant] would face a risk of harm giving rise to non-refoulement obligations upon a return to South Sudan due to his status as a returnee from a western country who has never lived in South Sudan, does not have relatives and meaningful relationships with any individuals, in a country that is in a civil strife.
9. In KMXK v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (Migration) [2021] AATA 3815, the applicant was a citizen of South Sudan and was found to be owed non-refoulement obligations, the Tribunal stated at [154] and [170]:
[154] There is no doubt that Australia owes the applicant non-refoulment obligations, but there is some uncertainty what that will mean for the applicant at a practical level.
[170] The fact that detention of uncertain length, and potentially spanning many years, is the likely result of the nonrefoulement obligations Australia owes to the applicant weighs heavily in favour of revoking the visa cancellation.
11. In SBMZ v Minister for Immigration, Citizenship, Migrant Services & Multicultural Affairs [2021] AATA 1409, in relation to an applicant who faced deportation to South Sudan, the Tribunal accepted that non-refoulement obligations arose and made the following findings at [140] β [143] regarding the harms faced by the applicant if returned to South Sudan:
[140] I am of the view that non-refoulement obligations do a rise under that test as enunciated in the Act. More specifically, I consider that in respect of the last-mentioned formulation of a claim put forward by the applicant, there is a real risk that the applicant will suffer significant harm, including being arbitrarily deprived of his life, as a necessary and foreseeable consequence of the applicant being removed from Australia to South Sudan, because he would hold particular characteristics that would expose him as being particularly vulnerable to significant harm that are not held by the population generally.
[141] In this regard, I accept the applicant's evidence that he was born in Khartoum and has in fact never been to the territory that is now South Sudan. I accept that the applicant's first language is Arabic, and while he understands some Dinka, he does not speak it. I further accept as being consistent with the applicant's evidence about his background that he has no family, tribal or social connections to other people living in South Sudan. I accept the applicant does not know anyone that might assist him if he were to return to that country. I accept that if he were to return to South Sudan, he would have no connections, resources or orientation to call upon for basic support or protection, and no knowledge about the circumstances and perils (which are significant) of life and survival in South Sudan.
[142] In this way, I consider that the applicant will be so particularly vulnerable to the unlawful and arbitrary killings, unlawful and forced recruitment into militias, food insecurity and violence described in the country information that his particular risk is different to that faced by the population of the country generally, who generally speaking may have access to social, tribal and other supports that will not be available to the applicant in Juba upon arrival, or indeed anywhere else in the country.
[143] Furthermore, having regard to the country information, I do not accept that it would be reasonable for the applicant to relocate to any part of South Sudan where there would not be a real risk that he would suffer significant harm. There is evidence before me of road blocks, inter-ethnic violence and cattle raids affecting many parts of the country, and the applicant was unable to articulate any particular part of the country where he might find support or protection even if he could find his way there. My observations about the applicant's lack of social and tribal connections apply in respect of the capital and all parts of the country.
In line with the Tribunal's reasoning in the above cases, the [appellant] submits that he is also owed nonrefoulement obligations due to his receiving country being South Sudan.
The Tribunal Decision
15 The Tribunal Decision is lengthy but it suffices for present purposes to only refer to the part of it that addresses the issue of present concern. It is convenient to replicate it in full (references omitted):
158. The [appellant] held a Class XB Subclass 202 Global Special Humanitarian visa. The issue of this Visa did not involve any assessment that he was owed non-refoulment obligations.
159. I am satisfiedβ¦that the [appellant] was never assessed on the basis that he was facing persecution. He was assessed under a "form 681 application".
160. He has never held a Protection Visa. He has never applied for one. He has never been determined to be a refugee under Article 1A of the Refugee Convention. He has never been assessed for an International Treaty Obligations Assessment.
161. Even if I am wrong about this, and I do not think that is the case, any assessment prior to 2011 (which this would have been), would have been made in respect of Sudan, not South Sudan. It would therefore be now irrelevant.
162. The [appellant] in these proceedings raised the issue of non-refoulment in his Statement of Facts, Issues and Contentions, this is set out in summary at paras 88 and 89 as follows:
"There is a possibility of the [appellant] suffering harm in Sudan, which might include persecution or discrimination on the basis of his Dinka ethnicity and/or Christian religion⦠The [appellant]'s removal to Sudan may potentially breach Australia's non-refoulment obligations and there is no known prospect of removing the [appellant] to any other country."
163. After some discussion in closing submissions, the [appellant]'s representative, quite properly in my view, said that there was "nothing known" to him that gave rise to a submission that the [appellant] would suffer any persecution in South Sudan as a Dinka person, or otherwise. There was certainly no evidence led from the [appellant] on this topic. In other words, consistent with his Statement of Facts, Issues and Contentions, the [appellant]'s refoulment argument was formulated on the basis that the receiving country would be Sudan, not South Sudan.
164. On the following day, (6 January 2022) the Tribunal received further, unsolicited submissions on this topic from the [appellant]'s counsel, resiling totally from his position as outlined above.
165. The [appellant]'s counsel referred to various cases. I have considered these cases. I note that the [appellant] led no evidence in support of any assertion that he, by reason of any particular personal characteristic, would suffer any particular persecution or disadvantage, by reason of being returned to South Sudan. Indeed, his representative submitted during the hearing that he could not name one.
166. Each question of refoulment must be determined based on evidence relevant to each individual Applicant. Asserting that other individuals, in their own unique circumstances were owed non-refoulment obligations, does nothing to demonstrate that these obligations are also owed, ipso facto to the [appellant]. The question here is about the individual concerned. It is not a generic question.
167. I note that the most recent Department of Foreign Affairs and Trade Country Information Report on South Sudan available to the Tribunal (dated 5 October 2016) states inter alia:
"The Dinka are the largest ethnic group in South Sudan at around 35.8% of the population, and have traditionally dominated South Sudanese society."
They may face some incidents of violence in "conflict-affected areasβ¦"
"In Juba, [the Capital of South Sudan] Dinkas face a low risk of being targeted on the basis of their ethnicityβ¦"
168. Based on this material, it appears that the [appellant] could choose to live for example in Juba and be relatively safe. There is no evidence to suggest that he would be obliged to do otherwise.
169. This is a separate and different consideration toβ¦the extent of impediments in [an applicant for revocation] "establishing themselves and maintaining basic living standards (in the context of what is generally available to other citizens of that country)."
170. Having regard to all of the above, I am of the view that on the evidence as it stands, [international non-refoulement obligations do] not arise in this case and so this consideration is neutral.
Judicial review and the present appeal
16 The appellant's application for judicial review identified two grounds upon which he contended that the Tribunal Decision was a product of jurisdictional error. Only one of them is relevant for present purposes, namely:
1. The [s]econd [r]espondent fell into jurisdictional error in its purported consideration of Australia's non-refoulement obligations by failing to consider a claim that clearly emerged from the materials before it and/or to consider critical material and evidence.
Particulars
a) The [appellant] made submissions that:
a. He was stateless and eligible for South Sudanese citizenship ([61]-[62] of the [appellant]'s Statement of Issues and Contentions).
b. He would be at risk of harm giving rise to non-refoulement in South Sudan due to his ethnicity as a Dinka Christian and his status as a returnee from a western country who has never lived in South Sudan, does not have relatives and meaningful relationships with any individuals, in a country that is in civil strife ([8] of the [appellant]'s post-hearing submissions).
b) Further, the [s]econd [r]espondent found, based on its review of the Department of Foreign Affairs and Trade (DFAT) Country Information Report on South Sudan dated 5 October 2016 ("the South Sudan Report"), that as the [appellant] is a Dinka Christian, the [appellant] could reside in Juba (the Capital of South Sudan) and be relatively safe because in Juba, Dinka's face a low risk of being targeted based on their ethnicity.
c) The [s]econd [r]espondent failed to consider the broader, clearly articulated claims that the [appellant] is owed international non-refoulement obligations by virtue of a real chance that he would suffer harm upon a return to South Sudan on account of his Dinka ethnicity and/or unique characteristic as a returnee from a western country with no relatives or connections in South Sudan.
17 That challenge marries (although not perfectly) with the sole ground contained within the appellant's draft notice of appeal, which reads as follows:
1. The Court erred in failing to find that the [s]econd [r]espondent's decision dated 12 January 2022 was affected by jurisdictional error by reason of a failure to give proper, genuine and realistic consideration to a clearly articulated claim raised by the [a]ppellant in relation to non-refoulement obligations.
Particulars
1.1 The [appellant] made a clearly articulated claim that he would face a risk of harm giving rise to non-refoulement obligations upon a return to South Sudan due to his status as a returnee from a western country who has never lived in South Sudan, does not have relatives and meaningful relationships with any individuals, in a country that is inβ¦civil strife (CB 1173).
1.2 The [s]econd [r]espondent failed to consider this claim.
18 As has been stated, the appellant's application for judicial review of the Tribunal Decision did not succeed. It is not necessary here to step through the reasoning by which the learned primary judge was led to conclude as his Honour did. For the reasons that follow, we are satisfied that no error has been established in his Honour's conclusion that the Tribunal Decision was not affected by jurisdictional error as alleged by the appellant.
Preliminary issue: extension of time
19 As has been stated, the appellant requires an extension of time within which to bring his proposed appeal. The criteria governing the grant of such extensions are notorious and need not be outlined in any detail here. It suffices to note that an extension will be granted if the court is satisfied that the interests of justice require one. Typically, those interests are informed by factors that include the length of an applicant's delay in challenging a first-instance judgment, the reasons behind that delay, the degree of prejudice to the respondent(s) if an extension were granted and the merits of the substantive case that is proposed to be entertained: Dimitrovski v Boland [2023] FCAFC 86, [28] (Markovic, Downes and Kennett JJ).
20 The present application was lodged 13 days after the expiry of the 28-day appeal deadline. On any view, the delay has been short. It was the subject of explanation in the affidavit that was filed in support of the extension application. Succinctly, the delay was brought about in part by a change to the appellant's representation and in part by reason of the ill-health of his father.
21 Without conceding anything about the merit of the proposed appeal, the Minister does not oppose the granting of an extension. There is no suggestion of any material prejudice to the Minister in the event that an extension were granted.
22 Although we are not persuaded that the sole appeal ground that is sought to be agitated should succeed, it could not be said to be so without merit as to warrant rejection of an extension. Furthermore, the delay that has occasioned the need for it has been explained and, in any event, was short. In our view, it is appropriate in the interests of justice to grant the extension for which the appellant moves.
The substantive issue: Failure to consider
23 In order that it might properly be (or not be) exercised, the revocation power conferred by s 501CA(4) of the Act is conditioned upon prior consideration of any representations that, in any given case, are made in response to the invitation extended under s 501CA(3)(b). A decision purportedly made under s 501CA(4) that is made without prior consideration of what is advanced as "another reason" for revocation is not one that the statute authorises.
24 In Plaintiff M1/2021 v Minister for Home Affairs (2022) 96 ALJR 497 (hereafter, "Plaintiff M1"), the High Court had occasion to identify when or how the obligation to consider representations might be discharged. The plurality reasoned (at [24], references omitted):
Consistently with well-established authority in different statutory contexts, there can be no doubt that a decision-maker must read, identify, understand and evaluate the representations. Adopting and adapting what Kiefel J (as her Honour then was) said in Tickner v Chapman, the decision-maker must have regard to what is said in the representations, bring their mind to bear upon the facts stated in them and the arguments or opinions put forward, and appreciate who is making them. From that point, the decision-maker might sift them, attributing whatever weight or persuasive quality is thought appropriate. The weight to be afforded to the representations is a matter for the decision-maker. And the decision-maker is not obliged "to make actual findings of fact as an adjudication of all material claims" made by a former visa holder.
25 The obligation to consider what an applicant advances as "another reason" for revocation under s 501CA(4) varies according to how specifically it is advanced. A claim that is put summarily might properly be considered or addressed just as baldly. In AXT19 v Minister for Home Affairs [2020] FCAFC 32, [56] (Flick, Griffiths and Moshinsky JJ), the point was made as follows:
β¦The greater the degree of clarity in which a claim has been made and advanced for consideration, the greater may be the need for the Tribunal to consider the claim in clear terms. Conversely, the more obscure and less certain a claim is said to have been made, the less may be the need for the Tribunal to consider the claim. The need for caution arises lest a reviewing Court is propelled from its sole task of undertaking judicial review and into the murky waters of impermissible merits review. The task of a court undertaking judicial review is not to elevate a statement that may have been made in passing by a claimant into a clearly articulated claim in need of resolutionβ¦
26 In Plaintiff M1, the High Court plurality made a similar observation (at [25], reference omitted):
β¦The requisite level of engagement β the degree of effort needed by the decision-maker β will vary, among other things, according to the length, clarity and degree of relevance of the representationsβ¦
27 Presently, the appellant complains that the Tribunal made its decision without first considering what he had put forward as "another reason" as to why the Cancellation ought to be revoked: specifically, that he would face a risk of harm upon removal to South Sudan that was sufficient to invoke Australia's international non-refoulement obligations. That was said in the email, recited above at [14], to be so because of "β¦his status as a returnee from a western country who has never lived in South Sudan [and who] does not have relatives and meaningful relationships with any individuals, in a country that is inβ¦civil strife".
28 There are some important contextual considerations to note about that representation.
29 First, it was summarily stated in the unsolicited submission that was furnished the day after the Tribunal hearing (see above, [14]). True it is that that submission gave his status as noted above at [27], and also contained references to other decisions of the Tribunal; but it failed to relate any characteristic to the relevant risk of harm. The most that was said was that, "[i]n line with the Tribunal's reasoning in [those] casesβ¦" the appellant was "owed non-refoulement obligations due to his receiving country being South Sudan".
30 Second, the representation that was advanced resiled from what the appellant's representative had told the Tribunal only one day earlier (above, [13]), noting importantly the concession that there was nothing about the appellant's characteristics that would expose him to relevant harm.
31 Third, the representation touched upon an important considerationβnamely, the significance of Australia's international non-refoulement obligationsβbut was highly generalised as to the appellant's individual circumstances and did not expose why those circumstances would expose him to the relevant harm.
32 Those matters properly inform the level of effort that the Tribunal was required to expend in discharging its obligation to consider what the appellant advanced. In our view, in the circumstances the Tribunal was not obliged to address the submission in any more detailed manner.
33 In any event, there can be no doubt in this matter that the Tribunal identified, read and understood what was contained within the unsolicited post-hearing submission. Its receipt was expressly referred to in the Tribunal's reasons; and it was not unfairly described as "resiling totally" from the position that his representative advanced at the hearing. Further, the Tribunal correctly recorded the appellant's reliance upon the authorities to which the unsolicited submission referred. Plainly, none of that could have been possible without proper identification, review and comprehension of what was advanced.
34 It is equally clear that the Tribunal engaged with the substance of the submission in the requisite way, notwithstanding that the submission was made without leave and after the conclusion of the oral hearing. As is apparent from the extracts replicated above, the Tribunal's consideration of the question of non-refoulement in its reasons for decision was commensurate with and appropriate to address the representation as made. It took account of the authorities upon which the appellant relied, stressingβon any view, correctlyβthat questions of non-refoulement "β¦must be determined based on evidence relevant to each individual applicant". Perhaps most importantly, the Tribunal referred to country information about conditions in the South Sudanese capital, Juba; and concluded that the appellant "β¦could choose to liveβ¦in Juba and be relatively safe".
35 That other applicants with similar characteristics were the subject of different findings in other cases is not material. The court is concerned presently to assess whether the submission that the appellant advanced was considered in the way that the Act mandates: in other words, did the Tribunal reflect upon the harm to which the appellant claimed that he would be subjected if he were removed to South Sudan and did it bring that reflection to bear upon its assessment of whether there was "another reason" for revoking the Cancellation?
36 We accept that it did. It identified what the appellant had asserted on the issue of non-refoulement (howsoever baldly and inconsistently with the submissions that were advanced at the hearing), it explained why the authorities to which he pointed were of limited if any assistance, and it made a finding of its own about the risk of harm to which the appellant might be subjected upon removal to South Sudan. It is not for this court to second-guess what the Tribunal concluded. It suffices to note that there was no relevant want of consideration.
Conclusion
37 In light of what has just been stated, it is unnecessary that we should say anything about s 500(6J) of the Act. Whatever might be the limits of its application, they are not dispositive of the appeal and, for that reason, we would prefer to say nothing more: Boensch v Pascoe (2019) 268 CLR 593, 600-601 [7]-[8] (Kiefel CJ, Gageler and Keane JJ), 629-630 [101] (Bell, Nettle, Gordon and Edelman JJ).
38 The court should grant the extension of time that is sought; but the substantive appeal should be dismissed with costs. We will make orders accordingly.
I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Snaden, Abraham, Cheeseman.
Associate:
Dated: 15 February 2024
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FEDERAL COURT OF AUSTRALIA
DHP17 v Minister for Home Affairs [2019] FCA 15
Appeal from: Application for leave to appeal: DHP17 v Minister for Immigration [2018] FCCA 1677
File number: NSD 1214 of 2018
Judge: PERRAM J
Date of judgment: 17 January 2019
Catchwords: MIGRATION β appeal from Federal Circuit Court β whether Court erred in summarily dismissing appeal on show cause basis from Immigration Assessment Authority β whether Applicant had arguable case for jurisdictional error β where Applicant alleged inconsistency between Authority's reliance on country reports
Legislation: Federal Circuit Court Rules 2001 (Cth) r 44.12
Date of hearing: 9 November 2018
Registry: New South Wales
Division: General Division
National Practice Area: Administrative and Constitutional Law and Human Rights
Category: Catchwords
Number of paragraphs: 10
Counsel for the Applicant: The Applicant appeared in person with the assistance of an interpreter
Counsel for the First Respondent: M Smith
Solicitor for the First Respondent: DLA Piper Australia
ORDERS
NSD 1214 of 2018
BETWEEN: DHP17
Applicant
AND: MINISTER FOR HOME AFFAIRS
First Respondent
IMMIGRATION ASSESSMENT AUTHORITY
Second Respondent
JUDGE: PERRAM J
DATE OF ORDER: 17 JANUARY 2019
THE COURT ORDERS THAT:
1. Leave to appeal be granted.
2. The appeal be allowed with costs.
3. The matter be remitted to the Federal Circuit Court for trial on all issues apart from grounds 1 and 2 raised in the Court below.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
PERRAM J:
1 This is an application for leave to appeal orders made by the Federal Circuit Court on 26 June 2018. It dismissed the Applicant's proceeding in that Court summarily on a show cause basis pursuant to r 44.12(1)(a) of the Federal Circuit Court Rules 2001 (Cth) on the basis that there was no arguable case for jurisdictional error. An appeal from such a decision requires leave.
2 Leave should be granted and the appeal allowed with costs.
3 In the Federal Circuit Court the Applicant had sought to set aside a decision of the Immigration Assessment Authority ('Authority') which had affirmed an earlier decision of a delegate of the Minister. The delegate and the Authority had both concluded that the Applicant was not entitled to the issue of a Safe Haven Enterprise Visa (a kind of protection visa).
4 That application was pursued on three grounds none of which the Federal Circuit Court thought viable. It did not accept that the Authority had denied him procedural fairness by failing to consider all of his circumstances because at the hearing the Applicant did not point to any such circumstances. It rejected an argument that the Authority had failed to consider that the Applicant had a problem understanding the interpreter who assisted him during his interview by the delegate. The Court did so on the basis that the Authority had explicitly considered that matter.
5 The Court also rejected a submission that the Authority had erred in not relying upon an excerpt from a report prepared by the United Nations Committee Against Torture entitled 'Concluding Observations on the Fifth Periodic Report of Sri Lanka' ('UNCAT Report'). The Authority thought that whilst the UNCAT Report suggested that numerous individuals suspected of having even a remote link with the LTTE had been abducted and subjected to torture, it made no further use of the UNCAT Report because 'it does not specify when such occurrences happened or the circumstances'. The Court below thought this reasoning was a legitimate basis for the Authority's decision to place no weight upon the UNCAT Report.
6 In this Court the Applicant would seek to review these three matters. I do not think either of the first two arguments has any prospect for the reasons given by the Federal Circuit Court. As in the Court below the Applicant did not explain in this Court what the circumstances were which the Authority had failed to consider. The Authority did explicitly deal with the translation issue at [31]-[32]. The Authority had noted the submission made by the Applicant's representative that no adverse inference should be drawn from the inconsistencies in his evidence to the delegate as these could be seen as deriving from communication issues which were evident during his interview. It then rejected this argument concluding that the submissions did not 'sufficiently address the concern I have regarding the changes in the Applicant's evidence'. It also noted in the same paragraph that twice during the interview the Applicant was asked whether he understood the interviewer and twice he said that he did. In light of that a contention that the Authority failed to consider this matter is not tenable.
7 As to the third argument concerning the UNCAT Report I agree with the Court below that the reason given by the Authority for placing no weight (or implicitly doing so) was open to it in the sense that a lack of particularity is a rational basis for such a conclusion. However, that is not the end of the matter. The Court below did, with respect, appear to overlook one aspect of the Applicant's argument. The Authority had placed reliance on a report presented by the Department of Foreign Affairs and Trade dated 24 January 2017 entitled 'DFAT Country Report: Sri Lanka' ('DFAT Report'). The Applicant submitted in his grounds of review in the Court below that, as with the UNCAT Report which it declined to use, the DFAT Report also did not refer with particularity 'to when certain occurrences occurred' but the Authority had been content to rely upon it. In practical sense, this ground is one of inconsistency.
8 There are two issues which arise from this argument. The first is whether the approach of the Authority to the two reports is inconsistent when regard is had to their contents. The second is whether, assuming that it can be shown that the Authority did act inconsistently in its treatment of the two reports, this discloses a judicial review ground.
9 Both of these matters raise questions of substance which warrant trial. Accordingly, the Court erred in dismissing the proceeding summarily because it cannot be said that the Applicant did not have an arguable case of jurisdictional error. Out of deference to the judge at first instance I would say that whilst the point does appear as part of Ground 3(e) ('The DFAT report too relied upon by the delegate not refer to when certain occurrences occurred') one could easily blink and miss it.
10 The conclusion in the preceding paragraph requires that leave to appeal be granted and the appeal allowed with costs. The matter will be remitted to the Federal Circuit Court for trial apart from grounds 1 and 2 raised in the Court below which the trial judge was correct to dismiss summarily. In light of that conclusion it is not necessary to deal with the remaining grounds in this Court (none of which were raised in the Court below).
I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.
Associate:
Dated: 17 January 2019
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2010-02-23 00:00:00
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Hoop & Javelin Holdings Limited v BT Projects Pty Limited (In Liq) (No 3) [2010] FCA 191
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2010/2010fca0191
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2024-09-13T22:45:52.632905+10:00
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FEDERAL COURT OF AUSTRALIA
Hoop & Javelin Holdings Limited v BT Projects Pty Limited (In Liq) (No 3) [2010] FCA 191
Citation: Hoop & Javelin Holdings Limited v BT Projects Pty Limited (In Liq) (No 3) [2010] FCA 191
Parties: HOOP & JAVELIN HOLDINGS LIMITED (A COMPANY INCORPORATED IN MALTA) v BT PROJECTS PTY LIMITED (IN LIQUIDATION) (ACN 097 995 698), INTABILL, INC (A COMPANY INCORPORATED IN THE BRITISH VIRGIN ISLANDS), DANIEL KIM TZVETKOFF and SALVATORE SCIACCA
File number: NSD 597 of 2009
Judge: LOGAN J
Date of judgment: 23 February 2010
Catchwords: BANKRUPTCY β Proof of Debts β Provable Debts β Demands in nature of unliquidated damages arising otherwise than by reasons of a contract or promise β Statutory claim for aiding, abetting, counselling or procuring contraventions of s 52 Trade Practices Act 1974 (Cth) which induced applicant contract with third party β Bankruptcy Act 1966 (Cth) ss 60, 82 and 86 β Trade Practices Act 1974 (Cth) ss 52 and 75B β Fair Trading Act (Qld)
Legislation: Bankruptcy Act 1966 (Cth) ss 60, 82, 86
Trade Practices Act 1974 (Cth) ss 52, 75B
Fair Trading Act 1989 (Qld)
Federal Court Rules
Cases cited: Yorke v Lucas (1985) 158 CLR 661 cited
Coventry v Charter Pacific Corporation Ltd (2005) 227 CLR 234 followed
Aliferis v Kyriacou [2000] 1 VR 447 cited
Date of hearing: 23 February 2010
Place: Brisbane
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 19
Solicitor for the Applicant: Norton Rose
Solicitor for the Respondents: No appearance by the Respondents
Counsel for Cronin Litigation (solicitor on record for the Third Respondent, Mr Tzvetkoff): Mr CD Coulsen
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 597 of 2009
BETWEEN: HOOP & JAVELIN HOLDINGS LIMITED (A COMPANY INCORPORATED IN MALTA)
Applicant
AND: BT PROJECTS PTY LIMITED (IN LIQUIDATION) (ACN 097 995 698)
First Respondent
INTABILL, INC (A COMPANY INCORPORATED IN THE BRITISH VIRGIN ISLANDS)
Second Respondent
DANIEL KIM TZVETKOFF
Third Respondent
SALVATORE SCIACCA
Fourth Respondent
JUDGE: LOGAN J
DATE OF ORDER: 23 FEBRUARY 2010
WHERE MADE: BRISBANE
THE COURT DECLARES THAT:
1. The applicant's claims against the third respondent are not provable in the bankruptcy of the third respondent within the meaning of and for the purposes of s 82(2) of the Bankruptcy Act 1966 (Cth).
THE COURT ORDERS THAT:
1. Costs of and incidental to the notice of motion be the applicant's costs in the proceedings.
2. Directions in respect of the third respondent are to be returned on 5 March 2010 at 9:30am and the applicant is to file and serve the notice of motion as to these directions on the third respondent not later than Tuesday 2 March 2010.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 597 of 2009
BETWEEN: HOOP & JAVELIN HOLDINGS LIMITED (A COMPANY INCORPORATED IN MALTA)
Applicant
AND: BT PROJECTS PTY LIMITED (IN LIQUIDATION) (ACN 097 995 698)
First Respondent
INTABILL, INC (A COMPANY INCORPORATED IN THE BRITISH VIRGIN ISLANDS)
Second Respondent
DANIEL KIM TZVETKOFF
Third Respondent
SALVATORE SCIACCA
Fourth Respondent
JUDGE: LOGAN J
DATE: 23 FEBRUARY 2010
PLACE: BRISBANE
REASONS FOR JUDGMENT
1 Hoop & Javelin Holdings Limited is the Applicant in proceedings originally instituted in the New South Wales Registry of the Court, which were transferred to the Queensland Registry for cause pursuant to an order made by Foster J. Hoop & Javelin has sought, by way of notice of motion, the following orders:
1. A declaration that its claims against Mr Daniel Kim Tzvetkoff (Mr Tzvetkoff), the Third Respondent, are not provable in the bankruptcy of Mr Tzvetkoff within the meaning, and for the purposes of, s 82(2) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act).
2. That it may proceed with its claims against Mr Tzvetkoff despite his bankruptcy.
2 Hoop & Javelin also seeks provision in respect of the costs of that application.
3 It is first necessary to state that Mr Tzvetkoff is indeed a bankrupt. The contingency that he had become a bankrupt was disclosed at an earlier directions hearing following the transfer of the case to the Queensland Registry. The evidence read today on behalf of Hoop & Javelin discloses that Mr Tzvetkoff is an undischarged bankrupt. He lodged a debtor's petition on 22 January 2010. He also filed a statement of affairs that day. Upon that contingency being raised at the previous directions hearing, and out of an abundance of caution, I directed that Hoop & Javelin give notice of its application to the trustee in bankruptcy. I am satisfied from evidence read before me today that the trustee has, had notice of the application, and of the fact that it was listed today for hearing.
4 Also at the previous directions hearing, the solicitors, then and still technically presently, on the record for Mr Tzvetkoff, Cronin Litigation, signified an intention on their part to withdraw. I drew to the attention of the solicitor concerned the requirements of the Federal Court Rules in that regard. Mr Coulsen of counsel has appeared today on behalf of that firm as a matter of courtesy to inform the Court that that process has been engaged. He also made, at my invitation and in response to an offer that he made, some helpful submissions in relation to the operation of the Bankruptcy Act. These, though, were made on an amicus basis, not, I should emphasise, on behalf of either the trustee or Mr Tzvetkoff personally.
5 Mr Tzvetkoff has been given notice of the application and of today's hearing. The application was served appropriately on the solicitors on the record.
6 A question which has troubled me is whether there is an academic quality in the relief sought by Hoop & Javelin Holdings in its interlocutory application. I do not consider that the interlocutory application has this quality. Hoop & Javelin have introduced in evidence a newspaper article, which has been published in the Courier Mail, following Mr Tzvetkoff's lodgement of a debtor's petition. The upshot of that article, it seems to me, is a view on the part of Mr Tzvetkoff that the lodgement of that debtor's petition extinguished claims against him and, in particular, that of Hoop & Javelin Holdings. Thus, whilst Mr Tzvetkoff has not personally sought to challenge the interlocutory relief sought by Hoop & Javelin, the question does not strike me as an academic one. That is so, further, even though the trustee has not appeared today and, it seems, is not disposed presently to come to a view about the question of whether Hoop & Javelin's claim is provable in bankruptcy. I do not make that observation in any critical way in relation to the trustee.
7 It is now necessary to make particular observations about the nature of the claim brought by Hoop & Javelin. The case is one on the "Fast Track" list. Thus, it is to the further amended "Fast Track" statement, as amplified by Hoop & Javelin's statement of facts, matters and circumstances constituting Mr Tzvetkoff's contravention of s 75B of the Trade Practices Act 1974 (Cth) (Trade Practices Act) that one must look, rather than to a statement of claim and particulars. Regard to the further amended "Fast Track" statement reveals that the claim is one for:
(a) a debt in the amount of EUR1,843,888.79, and USD644,004.00; and
(b) damages under s 82(1) and s 87(1A) of the Trade Practices Act 1974 (Cth), and s 99(1) and s 100(2) of the Fair Trading Act 1989 (Qld).
I should interpolate at this point that it is not necessary to resolve the application separately to consider the provisions of the Fair Trading Act 1989 (Qld).
8 It seems to me that the question of whether or not there is to be a stay of the proceeding as against Mr Tzvetkoff is resolved by a consideration of the claim made under the Trade Practices Act. The further amended "Fast Track" statement further reveals that the dispute relates to the conduct of two named corporate respondents, BT Projects Pty Ltd (BT Projects) and Intabill Inc (Intabill), and two named individual Respondents, Mr Tzvetkoff and one Salvatore Sciacca, in relation to the supply of online billing and payment processing services. Insofar as the claim is liquidated, in other words, insofar as there is a claim for the specified Euro and United States dollar amounts, the claim is as against BT Projects and Intabill.
9 Of more particular concern today is the claim for damages under, materially, the Trade Practices Act. In that regard, the further amended "Fast Track" statement discloses that an issue likely to arise is whether BT Projects, Intabill and Mr Sciacca engaged in misleading or deceptive conduct in contravention of s 52 of the Trade Practices Act. A further issue which is said to arise is whether Mr Tzvetkoff, Mr Sciacca, or both of them, were knowingly concerned in or parties to such contraventions for the purposes of s 75B(1) of the Trade Practices Act. There are, thus, a number of permutations in relation to the way in which the case is put as against Mr Tzvetkoff.
10 In that regard, it is sufficient, in my opinion, for present purposes, to set out the terms of paragraphs 43, 43I and 43J of the further amended fast track statement:
43. Tzvetkoff or Sciacca or both of them aided, abetted, counselled or procured the contraventions by BT Projects or, alternatively, Intabill Inc of S.52(1) of the Trade Practices Act 1974 (C'th) and were knowingly concerned in or parties to such contraventions within the meaning of S.75B(1) of the Trade Practices Act 1974 (C'th).
43I. Tzvetkoff or Sciacca or both of them aided, abetted, counselled or procured the contraventions by BT Projects or Intabill Inc of S.52(1) of the Trade Practices Act 1974 (Cth) β¦ and were knowingly concerned in or parties to such contravention within the meaning of S.75B(1) of the Trade Practices Act 1974 (C'th).
43.J Further or in the alternative, Tzvetkoff aided, abetted, counselled or procured the contraventions by Sciacca of S.52(1) of the Trade Practices Act 1974 (C'th) β¦ and was knowingly concerned in or a party to such contravention within the meaning of S.75B(1) of the Trade Practices Act 1974 (C'th).
11 From the further amended "Fast Track" statement, it can be seen that in one way or another Mr Tzvetkoff's liability is alleged to arise as a person "involved in a contravention" for the purposes of s 75B of the Trade Practices Act, as that particular provision, insofar as liability is concerned, was elucidated in Yorke v Lucas (1985) 158 CLR 661.
12 The question, then, of immediate concern is whether there ought to be an order, pursuant to s 60(1)(b) of the Bankruptcy Act, staying the present proceedings as against Mr Tzvetkoff on the basis that they concern the non-payment of a provable debt. That, in turn, directs attention to s 82 of the Bankruptcy Act and, in particular, s 82(1) and s 82(2), which provide:
(1) Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.
(2) Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust are not provable in bankruptcy.
13 In resolving the question as to whether or not there should be a stay, or, rather, a refusal to stay proceedings and grant the declaration sought, attention was necessarily focused, in submissions on behalf of Hoop & Javelin, and also in amicus submissions, on the High Court's decision in Coventry v Charter Pacific Corporation Ltd (2005) 227 CLR 234 (Charter Pacific). That case arose out of a statutory claim for unliquidated damages for misleading or deceptive conduct by the bankrupt which had induced the claimant in those proceedings to make a contract with a third party. That issue was whether or not the claim was a demand at 241-242:
β¦in the nature of unliquidated damages arising otherwise than by reason of a contract [or] promiseβ¦
in terms of s 82(2) of the Bankruptcy Act.
14 At the time, that question was the subject of a degree of controversy in Australian insolvency law, particularly having regard to a decision of the Victorian Court of Appeal, Aliferis v Kyriacou [2001] 1 VR 447. In the joint judgement of Gleeson CJ and Gummow, Hayne and Callinan JJ in Charter Pacific, one finds, with respect, a searching and reflective analysis of the origins of s 82 of the Bankruptcy Act, and its relationship with the concept of set-off in bankruptcy, the concept which presently reposes in s 86 of the Bankruptcy Act. The upshot of that analysis in the joint judgment is to be found in para 70 and para 71, where it is stated (omitting footnote references to cases cited):
[70] What is revealed by the analysis of decided cases recorded in the preceding pages of these reasons is that s 82(2) and its legislative predecessors stopped short of providing that "the bankrupt is to be a freed man β freed not only from debts, but from contracts, liabilities, engagements, and contingencies of every kind" (emphasis added). Some claims stand outside the reach of the statute. Although consideration of the application of the set-off provision required the inclusion, within the class of debts provable in bankruptcy, of those claims for unliquidated damages for fraudulent misrepresentation which had induced the making of a contract between the bankrupt and the claimant, the words of the section were not and are not to be stretched to encompass every other kind of claim which a person may have against the bankrupt.
[71] The claim in the present matter was a statutory claim. The relevant question is whether that claim is a demand arising "otherwise than by reason of a contract [or] promise". What the fraudulent misrepresentation cases of Jack v Kipping and Re Giles show is that claims of the kind made in this case (for unliquidated damages for misleading or deceptive conduct which induced the party misled to make a contract with a party other than the bankrupt) are claims arising otherwise than by reason of a contract. They are claims of a kind which s 82(2) provides are not provable. By contrast, however, claims for unliquidated damages for misleading or deceptive conduct inducing the making of a contract with the bankrupt are claims arising by reason of a contract. They are provable. To the extent to which Aliferis held to the contrary, it should be overruled. (footnotes omitted)
15 It seems to me, having regard to Charter Pacific, that the question for resolution is whether the present can be said to be a case which is for unliquidated damages for misleading or deceptive conduct, which induced the party misled to make a contract with a party other than the bankrupt. If the present is such a case, then Charter Pacific dictates that the claim is one otherwise than by reason of a contract, and thus of a kind which s 82(2) provides are not provable.
16 A point of distinction noted in the course of submissions as between Charter Pacific and the present is that, in Charter Pacific, the alleged liability arising in respect of the claim under the Trade Practices Act was direct, ie, that of a principal rather than accessorial, ie, that arising pursuant to s 75B of the Act. Irrespective of whether the involvement of Mr Tzvetkoff is either aiding and abetting Mr Sciacca in his own right, or aiding in abetting one or the other or each of the named corporate Respondents, it seems to me that this distinction is a distinction without a difference so far as the application in the present case of the elucidation of s 82 in Charter Pacific is concerned.
17 This is but another example of a claim which stands outside the reach of the Bankruptcy Act in terms of not giving rise to a claim which is provable in bankruptcy. In that regard, there is an evident misapprehension on Mr Tzvetkoff's part insofar as the newspaper article might be thought to reveal otherwise. One way of testing that is in the same way that the High Court tested the reach of s 82 by reference to set-off provisions. Here, there is no occasion giving rise to a course of mutual dealings between Mr Tzvetkoff and Hoop & Javelin. That aside and in terms of para 71 of Charter Pacific, the alleged involvement in misleading or deceptive conduct was conduct which, if proved, induced Charter Pacific to make a contract with a party other than Mr Tzvetkoff.
18 For these reasons I declare that Hoop & Javelin's claims against Mr Tzvetkoff are not provable in his bankruptcy within the meaning and for the purpose of s 82(2) of the Bankruptcy Act.
19 It seems to me unnecessary to make an order granting leave to Hoop & Javelin to proceed with its claims against Mr Tzvetkoff, despite his bankruptcy. Rather, s 60 of the Bankruptcy Act seems to be posited on the basis that, in the event there is a claim provable in bankruptcy, the Court may order a stay. There being, in my opinion, there is no occasion to make an order under s 60 of the Bankruptcy Act. I therefore content myself with making the declaration sought in para 1. As to costs, the order which I propose to make is that the costs of and incidental to the application be Hoop & Javelin's costs in the proceedings.
I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan.
Associate:
Dated: 5 March 2010
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federal_court_of_australia:fca/single/2000/2000fca1782
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2000-12-13 00:00:00
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Boles, Re [2000] FCA 1782
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2000/2000fca1782
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2024-09-13T22:45:52.674056+10:00
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FEDERAL COURT OF AUSTRALIA
Boles, Re [2000] FCA 1782
BANKRUPTCY β Annulment β Application made on basis that Court lacked jurisdiction to make sequestration order β Bankrupt departed Australia shortly before date of commission of act of bankruptcy β Whether bankrupt was "ordinarily resident" in Australia at that date β Whether bankrupt had a "dwelling-house" in Australia at that date β Eight year delay in making application β Destructionin that period of bank records relevant to question whether bankrupt was "carrying on business in Australia β¦ by means of an agent" at date of commission of act of bankruptcy β Applicant failed to demonstrate that sequestration order ought not to have been made.
Bankruptcy Act 1966 ss 43(1), 153B
Re IAN JOHN BOLES
N7144 of 2000
WILCOX J
SYDNEY
13 DECEMBER 2000
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALESDISTRICT REGISTRY N7144 of 2000
RE: IAN JOHN BOLES
JUDGE: WILCOX J
DATE OF ORDER: 13 DECEMBER 2000
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The application for annulment made on 21 February 2000 be dismissed.
2. The applicant, Ian John Boles, pay the costs of the application incurred by the Official Trustee in Bankruptcy.
Note: Settlement and entry of orders are dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALESDISTRICT REGISTRY N7144 of 2000
RE: IAN JOHN BOLES
JUDGE: WILCOX J
DATE: 13 DECEMBER 2000
PLACE: SYDNEY
REASONS FOR JUDGMENT
1 WILCOX J: This is an application by Ian John Boles for annulment of a sequestration order made against him on 3 December 1991.
2 Mr Boles brings his application under s153B of the Bankruptcy Act 1966. That section reads:
"153B. If the Court is satisfied that a sequestration order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Official Receiver, the Court may make an order annulling the bankruptcy."
3 Mr Boles contends the sequestration order ought not to have been made because the Court lacked jurisdiction to make the order. His argument is that none of the situations described in para (b) of s43(1) of the Act applied to him. Section 43(1) provides:
"43.(1) Subject to this Act, where:
(a) a debtor has committed an act of bankruptcy; and
(b) at the time when the act of bankruptcy was committed, the debtor:
(i) was personally present or ordinarily resident in Australia;
(ii) had a dwelling-house or place of business in Australia;
(iii) was carrying on business in Australia, either personally or by means of an agent or manager; or
(iv) was a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager;
the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor."
The bankruptcy proceedings
4 Mr Boles is apparently an Australian citizen. Prior to March 1991 he lived in Australia. Over many years, he engaged in a variety of business ventures. It seems many of these ventures failed and that, by the end of 1990, Mr Boles had significant debts.
5 In October 1988 proceedings were instituted against Mr Boles by the Receivers and Managers of Boles Stores Pty Limited ("Boles Stores"), a company of which Mr Boles was previously a director. The action was brought to recover monies allegedly paid out of the company's bank account to or on behalf of Mr Boles. The amount claimed was $566,415.49.
6 The action was brought in the Supreme Court of New South Wales. The plaintiffs did not succeed in effecting personal service of the originating process on Mr Boles. However, they eventually effected substituted service and a notice of appearance was filed, on behalf of Mr Boles, by Sly and Weigall. Subsequently, A G Robinson and Associates filed a notice of change of solicitor. On 14 March 1991 judgment was entered against Mr Boles in the sum of $726,419.09.
7 On 22 April 1991 A G Robinson and Associates filed a notice of motion in the Court of Appeal of New South Wales seeking an extension of time to appeal against the entry of judgment. So far as I am aware, that motion has never been heard. The reason, presumably, is that, on 10 April 1991, a bankruptcy notice was issued against Mr Boles at the request of Boles Stores.
8 Attempts were made to serve the bankruptcy notice at Mr Boles' last known address, 11 Ingleby Street, Dundas; but these attempts were unsuccessful. Boles Stores then applied for an order for substituted service. An order for substituted service of the bankruptcy notice was made on 16 May 1991 and service was effected on the following day by leaving the document with an unidentified woman at 11 Ingleby Street, Dundas.
9 The order for substituted service provided that the bankruptcy notice shall be deemed to be served on the debtor on 10 June 1991. On that basis, Mr Boles was required by the notice to comply with its requirements on or before 1 July 1991. He did not do so.
10 On 12 August 1991 Boles Stores filed the bankruptcy petition pursuant to which the sequestration order was made. The petition alleged that, at the date of commission of the act of bankruptcy, Mr Boles was ordinarily resident in Australia: see sub-para (i) of s43(1)(b) of the Act. The petition further alleged that Mr Boles was indebted to the petitioning creditor in the sum of $763,297.30 (being the amount of the Supreme Court judgment with accrued interest) and that he had committed an act of bankruptcy by failing, on or before 1 July 1991, to comply with the requirements of the bankruptcy notice.
11 The petitioning creditor was unable to effect personal service of the bankruptcy petition. However, substituted service was effected and a sequestration order was made. This was apparently done on the basis of the allegations made in the petition, including that Mr Boles was ordinarily resident in Australia on 1 July 1991.
The applicant's evidence
12 The evidence tendered in support of the application for annulment included two affidavits made by Mr Boles, one affidavit of his wife, Robyn May Boles, and one affidavit of a son, Benjamin.
13 In his first affidavit, dated 8 February 2000, Mr Boles gave as his address 313 Cascade Road, Columbus, Georgia, United States of America. He asserted that his first knowledge of either the bankruptcy notice or sequestration order was gained in December 1996. He said he left Sydney on 22 March 1991 and arrived in the United States on 26 March 1991 and has not, since then, returned to Australia. He stated:
"At the time of leaving Australia on 22 March 1991 it was not my intention to return to Australia. At no time since 22 March 1991 have I intended to return to Australia permanently."
14 Mr Boles entered the United States on a temporary visa, apparently valid for six months. However, on 24 September 1991, he applied for a non-immigrant visa valid until 30 September 1992. Mr Boles revealed his "permanent address outside the United States" as 11 Ingleby Street, Dundas and his United States address as 313 Cascade Road, Columbus, Georgia. He gave as the reason for the application: "To start up US company to assemble putter manufactured in Australia and sell in the US market. Market to Japan from US base". This application was approved.
15 Prior to the visa application, on 25 June 1991, Mr Boles executed a contract to purchase the property known as 313 Cascade Road, Columbus. This property apparently comprised a dwelling house. Mr Boles deposed that he purchased the property as "agent for the Boles Family Trust", although the contract itself does not so state. The contract contains a provision that the purchaser "shall be Ian J Boles or his assignee".
16 The house contract called for completion on 31 December 1991. However, Mr Boles deposed that "the seller and I had come to an informal understanding that actual completion would occur sometime in early 1992". Whether or not that statement is correct, completion did not take place until 13 February 1992. On that day the property was transferred to Cascade Investments Inc, a company formed by Mr Boles in Georgia. Apparently, the sole shareholder in that company is Mr Boles' son, Benjamin.
17 This purchase price of the house was $US360,000, of which $US72,000 was paid in cash and $US288,000 by way of a five-year promissory note to the vendor.
18 Notwithstanding the terms of the contract, according to Mr Boles, on the date of contract (25 June 1991) "my family and I moved into the property on a rent-free basis."
19 In his first affidavit, Mr Boles asserted that, at the time of moving into the Columbus house, and at all times since then, "I have regarded (this house) as my permanent home". Mr Boles also said:
"During the period from March to 30 June 1991:
(1) I had moved to the USA to live permanently;
(2) shipped all personal belongings and furniture of my family to the USA (having sold all items that were not taken before 1 July 1991); and
(3) was working permanently for a business in the USA."
20 According to Mrs Boles' affidavit, she continued to reside at the Dundas property, after her husband's departure, until 25 May 1991. She then joined him in the United States. She has continued to reside there ever since, with some visits back to Australia.
21 After Mrs Boles left the house at Dundas, Benjamin, and perhaps also another son, John, continued to reside there. Benjamin left Australia on 27 July 1991 to join his parents in America. According to his affidavit, when he left the property "to my knowledge it was left in the control of friends of my brother, John".
22 Apparently Benjamin continues to reside in the United States, although he has made some visits back to Australia.
23 Mr and Mrs Boles' sons, John and Jason, left Sydney for the United States in December 1991. Each of them returned after some time to Australia, although Jason now lives in the United States.
24 Mr Boles deposed:
"On 1 July 1991 and at any time since, I did not and have not:
(1) sought the payment in Australia or elsewhere of any debt due in Australia;
(2) acted as a manager or director of any company or other entity in Australia;
(3) placed any order for the provision of goods or services in Australia or which required any payment or step to be taken in Australia;
(4) operated any bank account with any bank located in Australia;
(5) supplied by sale or otherwise or offered to supply any goods or services in Australia;
(6) carried on a business in Australia whether personally or by means of an agent or manager;
(7) participated, either solely or jointly with any other person in any manner, in the conduct of any business in Australia;
(8) controlled, either solely or jointly with any other person in any manner, any interest in any business conducted in Australia;
(9) entered into any contract with any person in Australia;
(10) employed any person who resides or who has conducted any business in Australia; or
(11) held, either solely or jointly with any other person in any manner, any interest in any company or other entity which controlled any business conducted in Australia."
25 The property 11 Ingleby Street, Dundas was owned jointly by Mr and Mrs Boles. It was mortgaged to the Commonwealth Bank of Australia. The bank sold the property, apparently in late 1992 or early 1993, but the proceeds of sale were apparently insufficient to discharge Mr Boles' liability to the bank. The bank has lodged a proof of debt against Mr Boles' estate claiming $588,877.43.
26 In his second affidavit, Mr Boles set out information about some of his business ventures. It is unnecessary to mention those disposed of before his departure from Australia in March 1991. However, at that time he still owned two businesses. One was the Tilpa Hotel, of which Mr Boles was sole proprietor. The hotel was mortgaged to Royal Australia Finance Limited which had threatened, by March 1991, to exercise its power of sale. However, shortly before the threat was carried out, Mr Boles negotiated a sale of the hotel to his sister and brother in law. This was apparently done without the hotel being independently valued. The agreed price was less than the amount of the mortgage debt. A contract of sale was signed by Mrs Boles, acting under power of attorney, after Mr Boles departed from Australia. The sale was settled in late May 1991.
27 The other business held by Mr Boles at the date of his departure from Australia was Rosedale Station, a rural property at Tilpa, New South Wales. The property was mortgaged to Westpac Banking Corporation ("Westpac"). Mr Boles said in his second affidavit that "Westpac took possession of the Station several months before I left in March 1991". He gave no information as to how this was done. He said he "had no direct knowledge of the acquisition of the Station", although he was aware that Westpact caused most of the stock to be shot, presumably because of drought conditions and low stock prices. Westpac sold the property in August 1992 but the sale price was apparently insufficient to pay the whole of Mr Boles' debt to Westpac. The bank has lodged a proof of debt against his bankrupt estate claiming $1,319,541.65.
28 The circumstances of Westpac taking possession of the property have not been established. Mr Boles' solicitor issued a subpoena to have Westpac produce its records. No documents were produced. Apparently, they have been destroyed. One result of this is that it is not possible to determine whether the person appointed by Westpact to manage the business was deemed to do so as agent of the mortgagor; that is, Mr Boles.
The trustee's reports
29 The sequestration order made against Mr Boles on 3 December 1991 appointed Richard Campbell Brien as the trustee of his estate. Mr Brien remained the trustee of the estate until 14 February 2000, when his registration to act as a trustee was cancelled. About that time, the Official Trustee in Bankruptcy became trustee of the estate.
30 No evidence in relation to this application was adduced from Mr Brien. However, George Lionel Caddy, Official Receiver for the Bankruptcy District of New South Wales, has furnished two reports on behalf of the Official Trustee in Bankruptcy. These reports draw on information obtained from Mr Brien's file.
31 It appears that, shortly after his appointment, Mr Brien made some inquiries about possible assets of the estate, including three motor cars, a motor cruiser, three small boats and a light aeroplane. Mr Brien did not have great success in his inquiries, but he did establish that the motor cruiser and aeroplane were both transferred by Mr Boles to companies, apparently associated with Mr Boles, shortly before his departure from Australia and that Mr Boles flew in the aeroplane on his departure, at least as far as Hawaii.
32 It appears from one of Mr Caddy's reports that Mr Brien dispatched three letters to Mr Boles in the period immediately following the sequestration order. The earliest letter, dated 5 December 1991 and headed "Notification of Bankruptcy and Bankrupt's Responsibilities", was addressed to Mr Boles at 11 Ingleby Street, Dundas. Another letter, similarly headed but dated 10 January 1992, was addressed to Mr Boles at 313 Cascade Street, Columbus, Georgia, 31904 USA. A few days later, on 15 January 1992, another letter, headed "Formal Notification of Bankrupt by Sequestration" [sic] was sent to the same address.
33 It further appears from Mr Brien's file that, on 29 April 1992, there was a telephone conversation between Mr Boles and one S Nicol, apparently an accountant in the employ of Mr Brien. On 17 July 1992 Mr Brien wrote a letter to Mr Boles at the Columbus address requesting details of his income.
34 Mr Boles did not lodge a Statement of Affairs. Nor did he disclose particulars of his income. Accordingly, on 22 October 1992 Mr Brien lodged a Notice of Objection to Discharge: see ss 149 and 149A of the Bankruptcy Act. Mr Brien gave three grounds:
(i) the bankrupt had left Australia and not returned;
(ii) the bankrupt had failed to lodge a Statement of Affairs after the Trustee's request; and
(iii) the bankrupt had failed to disclose particulars of his income.
A copy of the Notice of Objection was sent to Mr Boles at the Columbus address.
35 It seems that, on 25 February 1993, Mr Brien wrote a further letter to Mr Boles, at the Columbus address, advising him he may be able to compromise his debts with his creditors pursuant to the provision of s 73 of the Bankruptcy Act.
36 So far as appears from the file, Mr Brien received no response to any of his letters, but none was returned unclaimed.
37 Mr Caddy's first report states:
"From February 1997 the bankrupt conducted negotiations with the former trustee through solicitors with a view to finalising the administration of the bankrupt estate. The negotiations were not successful. The bankrupt failed to provide any information relating to his assets or income, or to pay any money to the bankrupt estate for the benefit of creditors.
On 20th November 1997 a statement of affairs of the bankrupt was filed with the Official Receiver. A copy was also sent to the former trustee. The trustee returned the statement of affairs to the bankrupt for completion under cover of a letter dated 26th November 1997. The trustee requested that the bankrupt answer all of the questions in the statement of affairs and provide full names and addresses for his creditors. No further information has been provided by the bankrupt. The bankrupt advised by letter dated 11th December 1997 from his solicitors to the trustee that he 'does not accept that the Federal Court had jurisdiction to make him a bankrupt'."
38 The application for annulment, presently before the Court, was filed on 21 February 2000. Mr Caddy reported that Mr Boles "has failed to produce any books or accounting records to the trustee, although requested to do so" and that details of his income and trading activities are not known.
39 Although the information about Mr Boles' assets and liabilities is incomplete, it seems there is a substantial deficiency in his estate. Mr Boles disclosed asserts worth $10,400 and $46,274.23 has been received by the trustee. However, proofs of debt received by the trustee total almost $4 million.
Was Mr Boles "ordinarily resident" in Australia at 1 July 1991?
40 As I have mentioned, the petition on which the sequestration order was made alleged that Mr Boles was ordinarily resident in Australia at the date of commission of the act of bankruptcy, 1 July 1991. Counsel for Mr Boles, Mr Martin Hadley, contends the evidence now before the Court establishes this was not so; Mr Boles had departed from Australia in March 1991 and established his permanent home in the United States. He says it is not enough that Mr Boles continued, at 1 July 1991, to be a joint owner (with his wife) of the house at Dundas where he formerly resided; he was not ordinarily resident at that address.
41 On the evidence, this proposition seems irrefutable. By 1 July 1991 Mr Boles had abandoned his residence in Australia and executed a contract to purchase, in America, a house into which he and his wife had recently moved. Burchett J observed in Re Vassis; Ex parte Leung (1986) 9 FCR 518 at 525, "[i]t is a question of fact and degree at what point a temporary absence might, if sufficiently prolonged, prevent its being proper to continue to regard him as ordinarily resident in Australia". However, where there is cogent evidence that the absence was intended to be permanent, rather than temporary, that stage may be reached immediately after departure.
42 The concept of a person being "ordinarily resident" in Australia was also discussed, by Lockhart J, in Re Taylor; Ex parte Natwest Australia Bank Limited (1992) 37 FCR 194 at 198-199.
43 The fact that Mr Boles was not "ordinarily resident" in Australia on 1 July 1991 means that the sequestration order was apparently made on a false understanding of a relevant fact. It does not necessarily mean the Court lacked jurisdiction to make the order; there may have been jurisdiction because of the existence of one of the other fact situations mentioned in s 43(1) of the Act. In order to establish that "a sequestration order ought not to have been made", Mr Boles needs to negative each of those fact situations.
Did Mr Boles have a "dwelling-house" in Australia at 1 July 1991?
44 One obvious possible fact situation, which was discussed at the hearing, is that Mr Boles "had a dwelling-house β¦ in Australia" at 1 July 1991. In one sense, he clearly did; he continued to own the house at Dundas. However, it is not enough that a debtor owns a property that may properly be described as a dwelling-house.
45 The proposition just stated is supported by Re Nordenfelt; Ex parte Maxim-Nordenfelt Guns and Ammunition Company [1895] 1 QB 151. The debtor in that case lived with his wife in Paris. However, he owned the lease of a house in England, which was left in the charge of a caretaker and available to be let. The debtor could have used the house on his occasional visits to England but did not, in fact, do so. The English Court of Appeal held it was incorrect to say the debtor "had a dwelling-house β¦ in England" during the year before presentation of the bankruptcy petition. Lord Esher MR said at 153:
"I will not attempt to give an exhaustive definition, or indeed any definition, of the term 'dwelling-house' as used in this section. I only intend to say that what I think is not a 'dwelling-house'. If a man has a house belonging to him, but he has abandoned it as his dwelling-house, that house is not his 'dwelling-house' within the meaning of the section."
Lopes LJ and Rigby LJ agreed. Rigby LJ added some observations (at 154) relating to evidence of abandonment:
"The debtor had, no doubt, had a dwelling-house at Beckenham, and he might very easily after he went away to Paris had adopted the house again as his dwelling-house. But when it appears, as it does, that he offered all his furniture in the house for sale, and had that which was not sold packed up in such a way that it could not, without some trouble and expenditure, be placed in a position to be used, I am satisfied that he had abandoned the house as his dwelling-house before the commencement of the critical year. I am satisfied also that he did nothing during the year to adopt it again as his dwelling-house."
46 Nordenfelt was considered by the English Court of Appeal in Re Brauch; Ex parte Britannic Securities & Investments Ltd [1977] 3 WLR 354. The debtor was a property speculator. For that purpose, he used numerous companies incorporated in the Channel Islands. Apparently he spent most of his time outside England. However, he sometimes stayed in premises in London, that were leased in his name and occupied by the mother of his son and members of her family. The debtor used these premises for business purposes when visiting England. The Registrar found the debtor did not come to England as a casual visitor, but on business; and that he spent significant time in England. Having regard to those circumstances, the Registrar held the debtor had a dwelling-house in England.
47 The Court of Appeal affirmed the Registrar. Goff LJ, with whom Buckley LJ and Orr LJ agreed, distinguished Nordenfelt on the basis that that was a case of abandonment.
48 Applying Nordenfelt, I do not think it would be correct to hold that Mr Boles "had a dwelling-house β¦ in Australia" at 1 July 1991. Although he still owned the Dundas property, with his wife, and could have reoccupied it at any time, he had abandoned its use as his residence.
Was Mr Boles "carrying on business in Australia by means of an agent"?
49 Another possibility is that, at 1 July 1991, Mr Boles "was carrying on business in Australia β¦ by means of an agent or manager": see s 43(1)(b)(iii) of the Bankruptcy Act. It will be recalled that, at 1 July 1991, Westpac was in possession of a rural property owned by Mr Boles, Rosedale Station. Apparently somebody was carrying on the business of the station, limited though that business might have been. Presumably, that person was appointed by Westpac pursuant to a power conferred on Westpac by a mortgage document. However, it seems the mortgage document has been destroyed, so it is not possible to say whether it provided that any such appointee should be deemed to be the agent of the mortgagor. In my experience, such a provision is commonly included in bank mortgages. If it was included, the Court probably had jurisdiction to make the sequestration order pursuant to s 43(1)(b)(iii) of the Act.
50 I am not in a position affirmatively to hold that the Court had jurisdiction pursuant to that provision. But, equally, I cannot hold to the contrary. Accordingly, I cannot be satisfied that "a sequestration order ought not to have been made", as required by s 153B. It follows that the application must be dismissed.
51 In case it might be thought my conclusion is a harsh one, I point out it flows from Mr Boles' delay in bringing this application. The evidence indicates that Mr Boles was apprised of the making of the sequestration order, at the latest, by early 1992. Had he mdae an application for annulment at that time, before Westpac sold the property, it seems certain that the full bank records would have been available; the possible application of s 43(1)(b)(iii) of the Act could have been explored. Even if Mr Boles had made his application within six years thereafter, the probability is there would have been no problem. But Mr Boles chose to delay for eight years, during which period the records have been destroyed. He has offered no explanation for this delay, other than to make the apparently false claim that it was not until December 1996 that he learnt of the making of the sequestration order. Mr Boles' own delay has caused the deficiency in evidence which causes his application to fail.
52 The application will be dismissed with costs.
I certify that the preceding fifty-two (52) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox.
Associate:
Dated: 13 December 2000
Counsel for the Applicant: M Hadley
Solicitor for the Applicant: Deacons Lawyers
Solicitor for the First Respondent: M McNally of Lobban McNally & Harney
(Commonwealth Bank)
Solicitor for the Second Respondent: N Ireland for E Taylor
Official Trustee in Bankruptcy
Date of Hearing: 27 October 2000
Date of Judgment: 13 December 2000
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Australian Competition and Consumer Commission v Homeopathy Plus! Australia Pty Limited (No 2) [2015] FCA 1090
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FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Homeopathy Plus! Australia Pty Limited (No 2) [2015] FCA 1090
Citation: Australian Competition and Consumer Commission v Homeopathy Plus! Australia Pty Limited (No 2) [2015] FCA 1090
Parties: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v HOMEOPATHY PLUS! AUSTRALIA PTY LIMITED and FRANCES MERCIA SHEFFIELD
File number: NSD 256 of 2013
Judge: PERRY J
Date of judgment: 13 October 2015
Catchwords: CONSUMER LAW β where representations made on respondent company's website that the whooping cough vaccine is ineffective and there is a reasonable basis in medical science for stating that homeopathy is an effective alternative β where representations misleading and deceptive contrary to ss 18 and 29, Australian Consumer Law β where grant of injunctive relief appropriate β where parties' submissions as to appropriate amount of any penalty disregarded as irrelevant (Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCA 59; (2015) 229 FCR 331) β whether to quantify penalty as separate contraventions or one or more courses of conduct β consideration of relevant factors in imposing pecuniary penalty under s 224, Australian Consumer Law β where significance of loss and damage is potential to divert customers from vaccinating themselves and those in their care posing grave risks of harm to them and the community β where little weight given to absence of proof of actual loss or harm β where contraventions extremely serious due to grave risks posed to public health β where general and specific deterrence primary consideration β whether imposition of pecuniary penalty would be crushing on individual contravener due to extenuating personal circumstances
COSTS β where no reason to depart from general principle that costs follow the event β where individual respondent submitted that the company should bear costs exclusively or predominantly β where no basis for differentiating between respondents in their conduct of the case β where ordinary course that an order for costs be joint and several between respondents followed
Legislation: Australian Consumer Law (Competition and Consumer Act 2010 (Cth), Schedule 2), ss 18, 29, 224, 232
Competition and Consumer Act 2010 (Cth), s 137H
Cases cited: Australian Competition and Consumer Commission v ACN 135 183 372 (in liquidation) (formerly known as Energy Watch Pty Ltd ) [2012] FCA 749
Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36
Australian Competition and Consumer Commission v Breast Check Pty Ltd (No 2) [2014] FCA 1068
Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited [2015] FCA 330
Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd (in liq) [2007] FCAFC 146; (2007) 161 FCR 513
Australian Competition and Consumer Commission v EnergyAustralia Pty Ltd [2015] FCA 274
Australian Competition and Consumer Commission v Homeopathy Plus! Australia Pty Limited [2014] FCA 1412; (2014) 146 ALD 278
Australian Competition and Consumer Commission v MSY Technology Pt Ltd (No 2) [2011] FCA 382; (2011) 279 ALR 609
Australian Competition and Consumer Commission v Safe Breast Imaging Pty Ltd (No 2) [2014] FCA 998
Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (No 4) [2011] FCA 761; (2011) 282 ALR 246
Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640
Australian Competition and Consumer Commission v Visa Inc [2015] FCA 1020
Australian Competition and Consumer Commission v Z-Tek Computer Pty Ltd (1997) 78 FCR 197
Barbaro v The Queen [2014] HCA 2; (2014) 253 CLR 58
Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCA 59; (2015) 229 FCR 331
Dowdell v Knispel Fruit Juices Pty Ltd [2003] FCA 1276
Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82
Hughes v Western Australian Crick Association (Inc.) (1986) ATPR 40-748
Jones v Sterling (1982) 63 FLR 216
Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357
Noone (Director of Consumer Affairs Victoria) v Operation Smile (Aust) Inc [2012] VSCA 91; (2012) 38 VR 569
NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285
Ruddock v Vadarlis (No 2) [2001] FCA 1865; (2001) 115 FCR 229
Scott v Secretary, Department of Social Security (No 2) [2000] FCA 1450
Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; (2012) 287 ALR 249
SZAFV v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCA 1457
Tax Practitioners Board v Li [2015] FCA 233
TPG Internet Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 190; (2012) 210 FCR 227
Trade Practices Commission v Nicholas Enterprises Pty Ltd (1979) 28 ALR 201
Date of hearing: 22 April 2015
Date of last submissions: 25 May 2015
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 94
Counsel for the Applicant: Ms R Higgins
Solicitor for the Applicant: Corrs Chambers Westgarth
Counsel for the Respondents: Mr M White
Solicitor for the Respondents: Mackenzie and Vardanega Solicitors
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 256 of 2013
BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant
AND: HOMEOPATHY PLUS! AUSTRALIA PTY LIMITED
First Respondent
FRANCES MERCIA SHEFFIELD
Second Respondent
JUDGE: PERRY J
DATE OF ORDER: 13 October 2015
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The First Respondent and the Second Respondent cease publishing and remove from the website www.homeopathyplus.com.au permanently:
(a) the article entitled "Whooping Cough β Homeopathic Prevention and Treatment" published from 1 January 2011 until around 26 April 2012;
(b) the article entitled "Whooping Cough β Homeopathic Prevention and Treatment" published from 11 January 2013 until around March 2013 and;
(c) the article entitled "Government Data Shows Whooping Cough Vaccine a Failure" published from 3 February 2012 until around March 2013.
2. The First Respondent and Second Respondent be restrained, whether by themselves, their agents, servants or howsoever otherwise, for a period of five years from making any statements or representations, in trade or commerce, in connection with the supply or possible supply of homeopathic treatments or products (Homeopathic Treatments) or in connection with the promotion of the supply of Homeopathic Treatments, to the effect that the vaccine publicly available in Australia for whooping cough (Vaccine):
(a) is short-lived in protecting against whooping cough;
(b) is unreliable in protecting against whooping cough;
(c) is no longer effective in protecting against whooping cough;
(d) may not be the best solution for protecting against whooping cough;
(e) is of limited effect in protecting against whooping cough;
(f) is unreliable at best in protecting against whooping cough; and/or
(g) is largely ineffective in protecting against whooping cough,
for so long as the Vaccine is effective in protecting a significant majority of people who are exposed to the whooping cough infection from contracting whooping cough.
3. The First Respondent and Second Respondent be restrained, whether by themselves, their agents, servants or howsoever otherwise, for a period of five years from making any statements or representations, in trade or commerce, in connection with the supply or possible supply of Homeopathic Treatments or in connection with the promotion of the supply of Homeopathic Treatments, to the effect that Homeopathic Treatments are a safe and effective alternative to the Vaccine for the prevention of whooping cough, for so long as:
(a) there is no reasonable basis, in the sense of an adequate foundation, in medical science to enable the First Respondent and the Second Respondent to state that Homeopathic Treatments are safe and effective as an alternative to the Vaccine for the prevention of whooping cough; and
(b) the Vaccine is the only treatment approved for use by the Therapeutic Goods Administration for inclusion on the National Immunisation Program for the prevention of whooping cough.
4. Given Orders 2 and 3 above, the Respondents are released from the undertaking by their counsel given on 1 March 2013.
5. Pursuant to s 224 of the Australian Consumer Law, the First Respondent pay to the Commonwealth within 30 days of the making of this Order by the Court a pecuniary penalty of $115,000 in respect of the acts constituting its contraventions of s 29(1)(a), (b) and (g) of the Australian Consumer Law.
6. Pursuant to s 224 of the Australian Consumer Law, the Second Respondent pay to the Commonwealth within 90 days of the making of this Order by the Court a pecuniary penalty of $23,000 in respect of the acts constituting her contraventions of s 29(1)(a), (b) and (g) of the Australian Consumer Law.
7. A copy of the reasons for judgment given on 22 December 2014, with the seal of the Court thereon, be retained in the Court for the purposes of section 137H of the Competition and Consumer Act 2010 (Cth).
8. The Respondents pay the Applicant's costs of the proceeding as agreed or assessed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 256 of 2013
BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant
AND: HOMEOPATHY PLUS! AUSTRALIA PTY LIMITED
First Respondent
FRANCES MERCIA SHEFFIELD
Second Respondent
JUDGE: PERRY J
DATE: 13 October 2015
PLACE: SYDNEY
REASONS FOR JUDGMENT
1 INTRODUCTION [1]
2 THE EVIDENCE [5]
3 INJUNCTIONS [6]
4 PENALTY [16]
4.1 The decision in Director, Fair Work Building Industry Inspectorate v CFMEU delivered after judgment on penalty was reserved [16]
4.2 Penalty principles [19]
4.3 The respondents' position as to penalty [31]
4.4 Consideration of relevant factors [32]
4.4.1 Quantifying the contraventions β maximum penalty and course of conduct [32]
4.4.2 The nature and extent of the acts or omissions and any loss or damage suffered (s 224(2)(a)) [37]
4.4.3 The circumstances in which the contraventions took place (s 224(2)(b)) [44]
4.4.4 Whether the contravener has shown a disposition to cooperate with the authorities responsible for the enforcement of the ACL in relation to the contravention [51]
4.4.5 Whether the respondents have previously engaged in similar conduct (s 224(2)(c)) [53]
4.4.6 The size and financial position of Homeopathy Plus and the financial position and other personal circumstances of Mrs Sheffield [54]
4.4.7 Senior management in the conduct and whether Homeopathy Plus' corporate culture was conducive to compliance with the ACL [61]
4.4.8 The need for general deterrence [62]
4.4.9 The deliberateness of the respondents' conduct [67]
4.4.10 Specific deterrence [68]
4.4.11 The parity principle [75]
4.4.12 The appropriate penalty [81]
5 ORDER FOR RETENTION OF SEALED REASONS FOR JUDGMENT [85]
6 COSTS [86]
7 CONCLUSIONS [94]
1. INTRODUCTION
1 In reasons delivered on 22 December 2014, I concluded that the respondents, Homeopathy Plus! Australia Pty Limited (Homeopathy Plus) and Frances Mercia Sheffield had engaged in misleading and deceptive conduct in trade or commerce and thereby contravened ss 18 and 29 of the Australian Consumer Law (Schedule 2 of the Competition and Consumer Act 2010 (Cth)) (ACL): Australian Competition and Consumer Commission v Homeopathy Plus! Australia Pty Limited [2014] FCA 1412; (2014) 146 ALD 278 (the liability judgment). Those contraventions arose from representations that the vaccine publicly available in Australia for whooping cough (the Vaccine) was ineffective and that there was a reasonable basis in medical science for stating that homeopathic treatments are a safe and effective alternative to the Vaccine.
2 At the same time as I delivered my reasons, declarations were made giving effect to the conclusions reached in the liability judgment in the following terms:
(1) The First Respondent and the Second Respondent have in trade and commerce:
(a) engaged in conduct that was misleading and deceptive or was likely to mislead and deceive, in contravention of section 18 of the Australian Consumer Law ("ACL"); and
(b) in connection with the supply or possible supply of homeopathic treatments or products ("Homeopathic Treatments"), and in connection with the promotion of the supply of Homeopathic Treatments, made false or misleading representations that the vaccine publicly available in Australia for whooping cough ("Vaccine") is of a particular standard or quality in contravention of sections 29(1)(a) and (b) of the ACL,
by publishing, or causing to be published, on the website www.homeopathyplus.com.au ("Website"):
(c) from 1 January 2011 until around 26 April 2012, an article entitled "Whooping Cough β Homeopathic Prevention and Treatment" (the "First Whooping Cough Article") in which a representation was made to the effect that the Vaccine is short-lived, unreliable and no longer effective in protecting against whooping cough;
(d) from 11 January 2013 until around March 2013, an article entitled "Whooping Cough β Homeopathic Prevention and Treatment" (the "Second Whooping Cough Article") in which a representation was made to the effect that the Vaccine may not be the best solution for, is of limited effect, and is unreliable at best, in protecting against whooping cough; and
(e) from 3 February 2012 until around March 2013 an article entitled "Government Data Shows Whooping Cough Vaccine a Failure" (the "Government Article") in which a representation was made to the effect that the Vaccine is largely ineffective in protecting against whooping cough;
when, in fact, the Vaccine is effective in protecting a significant majority of people who are exposed to the whooping cough infection from contracting whooping cough.
(2) The First Respondent and the Second Respondent have in trade or commerce:
(a) engaged in conduct that was misleading and deceptive or was likely to mislead and deceive, in contravention of section 18 of the ACL;
(b) in connection with the supply or possible supply of Homeopathic Treatments, and in connection with the promotion of the supply of Homeopathic Treatments, made false or misleading representations that the Homeopathic Treatments are of a particular standard or quality in contravention of section 29(1)(a) and (b) of the ACL; and
(c) in connection with the supply or possible supply of Homeopathic Treatments, and in connection with the promotion of the supply of Homeopathic Treatments, made false or misleading representations that Homeopathic Treatments have a use or benefit in contravention of section 29(1)(g) of the ACL,
by publishing, or causing to be published, on the Website:
(d) the First Whooping Cough Article;
(e) the Second Whooping Cough Article; and
(f) the Government Article in conjunction with the Second Whooping Cough Article,
in which representations were made to the effect that there was a reasonable basis, in the sense of an adequate foundation, in medical science to enable it or them (as the case may be) to state that Homeopathic Treatments are a safe and effective alternative to the Vaccine for the prevention of whooping cough when, in fact:
(g) there is no reasonable basis, in the sense of an adequate foundation, in medical science to enable the First Respondent and the Second Respondent to state that Homeopathic Treatments are safe and effective as an alternative to the Vaccine for the Prevention of Whooping Cough; and
(h) the Vaccine is the only treatment currently approved for use and accepted by medical practitioners in Australia for the prevention of whooping cough.
3 For convenience and consistently with the liability judgment, I will describe the representations as to the alleged lack of effectiveness of the Vaccine referred to in paragraph (1) of the declaration as the "Vaccine Representations" and the representations as to the alleged effectiveness of homeopathic treatments in prevention of whooping cough referred to in paragraph (2) as the "Homeopathy Alternative Reasonable Basis Representations".
4 Following delivery of the liability judgment, a hearing was held on penalty with further evidence being led. The terms of any injunctive relief and other final relief were also argued at that hearing. As I later explain, supplementary submissions were filed by the applicant by leave following delivery of judgment by the Full Court of the Federal Court in Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCA 59; (2015) 229 FCR 331 (FWBII v CFMEU).
2. THE EVIDENCE
5 The applicant led evidence as to the existence of a webpage on the website of Homeopathy Plus (the Website) concerning homeoprophylaxis in April 2015. The evidence was led to support the applicant's submission as to the need for specific deterrence and was not objected to on that basis. Mrs Sheffield also gave evidence by affidavit sworn 16 March 2015. She was not cross-examined on that evidence.
3. INJUNCTIONS
6 The Court has power to grant an injunction under s 232 of the ACL in such terms as the Court considers appropriate on the application of the ACCC if satisfied that a person has engaged or is proposing to engage in conduct that constitutes or would constitute, relevantly, a contravention of a provision of Chapter 2 or 3 in which ss 18 and 29(1)(a), (b) and (g) respectively appear. The power is a broad one, extending under subs (4) to the grant of an injunction irrespective of, for example, whether it appears to the Court that the person intends to engage again in the contravening conduct or whether there is an imminent danger of substantial damage to any other person if the person engages in conduct of that kind. The power is subject to at least three limitations (Australian Competition and Consumer Commission v Z-Tek Computer Pty Ltd (1997) 78 FCR 197 at 202-4 (Merkel J)):
(1) it is confined by reference to the scope and purpose of the ACL, which would include injunctive relief designed to prevent a repetition of the conduct for which the relief is sought;
(2) as the Court must be satisfied that the injunction sought is "appropriate", there must be a sufficient nexus or relationship between the contraventions and the injunction sought; and
(3) the injunction must relate to the case or controversy the subject of the proceeding.
7 As finally formulated, the ACCC seeks orders that the respondents:
(1) be permanently restrained from publishing the First Whooping Cough Article, the Second Whooping Cough Article and the Government Article (the Three Articles);
(2) be restrained for a period of 5 years from making representations in trade or commerce, in connection with the supply, possible supply or promotion of homeopathic treatments or products, to the effect that:
a) the whooping cough Vaccine is, among other things, short-lived, unreliable and no longer effective, for so long as the Vaccine is effective in protecting a significant majority of people who are exposed to the whooping cough infection from contracting whooping cough;
b) homeopathic treatments are a safe and effective alternative to the Vaccine for the prevention of whooping cough, for so long as there is no reasonable basis in medical science to enable the respondents to state so, and the Vaccine is the only treatment approved for use by the Therapeutic Goods Administration for inclusion on the National Immunisation Program for the prevention of whooping cough.
8 The respondents did not oppose the grant of an injunction in these terms. However, they submitted that in the reasons which accompany the decision on penalty and other relief, a number of matters should be noted, allegedly to clarify the scope of the injunctions, and that "the logical, but narrow, import of the Federal Court's decision" is that Mrs Sheffield "may not re-publish these specific articles or say the same things as written in those articles within the commercial context" (emphasis added).
9 With respect, the submission is misconceived. First the injunction is the operative order which is required to be obeyed and must embody in its own terms with precision the conduct which it restrains. As such, any narrowing of the scope of the injunction can be effected only by narrowing the terms of the injunction itself. Yet the respondents did not seek any such amendment.
10 Secondly, even if it were suggested that the injunction should be limited in this way, I do not consider that that would be appropriate. Different words could be used to convey representations to the same effect as the contravening representations and be equally misleading and deceptive.
11 Thirdly, I agree with the ACCC's concerns that the respondents may, absent injunctions in the terms proposed, engage in the offending conduct again in trade and commerce and in connection with the supply or possible supply of homeopathic treatments. In this regard, I note that the Second Whooping Cough Article was Mrs Sheffield's attempt to address the concerns raised by the ACCC with respect to the First Whooping Cough Article but was also found to be in breach of ss 18 and 29 of the ACL. Further, Mrs Sheffield admits that she is a passionate advocate of homeoprophylaxis and that this passion leads her to advocate against vaccination because she believes homeoprophylaxis is the better approach. This passion has been pursued in publishing the Three Articles in conjunction with promoting her online shop. Nor, as the ACCC submits, has Mrs Sheffield demonstrated any remorse either in her evidence at trial or in her affidavit on penalty, or promised not to engage in the impugned conduct again. As such, given that Mrs Sheffield is the sole director of Homeopathy Plus and is responsible for all of the content uploaded to the Website, I consider that there is a real, if not significant, risk that the respondents will engage in the contravening conduct again absent the injunction.
12 In the fourth place, the contravening representations posed a grave risk of serious harm to the health and safety of those consumers who may rely upon them and, in the case of parents, to their infants and children, should they be persuaded not to vaccinate. Any future contravention along the same lines carries the same risks.
13 Furthermore, as in Australian Competition and Consumer Commission v Breast Check Pty Ltd (No 2) [2014] FCA 1068 (Breast Check) at [44] (Barker J), it is in the public interest to grant an injunction as it appropriately reinforces the understanding in the public mind, and to other would-be operators of such businesses, that considerable care needs to be taken to comply with consumer laws so as not to put the public interest and, more particularly, members of the public, at risk.
14 Finally, the injunctions do not forbid the respondents from holding or expressing opinions. They prevent the respondents from making representations to the effect of those found to be false and misleading in contravention of the ACL when made in trade and commerce in connection with the supply or possible supply of homeopathic treatments or products. As the ACCC submits, representations made by the respondents in trade and commerce must be held to standards of responsible accuracy. It is well established that matters of consumer protection and the prohibition of misleading and deceptive conduct in s 18 of the ACL are a justifiable limitation on the common law doctrine of freedom of speech: Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 86β87 (the Court); Noone (Director of Consumer Affairs Victoria) v Operation Smile (Aust) Inc [2012] VSCA 91; (2012) 38 VR 569 at 610 [144]-[145] (Nettle JA).
15 In all of the circumstances, I am satisfied that it is appropriate to make the injunctions sought by the ACCC.
4. PENALTY
4.1 The decision in Director, Fair Work Building Industry Inspectorate v CFMEU delivered after judgment on penalty was reserved
16 After judgment on penalty and other final orders was reserved, the Full Court of the Federal Court delivered judgment in FWBII v CFMEU. In that decision, the Full Court held that the Court's task in proceedings for the imposition of a pecuniary penalty is to fix the appropriate penalty in the exercise of discretion. A submission made by the parties, agreed or otherwise, as to an appropriate penalty or range of penalties is an impermissible expression of an opinion, and is irrelevant and contrary to the process of instinctive synthesis which the exercise of discretion requires (FWBII v CFMEU at 335 [3], 376 [138]-[139], 388 [180], 391-392 [190]-[194] and 404-405 [239]-[241] (the Court)). In so holding, the Full Court held that the decision of the High Court in Barbaro v The Queen [2014] HCA 2; (2014) 253 CLR 58 (Barbaro) concerning the exercise of the sentencing discretion in criminal trials was equally applicable to the exercise of discretion to set a pecuniary penalty in civil proceedings instituted by the regulator.
17 As a result, the parties were granted leave to provide further written submissions on the effect of that decision, together with copies of the transcript and the earlier submissions on penalty from which all submissions by the ACCC as to the suggested amount of penalty were redacted. The respondents accepted that the ACCC had redacted the appropriate references to penalty in the relevant documents. In the circumstances I have not had regard to the redacted paragraphs of the applicant's outline of submissions on relief, redacted penalty amounts in the applicant's proposed minutes of final orders, or redacted passages from the transcript.
18 The ACCC submitted, and I agree, that the Court may still however have regard to the remaining parts of its outline of submissions on relief which address the facts and evidence, the relevant principles including penalty factors, and comparable decisions to the extent that those decisions did not involve the Court's approval of agreed pecuniary penalties. As to the last of these points, however, as the applicant also pointed out, the Full Court considered in FWBII v CFMEU that decisions in which a penalty was imposed following the matter being resolved by consent may not be treated as helpful in future cases, save to the extent that they indicate a position by a regulator to which it should be held in later cases (at 404 [238]).
4.2 Penalty principles
19 The principles governing the imposition of a penalty were not in dispute. Under s 224 of the ACL, the Court is empowered to order a person to pay to, relevantly, the Commonwealth "such pecuniary penalty, in respect of each act or omission by the person to which [s 224] applies, as the court determines to be appropriate". That provision applies relevantly only to the contravention of s 29 of the ACL which is located within Part 3-1 of the ACL. Section 224 has no application to s 18.
20 Section 224(2) provides that in determining the appropriate pecuniary penalty, the Court must have regard to all relevant matters including:
(1) the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission; and
(2) the circumstances in which the act or omission took place; and
(3) whether the person has previously been found by a court in proceedings under Chapter 4 or Part 5-2 to have engaged in any similar conduct.
21 Otherwise, potentially relevant factors, as identified in Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (No 4) [2011] FCA 761; (2011) 282 ALR 246 at 250-251 [11] (Perram J), include:
(1) the size of the contravening company;
(2) the deliberateness of the contravention and period over which it extended;
(3) whether the contravention arose out of the conduct of senior management of the contravener or at some lower level;
(4) whether the contravener has a corporate culture conducive to compliance with the ACL as evidenced by, for example, educational programs and disciplinary or other corrective measures in response to an acknowledged contravention;
(5) whether the contravener has shown a disposition to cooperate with the authorities responsible for the enforcement of the ACL in relation to the contravention;
(6) whether the contravener has engaged in similar conduct in the past;
(7) the financial position of the contravener; and
(8) whether the contravening conduct was systematic, deliberate or covert.
22 The list is not exhaustive and should not be approached in a regimental formulaic way. As Wigney J recently pointed out in Australian Competition and Consumer Commission v Visa Inc [2015] FCA 1020 (ACCC v Visa) at [83], "to do that would impermissibly constrain or formalise what is, at the end of the day, a broad evaluative judgment."
23 The process of arriving at the appropriate sentence for a criminal offence involves an intuitive or instinctive synthesis of all of the relevant factors: Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357 (Markarian) at 373-374 [35]-[37] (Gleeson CJ, Gummow, Hayne and Callinan JJ). The same approach has been held to apply to civil penalties under the ACL and its predecessor provision in the Trade Practices Act 1974 (Cth): TPG Internet Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 190; (2012) 210 FCR 227 at 294 [145] (the Court); Australian Competition and Consumer Commission v EnergyAustralia Pty Ltd [2015] FCA 274 at [103] (Gordon J); Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited [2015] FCA 330 (ACCC v Coles) at [6] (Allsop CJ). Instinctive synthesis was helpfully described by McHugh J in Markarian as meaning "the method of sentencing by which the judge identifies all the factors that are relevant to the sentence, discusses their significance and then makes a value judgment as to what is the appropriate sentence given all the factors of the case" (at 378 [51]). In short, as Gaudron, Gummow and Hayne JJ explained in Wong v The Queen [2001] HCA 64; (2001) 207 CLR 584 at 611 [75] (in a passage approved in Markarian at 374 [37]), "the task of the sentencer is to take account of all of the relevant factors and to arrive at a single result which takes due account of them all" (emphasis in original).
24 Accordingly, as the High Court recently emphasised in Barbaro at 72 [34]-[35] (French CJ, Hayne, Kiefel and Bell JJ), sentencing (and by analogy, setting a pecuniary penalty) is not a mathematical exercise:
Sentencing an offender is not, and cannot be undertaken as, some exercise in addition or subtraction. A sentencing judge must reach a single sentence for each offence and must do so by balancing many different and conflicting features. The sentence cannot, and should not, be broken down into some set of component parts. As the plurality said in Wong v The Queen [(2001) 207 CLR 584 at 611 [75]], "[s]o long as a sentencing judge must, or may, take account of all of the circumstances of the offence and the offender, to single out some of those considerations and attribute specific numerical or proportionate value to some features, distorts the already difficult balancing exercise which the judge must perform" (original emphasis).
No less importantly, any determination of the bounds of an available range of sentences would have to depend upon first, what considerations are judged to bear upon the fixing of sentence and secondly, what effect is given to those considerations.
25 The deterrent effect of a pecuniary penalty is a particularly significant consideration to which regard must be had when determining an appropriate penalty for commercial and competition related contraventions, including s 29. As the Full Court said in the context of assessing a pecuniary penalty for a consumer protection contravention by a corporation in Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; (2012) 287 ALR 249 (Singtel Optus) at 265 [62], "in relation to offences of calculation by a corporation where the only punishment is a fine, the punishment must be fixed with a view to ensuring that the penalty is not such as to be regarded by that offender or others as an acceptable cost of doing business." The High Court approved this statement in Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640 at 659 [66], explaining at 659 [65]:
General and specific deterrence must play a primary role in assessing the appropriate penalty in cases of calculated contravention of legislation where commercial profit is the driver of the contravening conduct.
26 In considering the appropriate penalty to secure deterrence, some consideration must be given to the size and financial position of the contravener. The sum required to achieve the object of the deterrence will be larger where the company has vast resources than in the case of a small company: NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 (NW Frozen Foods) at 293 (Bruchett and Kiefel JJ); ACCC v Visa at [96] (Wigney J).
27 In this process, careful attention to maximum penalties will always be required because the legislature has legislated for them, they invite comparison between the case before the court and the worst possible case, and they provide, taken and balanced with all of the other relevant factors, a yardstick: Markarian at 372 [31] (Gleeson CJ, Gummow, Hayne and Callinan JJ). However, even where the maximum penalty is high and the amount necessary to provide effective deterrence is large, the amount of the penalty cannot be so high as to be oppressive. As Burchett and Kiefel JJ explained in NW Frozen Foods, "[p]lainly, if deterrence is the object, the penalty should not be greater than is necessary to achieve this object; severity beyond that would be oppression" (at 293).
28 The Court may in some cases derive assistance from penalties imposed previously in comparable cases, particularly where those cases establish a pattern or range of penalties imposed for like contraventions. That assistance is subject to the caveat following the decision in FWBII v CFMEU explained at [18] above.
29 Finally, as the ACCC submits, the total penalty for related offenses ought not to exceed what is proper for the entire contravening conduct involved (the totality principle). The totality principle operates as a final check. As Goldberg J explained in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36:
The totality principle is designed to ensure that overall an appropriate sentence or penalty is appropriate and that the sum of the penalties imposed for several contraventions does not result in the total of the penalties exceeding what is proper having regard to the totality of the contravening conduct involved.
30 Alternatively as I explain below in certain circumstances it may be appropriate for the Court to treat a number of contraventions as a course of conduct so as to warrant the imposition of only one penalty.
4.3 The respondents' position as to penalty
31 The respondents submit that in exercising its discretion the Court should not order a pecuniary penalty against Mrs Sheffield personally and should significantly temper the pecuniary penalty against Homeopathy Plus. I consider the respondents' specific submissions in support of their respective positions in the course of considering the relevant factors.
4.4 Consideration of relevant factors
4.4.1 Quantifying the contraventions β maximum penalty and course of conduct
32 As a corporate respondent, the maximum penalty that may be imposed on Homeopathy Plus for each contravention is $1.1 million, while in Mrs Sheffield's case, the maximum penalty that may be imposed for each contravention is $220,000 (s 224(3), item 2, ACL). A person is not liable to more than one pecuniary penalty in respect of the same conduct if the conduct constitutes a contravention of two or more penalty provisions (s 224(4), ACL). In this proceeding, the ACCC submitted that the maximum penalty that can be imposed against Homeopathy Plus is $6.6 million and against Mrs Sheffield, $1.32 million, comprising six acts or omissions for each respondent for the making of two offending representations in contravention of s 29 of the ACL in each of the Three Articles published on the Website.
33 However, as I have mentioned, where there are multiple contraventions, it is also within the Court's discretion to consider whether a number of contraventions should be treated as separate contraventions for penalty purposes, or as falling within one or more courses of conduct: Australian Competition and Consumer Commission v MSY Technology Pt Ltd (No 2) [2011] FCA 382; (2011) 279 ALR 609 at 630 [97] (Perram J); Australian Competition and Consumer Commission v Safe Breast Imaging Pty Ltd (No 2) [2014] FCA 998 (Safe Breast Imaging) at [31] (Barker J). Typically the purpose in so doing is "to ensure the punishment fits the contravention and the penalty outcome is not artificially, and unjustly, inflated because of the sheer number of contraventions found": Safe Breast Imaging at [31] (Barker J); see also ACCC v Coles at [17]-[18] (Allsop CJ).
34 Ultimately each case must be approached on its own facts. The Vaccine Representations and the Homeopathy Alternative Reasonable Basis Representations were made together in the First and Second Whooping Cough Articles in order relevantly to promote the online store. They were, in effect, "two sides of the same coin" and are not readily treated separately. In my view, the two representations in the case of each of these articles ought fairly to be considered as part of the same contravention. To do otherwise would, in my view, produce an artificial and unjust outcome on penalty.
35 The position with the Government Article is more complex. The Government Article in its own terms contained the Vaccine Representation and I consider that constitutes a separate contravention. It was only in conjunction with the Second Whooping Cough Article that the Government Article made the Homeopathy Alternative Reasonable Basis Representation. That being so, in my view the Homeopathy Alternative Reasonable Basis Representation in the Government Article ought properly to be considered as part of the same course of conduct as the Second Whooping Cough Article for the purposes of setting a penalty.
36 In those circumstances, the starting approach to a pecuniary penalty assessment is that Homeopathy Plus is liable to a maximum pecuniary penalty of $3.3 million and Mrs Sheffield to a maximum pecuniary penalty of $660,000.
4.4.2 The nature and extent of the acts or omissions and any loss or damage suffered (s 224(2)(a))
37 The representations were made in the Three Articles published on the Website which hosts an online shop for the purchase of homeopathy treatments and products. As I have mentioned, Mrs Sheffield, the sole director of Homeopathy Plus, is the author of the Three Articles, was solely responsible for the content uploaded onto the Website and uploaded the Three Articles. Mrs Sheffield has promoted the prophylactic qualities of homeopathy through Homeopathy Plus for several years.
38 Mrs Sheffield's evidence fell well short of providing any credible basis for the impugned representations regarding the Vaccine. To the contrary, the evidence emphatically established that the Vaccine is effective. Conversely, there was no evidence of any support even among peak homeopathic associations for the use of homeopathy treatments as an alternative to the Vaccine, nor any published literature that supported the efficacy or effectiveness of homeopathic treatments as an alternative to the Vaccine.
39 The key issue here, in my view, in considering the significance of loss and damage, is not the question of the effect of the conduct on other "competitors", but the potential to divert consumers from immunising themselves and those in their care, with potential risks to their health and to the broader community (see by analogy e.g. Breast Check at [29] (Barker J)).
40 On this issue, the respondents stress in mitigation of penalty that no consumer was shown to have suffered loss or damage; nor was any evidence led of any consumer complaint. However, if even one consumer has been diverted from vaccinating to her or his detriment, or to the detriment of those in their care such as an infant, the potential consequences to their health may be very serious and at worst, fatal. These risks were increased by the informative style adopted in the articles including that the deficiencies in the Vaccine were presented as if they were established and accepted in orthodox medicine. This impression was only reinforced by the terms of the disclaimer that appeared before a visitor could access the Second Whooping Cough Article in the members' area of the Website.
41 Nor is this a case where the evidence suggests a narrow publication of the offending representations. The Three Articles were published on the internet and accessible to any member of the general public including for the period that the Second Whooping Cough Article was accessible only in the members' area of the Website.
42 In these circumstances, I do not consider that much weight can be given to the absence of proof of actual loss or damage. I am reinforced in this view by the fact that the number of persons who accessed the Website during the period when the Three Articles were published on the Website is likely to have been substantial. So much may be inferred from the fact that as at 28 June 2013, being some three or four months after the Second Whooping Cough Article and the Government Article were removed from the Website, there were 12,041 subscribers to the email newsletters. Added to this, the period for which the representations were made on the Website were lengthy, particularly in the case of the contravening representations made in the First Whooping Cough Article which was published from 1 January 2011 until 26 April 2012 and the Vaccine Representation in the Government Article which was published from 3 February 2012 to around March 2013. It should also be borne in mind that this is a case where the representations are such that actual loss or damage may not readily be proved such as in a case where children may have suffered injury as a result of misleading and deceptive representations to their parents about the safety or age appropriateness of a toy. It is also a case where injury consequential on heeding the representation, i.e. a consumer or child contracts the disease or suffers more severe symptoms, may not occur for some time. Moreover, at a general level, such representations risk serious harm to the Australian community in potentially reducing the capacity of communities to cocoon vulnerable infants and others, and to achieve herd immunity.
43 I therefore agree with the ACCC that the respondents' conduct in making the impugned representations in trade and commerce was extremely serious. This is so notwithstanding that there is no evidence of actual consumer loss or harm. I do not consider that the respondents intended such harm.
4.4.3 The circumstances in which the contraventions took place (s 224(2)(b))
44 Details as to the circumstances in which the contraventions took place are contained in the liability judgment and it is not necessary to repeat those at length here.
45 The First Whooping Cough Article was written at some time during 2009 and published on the Website from 1 January 2011 until 26 April 2012. The banner at the top of the page did not refer to the online shop. However, the article appeared on a page with a toolbar on which the click through button "Shop" appeared. Visitors to the Website could, by clicking through a series of two or three links commencing with the "Shop" button, reach a page where they could purchase Drosera which was referred to in the First Whooping Cough Article as a remedy for the prevention of whooping cough.
46 From 20 April 2012, the ACCC corresponded with Mrs Sheffield for the purpose of requesting that the First Whooping Cough Article be removed from the Website. That article was removed from the Website shortly thereafter on 26 April 2012 following a verbal undertaking given by Mrs Sheffield to the ACCC in a telephone conversation on the same day. In line with statements by Mrs Sheffield in the course of that conversation, she always intended to re-upload the First Whooping Cough Article when she had undertaken further research and decided whether any part of it needed to be changed on Mrs Sheffield's instructions.
47 The Second Whooping Cough Article was uploaded to the Website by Mrs Sheffield's son on 11 January 2013 where it remained until around March 2013. This article was a revised version of the First Whooping Cough Article. In the interim, Mrs Sheffield had read some further material. When the Second Whooping Cough Article was uploaded, Mrs Sheffield believed that it could not be accessed outside the members' area on the Website. Before accessing material within the members' area, a visitor was required to view a disclaimer stating that information on the Website "is for general information and education purposes only" and to accept a set of terms and conditions. The terms and conditions were exceedingly lengthy and it was highly unlikely that any visitor would trawl through them merely to access another part of the Website for free.
48 Subsequently, when Mrs Sheffield visited the Website on 15 January 2013 after receiving an email from the ACCC, she saw that the Second Whooping Cough Article was not only visible in the members' area, but also on the public area of the Website where it had been accessible for the previous four days. That day, Mrs Sheffield asked her son to remove the article from the public area of the Website so that it would be accessible only within the members' area after viewing the front disclaimer screen. Two days later on 17 January 2013, Mrs Sheffield spoke to an employee of the ACCC on the telephone and advised the ACCC that the Second Whooping Cough Article could now only be accessed in the members' area on signing an agreement. The ACCC did not at this time say that the Second Whooping Cough Article should be removed.
49 The Government Article was uploaded to the Website on 3 February 2012 where it remained until around March 2013. Mrs Sheffield's motives in uploading the Government Article were in part to advocate for a change in the government's approach. However, they were also to promote her online shop. This article was freely accessible to any member of the public who visited the Website without becoming a member of the Website. In contrast to the First and Second Whooping Cough Articles this article did not refer to any specific homeopathic products. Nonetheless it sought to promote homeopathic remedies in a partial and persuasive tone giving the impression, when read with the Second Whooping Cough Article, that homeopathy provides a safe and effective alternative to the Vaccine.
50 The potential class of consumers viewing the Website, including when the Second Whooping Cough Article was accessible only in the members' area, was unlimited. The breadth of persons accessing the Website has already been referred to and included men and women of various ages pursuing a variety of vocations, including the astute and the gullible, the intelligent and the not so intelligent, the well-educated and the poorly educated.
4.4.4 Whether the contravener has shown a disposition to cooperate with the authorities responsible for the enforcement of the ACL in relation to the contravention
51 In removing the First Whooping Cough Article and in responding immediately to the email from the ACCC with respect to the Second Whooping Cough Article by checking the website to see whether its publication was limited to the members' area, Mrs Sheffield and through her, Homeopathy Plus, have demonstrated a disposition to cooperate with the ACCC in relation to the contraventions.
52 Furthermore, in these proceedings Mrs Sheffield and Homeopathy Plus gave an undertaking on 1 March 2013 that, until the final determination of the proceedings, the respondents would cease publishing and remove from the Website the Second Whooping Cough Article and the Government Article, and would not make any statements or representations in trade or commerce to the effect that relying solely on homeopathic treatments without vaccination is a safe and effective alternative to the Vaccine for the prevention and/or treatment of whooping cough, and that the Vaccine:
(1) is short-lived in protecting against whooping cough;
(2) is unreliable in protecting against whooping cough;
(3) is no longer effective in protecting against whooping cough;
(4) may not be the best solution for protecting against whooping cough;
(5) is of limited effect in protecting against whooping cough;
(6) is unreliable at best in protecting against whooping cough; and/or
(7) is largely ineffective in protecting against whooping cough.
4.4.5 Whether the respondents have previously engaged in similar conduct (s 224(2)(c))
53 The respondents have not previously been found by a Court to have engaged in similar conduct.
4.4.6 The size and financial position of Homeopathy Plus and the financial position and other personal circumstances of Mrs Sheffield
54 Mrs Sheffield was diagnosed with a serious medical condition requiring medical intervention early this year which may incapacitate her for some time and affect her capacity to earn an income for an unknown period. Her husband is a paraplegic with significant and multiple health problems and I infer is financially dependent on Mrs Sheffield. Mrs Sheffield is currently his primary carer.
55 Mrs Sheffield gave evidence that any personal financial liability, whether by way of a pecuniary penalty or costs, would be "financially ruinous" for her and have "significant consequences" on her family. She also gave evidence that she anticipated that any fine or award of costs against the company would lead to its ultimate winding up and liquidation.
56 Mrs Sheffield's evidence that the proceeding has involved significant financial costs for her is not challenged, nor that part way through the proceeding she was unable to continue to pay for her legal team who continued acting for her pro bono thereafter. While, as the ACCC point out, it was her election to defend the proceedings, no doubt the reality is that the decision to do so has adversely affected her financial situation. It may also be inferred from the serious medical conditions that afflict both Mrs Sheffield and her husband that they impact upon Mrs Sheffield's capacity to earn an income and that the costs of those medical conditions impose a financial burden. Mrs Sheffield, however, provided evidence of her financial position only by way of a brief and manifestly inadequate statement of personal assets and personal liabilities prepared by her which showed a personal net worth significantly in the red. The evidence of the financial position of Homeopathy Plus was equally inadequate with again a brief statement of business assets and liabilities prepared by Mrs Sheffield which again showed a business with no significant assets and significant liabilities when measured against those assets. No disclosure was made as to income received by Mrs Sheffield or Homeopathy Plus. No bank statements were provided or other documents created by independent third parties. No evidence was led from any past accountant or the current accountant recently engaged by Mrs Sheffield; nor, while the engagement of the new accountant was given as the reason for the inadequate financial disclosure, was any explanation given as to why she or he had been engaged only now. Mrs Sheffield's evidence as to difficulties in collating the material and recent engagement of a new accountant does not, in my view, adequately explain the complete failure to address the issue of income and alleged inability to pay any penalty in her case and a low penalty in the case of Homeopathy Plus.
57 Nonetheless, Mrs Sheffield gave evidence that she works five to six days a week in her practice as a homeopath, and leases one of the rooms in the Homeopathy Plus premises. It can also be inferred that income continues to be generated by sales from the online store. That income is apparently sufficient to employ her two adult children, together with two part-time employees, who draw a wage from the company. Moreover, Mrs Sheffield gave evidence that some of the proceeds received from the online shop have been donated to homeopathic and other charities, some of which receive regular monthly donations from the company. In addition, while Homeopathy Plus can be described as a small family company, it must not be overlooked that the newsletter had many thousands of subscribers and the Website had an unlimited audience.
58 It was accepted by the ACCC that the evidence was sufficient to establish that Mrs Sheffield and Homeopathy Plus were in difficult financial circumstances with limited capacity to pay a pecuniary penalty and that this must be taken into account in ensuring that the penalty is not oppressive. I agree. I also consider that I should have regard to the fact that Mr Sheffield is financially dependent on Mrs Sheffield and not in a position to earn an income through his own labours. However, in the circumstances, I cannot find that the imposition of any penalty on Mrs Sheffield would be financially ruinous. There is clearly income being earned by Mrs Sheffield and her company Homeopathy Plus which she has chosen not to disclose.
59 In this regard, the decision in Tax Practitioners Board v Li [2015] FCA 233 on which Mrs Sheffield relies is distinguishable. In that case, the Court held that Mr Li should not be required to pay any penalty for recklessly making false or misleading statements in tax returns lodged on behalf of various taxpayers contrary to the Tax Agent's Services Act 2009 (Cth). However, among other points of distinction, the evidence in that case "demonstrated" that the penalty sought would have a crushing impact on him and his wife and children who were financially dependent on him (at [98(2)]). Mr Li had also lost his livelihood and ability to work in his profession as he had lost his registration as a tax agent as a result of his actions (at [126]). Further, the offences came about as a consequence of Mr Li being deliberately and carefully targeted by the perpetrators of a sophisticated scam (at [98(7)]).
60 Furthermore, even if Homeopathy Plus were currently in liquidation, that would not of itself have been an immutable reason for not imposing a penalty on Homeopathy Plus: Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd (in liq) [2007] FCAFC 146; (2007) 161 FCR 513 (Dataline) at 519 [19]-[21] (the Court). For example, the Court may wish clearly and unambiguously to signify to companies or traders in a discrete industry that a penalty of a particular magnitude was appropriate and might be imposed in the future: Dataline at [20]. In any case, the question remains what is the appropriate penalty in all of the circumstances: Dataline at [21].
4.4.7 Senior management in the conduct and whether Homeopathy Plus' corporate culture was conducive to compliance with the ACL
61 The contravening conduct was the result of Mrs Sheffield's actions. There was no evidence regarding the compliance culture of Homeopathy Plus although that is not unexpected for a company of its type and size, as the applicant submits.
4.4.8 The need for general deterrence
62 The respondents contend that general deterrence need not weigh so heavily in the Court's mind in its assessment as to whether to impose a pecuniary penalty or as to the amount of any such penalty for the following reasons:
β’ the publicity this case has already received;
β’ the characteristics of the Homeopathy Plus! Advocacy business and the Sheffield family are sufficiently unique that it would not be fair or just in the circumstances of this case to use them any further to communicate a broader message to the market;
β’ to use the Sheffield family (with both parents suffering from significant health problems and facing financial ruin, possibly even if the Court makes no further monetary or costs orders against them) as a tool for general deterrence would be oppressive and crushing.
63 There was no evidence led as to the extent of publicity which the case had received although it was not in issue that the liability judgment had received some publicity and it may be accepted that this had some impact upon Mrs Sheffield and her family although no specific evidence again was led on this point.
64 Further, as the respondents also submit, the penalty must not be oppressive. I have referred already in particular to Mrs Sheffield's extenuating personal circumstances which are significant factors in mitigation.
65 As to the characteristics of the business of Homeopathy Plus, one of the main purposes of Homeopathy Plus was to advocate for homeopathy as was also the online shop. The First Whooping Cough Article was published in the "Treatment Room" of the Website which was intended in part to educate visitors. Nonetheless advertising also had a significant role in uploading the article, it was directed to the public at large, it was persuasive in tone, partial and not intended as a learned contribution to a scientific debate. The same features were present in the Second Whooping Cough Article and lead to the same conclusion. The Government Article similarly bore a trading and commercial character even though it was in part intended to advocate for a change in the government's approach to the epidemic. These matters point to the need to ensure that the penalty is not such as to be regarded by the respondents or others as an acceptable cost of doing business.
66 I also consider that particular emphasis should also be given to general deterrence as a factor where representations made in trade and commerce and held to be in breach of s 29 of the ACL relate to matters of medical science affecting the health and safety of individuals and of the community at large. The representations here, it must be emphasised, did not relate to an ideological debate. Submissions at trial and on penalty which endeavoured to characterise the representations in this way misapprehend the tenor of the representations, the case put against the respondents by the ACCC, and the findings in the liability judgment embodied in the declaratory relief granted. Rather, the offending representations conveyed the existence of a reasonable basis in medical science for stating that a vaccine for a serious and potentially fatal disease was ineffective despite the evidence emphatically establishing that that was false and conveyed that homeopathy was a safe alternative means of preventing whooping cough despite there being no reasonable basis in medical science for the representation.
4.4.9 The deliberateness of the respondents' conduct
67 As the respondents submit, I did not find that Mrs Sheffield intended to mislead or deceive by making the impugned representations regarding the Vaccine. Rather, I accept that Mrs Sheffield genuinely believed that protection from the Vaccine is short-lived and unreliable, and that this is a relevant matter to take into account in mitigation in Mrs Sheffield's case. However, this must be balanced against the dangerousness of her conduct. She is avowedly a passionate advocate of homeoprophylaxis. This passion led her to advocate against vaccination including relevantly in the course of promoting her online store, and explained why she was consciously or subconsciously selective in her use of material which formed part of the basis of her thinking in writing the Three Articles. Furthermore, Mrs Sheffield lacked any relevant expertise in vaccines, medicine and science and was in a rush to get the First and Second Whooping Cough Articles out. However, the subject matter of the Vaccine Representations and Homeopathy Alternative Reasonable Basis Representations is a serious matter, and the publication of false representations about their effectiveness has potentially very serious and dangerous consequences for those who may follow that advice and their families. These matters call for great care before representations are made to the general public about such matters where the representations imply, as here, that there is an adequate basis for the representations in medical science - care which was plainly lacking in Mrs Sheffield's conduct in preparing the Three Articles and publishing them on the Website for the online shop.
4.4.10 Specific deterrence
68 Leaving aside those submissions made for which no evidence was led and which were conceded by the ACCC, the respondents contend that specific deterrence need not weigh so heavily in the Court's mind in its assessment as to whether to fix a pecuniary penalty for a number of reasons:
β’ the decision and its included declarations stand akin to a 'conviction' of the Respondents;
β’ the Injunctions specifically deter the same conduct of the Respondents;
β¦
β’ the Court process to this point has been significantly draining and stressful on the Sheffield familyβ¦
β’ the Costs of defending this proceeding have been relatively high for the Respondentsβ¦
β’ if this was a criminal proceeding a very strong submission would be made that a person in Mrs Sheffield's position that suffer no further punishment than that already meted out (i.e. the published 'conviction' and the expense of defending the matter, previous 'good record' and personal financial and health problems).
69 It is wrong to say that the decision and declarations are akin to a conviction. The respondents have not been charged with any criminal offence. The proceedings are civil in character. The submission is misconceived. As to costs, while not necessarily irrelevant to the issue of financial hardship, they were nonetheless a potential consequence of the election to defend the litigation.
70 However, even allowing for the injunction and for the impact that the proceedings have had on Mrs Sheffield and her family, I consider that specific deterrence is a highly significant factor in this case.
71 First, it is evident from her affidavit that Mrs Sheffield continues to be a passionate advocate against the Vaccine and vaccination generally - advocacy which she has seen to pursue through the Three Articles in the context of, and relevantly for the purposes of, an online shop. This raises legitimate grounds for concern about whether her future conduct will comply with the ACL. The further evidence led by the ACCC on the penalty hearing reinforces those concerns, demonstrating that even after the liability judgment, Mrs Sheffield and Homeopathy Plus continue to advocate against vaccination and to promote homeopathy as an alternative with "an excellent safety record in treating and protecting against epidemic disease" (emphasis added) on the Website where the online shop is supported.
72 Secondly, Mrs Sheffield has shown no remorse for her conduct, a lack of comprehension of the gravity of the conduct found to contravene the ACL and indeed a lack of acceptance that she has done anything wrong. These matters are apparent from her evidence on penalty that she:
β¦acted in good faith on documented homeopathic practice and knowledge regarding homeoprophylaxisβ¦ Unfortunately this information is not acknowledged or accepted by the current medical orthodoxy and so I have to pay a price for that.
Throughout this entire dispute I have acted in conformity with the dictates of my conscience and the statements which the Court has deemed misleading were not calculated lies so as to achieve some personal financial benefit.
(Emphasis added.)
73 In this regard, the findings by this Court embodied in the declarations do not "deem" the representations to be misleading, but make a finding that they are misleading and contravene s 29(1) of the ACL on the basis of an extensive body of evidence. The above statements also show a continuing failure by Mrs Sheffield to appreciate that the representations made in the Three Articles conveyed that they had a reasonable basis in medical science. The submissions made on her behalf on penalty similarly continued to seek to mischaracterise the representations as relating to matters of ideology or belief, and not of science.
74 It is not appropriate to consider whether these later representations referred to at [72] would contravene the ACL and they are broader in nature than those considered in the liability judgment. However, the continued publication of such material on the Homeopathy Plus Website with the online store heightens the need, in my view, for specific deterrence to be a primary consideration in assessing an appropriate penalty for both respondents.
4.4.11 The parity principle
75 As Burchett and Kiefel JJ observed in NW Frozen Foods at 295:
A hallmark of justice is equality before the law, and, other things being equal, corporations guilty of similar contraventions should incur similar penaltiesβ¦ There should not be such an inequality as would suggest that the treatment meted out has not been even-handedβ¦
76 Conversely, as the Full Court of the Federal Court cautioned in Singtel Optus at 264 [60], "the court is not assisted by Optus's citation of penalties imposed in other cases, where the combination of circumstances were different from the present, as if that citation is apt to establish a "range" of penalties appropriate in this case."
77 The ACCC identified the two potentially relevant decisions.
78 First Breast Check concerned deliberately false, misleading and deceptive representations over a period of seven months that breast imaging using certain devices as opposed to a mammography could provide an adequate scientific basis for determining whether a consumer was at risk from breast cancer and the level of that risk. Breast Check was a small company through which the second respondent in those proceedings, its sole director and shareholder, operated his practice as a physiotherapist in Darwin. As here, his Honour accepted the risk to the relevant section of the public was that it had the potential to divert, and may have diverted, members of the class from using a medically recognised and more reliable means of breast imaging. However, as his Honour observed at [105] it was not a case where other more pervasive forms of advertising were used, such as internet advertising. The evidence did not there establish a wide circulation of the breast imaging pamphlet containing the representations (at [104]). His Honour considered in all the circumstances, including the seven-month period of the contravention involved and the relatively limited evidence going to the number of persons to whom publication was made and other factors, a pecuniary penalty in the sum of $75,000 was appropriate against the company having regard to the seriousness of the contravention and as against the individual respondent, $25,000.
79 Similar representations were made in Safe Breast Imaging. In that case, the respondent company, a small business owned and operated by the second respondent in those proceedings, made various representations found to be false, misleading and deceptive on its website, on YouTube and elsewhere on the internet, and in material distributed to the public and its customers over a period of approximately two years. The representations were that breast imaging using the MEM Device could provide an adequate scientific basis for assuring a customer that they do not have breast cancer, for assessing the risk of breast cancer, that it could be used as a substitute for mammography and that the service would be provided by a medical doctor. The second respondent, who was the controlling mind of the company, was held to be knowingly concerned in, or party to, the contraventions by the company. The service attracted many customers and the conduct had the potential to pose a grave risk of serious harm. The respondents saw a commercial advantage in their strategy even though it was based on their strong beliefs (at [56]). The contravention was deliberate with the second respondent knowing that the representations could not be supported, liability was contested and there were no expressions of regret or undertaking not to repeat the contraventions. In that case the corporate respondent was ordered to pay a penalty of $200,000 and the individual respondent, of $50,000.
80 These provide some limited assistance but ultimately all cases must be decided on their own facts. There were factors present in those cases which are not present here and vice versa.
4.4.12 The appropriate penalty
81 I have taken into account the matters in s 224(2) of the ACL and the other relevant factors set out above, including that the contraventions are extremely serious in light of the risk they pose to public health and the heightened importance generally in cases of this kind of general deterrence and here, also of specific deterrence. It is important to send a strong message that the kind of conduct undertaken in this case will attract a penalty which ensures that such contraventions are not regarded as merely an acceptable part of the price of doing business. Nor that a passionate belief is a matter that justifies conduct in trade and commerce that contravenes the ACL and creates serious risks to public health. These factors mean that I consider that a pecuniary penalty should be imposed upon both respondents.
82 In the case of Mrs Sheffield, I am entitled also to take into account her extenuating personal factors, including her health. Furthermore, notwithstanding the failure effectively to disclose her financial circumstances in support of her submissions, the ACCC accepted that Mrs Sheffield was in difficult financial circumstances. No doubt, her illness together with her husband's medical condition, will contribute to those difficulties. In the circumstances of this case, I consider that it would be crushing to impose on her a substantial pecuniary penalty although the penalty must still pay specific attention to general and specific deterrence. Having regard to all of these factors, I consider it is appropriate to order that a pecuniary penalty be imposed on Mrs Sheffield of $7,000 for the contravention by reason of the representations contained in the First Whooping Cough Article, $6,000 for the contravention by reason of the Vaccine Representation in the Government Article, and $10,000 for the contravention by reason of the representations in the Second Whooping Cough Article and the Homeopathy Alternative Reasonable Basis Representation in the Government Article in conjunction with the Second Whooping Cough Article. This gives a total penalty of $23,000 for all contraventions which in my view does not exceed what is proper for the entire contravening conduct.
83 I also consider it appropriate to order a more extended period in Mrs Sheffield's case for payment of the penalty and accordingly have allowed a 90 day period.
84 The position with respect to Homeopathy Plus is different. While it is a small family-run company, the Three Articles reached an unlimited and substantial audience. Furthermore, I can give little weight to the impact that any pecuniary penalty might have on its financial situation given the failure by Homeopathy Plus to provide any real disclosure of its financial circumstances, although in considering specific and general deterrence I do take into account that the impact of a small fine on a small company may be proportional to the impact of a large fine on a large company. While I have taken into account all of the factors to which I have referred, general deterrence is a primary consideration, as is specific deterrence in this case. I consider in the circumstances that it is appropriate to order that a pecuniary penalty be imposed on Homeopathy Plus of $35,000 for the contravention by reason of the impugned representations contained in the First Whooping Cough Article, $30,000 for the contravention by reason of the Vaccine Representation in the Government Article, and $50,000 for the contravention by reason of the impugned representations in the Second Whooping Cough Article and the Homeopathy Alternative Reasonable Basis Representation in the Government Article in conjunction with the Second Whooping Cough Article. This gives a total penalty of $115,000 for all contraventions which again in my view does not exceed what is proper for the entire contravening conduct
5. ORDER FOR RETENTION OF SEALED REASONS FOR JUDGMENT
85 The ACCC seeks an order that a copy of the sealed reasons for judgment be retained by the Court for the purposes of s 137H of the Competition and Consumer Act 2010 (Cth) (CCA). The order is sought so that any persons affected by the respondents' conduct who wish to take further action will be able to use the findings of fact in this proceeding as prima face evidence of those facts in subsequent proceedings: Jones v Sterling (1982) 63 FLR 216 at 221β222 (Davies J). The order is not opposed and I consider it is appropriate for it to be made.
6. COSTS
86 While the question of costs is a matter for the Court's discretion, the general rule is that a successful party is entitled to its costs: Ruddock v Vadarlis (No 2) [2001] FCA 1865; (2001) 115 FCR 229 at 234-235 [11] (Black CJ and French J); Scott v Secretary, Department of Social Security (No 2) [2000] FCA 1450 at [2] (Beaumont and French JJ). In Hughes v Western Australian Crick Association (Inc.) (1986) ATPR 40-748 at 48,136, Toohey J observed that the discretion must be exercised judicially and identified three principles as to the exercise of the discretion evident from the authorities:
1. Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order. Ritter v. Godfrey (1920) 2 K.B. 47.
2. Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed. Forster v. Farquhar (1893) 1 Q.B. 564.
3. A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party's costs of them. In this sense, "issue"' does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law. Cretazzo v. Lombardi (1975) 13 S.A.S.R. 4 at p. 12.
87 The ACCC was successful on all grounds and no conduct on its part is sought to be relied upon as a basis upon which it should be deprived of its costs.
88 The respondents, however, seek, in descending order of preference::
β’ that the parties bear their own Costs of this 'public interest' litigation on a novel legal question (i.e. the basis for representations in trade and commerce for statements about vaccines and homeopathy); or
β’ that the First Respondent pay the Applicant's costs; or
β’ that the First Respondent pay 95% of the Applicant's costs and the Second Respondent pay 5% of the Applicant's costs on a standard party β party basis.
89 As to the first issue, the public interest involved in this litigation is the public interest in enforcing the ACL and obtaining appropriate relief. The interests of the respondents in defending the litigation, however, is personal and it was open to them at any time to elect to admit the contraventions and avoid the cost and expense of a trial. With respect to the latter, it is of some relevance that the evidence of one of the experts called by the respondent, Dr Donohoe, on the effectiveness of the Vaccine was largely consistent with that given by the experts called by the ACCC. Yet the decision was still made by the respondents to defend even these aspects of the claim by the ACCC.
90 The respondents also point to the fact that an award of costs is likely to be higher than the pecuniary penalties imposed. However, this submission ignores the fact that, an order for costs is compensatory only and not punitive, and further that even impecuniosity is not regarded as a sufficient reason for departing from the general rule: SZAFV v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCA 1457 at [15] (Hely J).
91 In support of their submission that Homeopathy Plus should bear the costs exclusively or predominantly, the respondents rely upon orders made in Australian Competition and Consumer Commission v ACN 135 183 372 (in liquidation) (formerly known as Energy Watch Pty Ltd ) [2012] FCA 749 in which the Court made orders awarding 90% of the costs against the company and 10% against the individual notwithstanding his contravening conduct and that he was described as "the public face of Energy Watch" (at [23]). However, that order was made by consent and does not therefore assist here. I afforded the respondents the opportunity to draw my attention after the hearing on penalty to any further authority which might support the respondents' second and third alternative positions, and none was forthcoming.
92 In the ordinary course an order for costs would be joint and several: Trade Practices Commission v Nicholas Enterprises Pty Ltd (1979) 28 ALR 201 at 210 (Fisher J). As Selway J explained in Dowdell v Knispel Fruit Juices Pty Ltd [2003] FCA 1276 at [20], "[o]ne of the reasons for this practice is for the greater protection of the successful party in the event that one or other of the respondents is unable to meet its share of the obligation to pay costs". Nonetheless, as his Honour also said in that case, it is open to the court in the exercise of discretion to decline to follow the usual practice in this regard. The difficulty is that this is not a case where it is possible to differentiate between the respondents in their conduct of their defence to the proceedings. This is particularly so given that Mrs Sheffield is a sole director and was the directing mind of the company. The fact that the Three Articles did not disclose Mrs Sheffield as the author is irrelevant, contrary to the respondents' submissions.
93 For these reasons I consider that the ACCC is entitled to its costs for which the respondents should be jointly and severally liable.
7. CONCLUSIONS
94 For the reasons set out above, I consider that it is appropriate to grant injunctive relief in the terms sought by the ACCC, to impose pecuniary penalties on Homeopathy Plus cumulatively totalling $115,000 payable to the Commonwealth in 30 days, and to impose pecuniary penalties on Mrs Sheffield totalling $23,000 payable to the Commonwealth in 90 days. I also consider that the respondents should be jointly and severally liable for the ACCC's costs.
I certify that the preceding ninety-four (94) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perry.
Associate:
Dated: 13 October 2015
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McLean v Adelaide Bank Limited [2009] FCA 1004
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FEDERAL COURT OF AUSTRALIA
McLean v Adelaide Bank Limited [2009] FCA 1004
SHONA DIMITY MCLEAN v ADELAIDE BANK LIMITED, WESTPAC BANKING CORPORATION, RAMS WESTPAC BANKING CORPORATION, ST GEORGE WESTPAC BANKING CORPORATION and PERMANENT CUSTODIANS
WAD 147 of 2009
SIOPIS J
27 AUGUST 2009
PERTH
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
general division WAD 147 of 2009
BETWEEN: SHONA DIMITY MCLEAN
Applicant
AND: ADELAIDE BANK LIMITED
First Respondent
WESTPAC BANKING CORPORATION
Second Respondent
RAMS WESTPAC BANKING CORPORATION
Third Respondent
ST GEORGE WESTPAC BANKING CORPORATION
Fourth Respondent
PERMANENT CUSTODIANS
Fifth Respondent
JUDGE: SIOPIS J
DATE OF ORDER: 27 AUGUST 2009
WHERE MADE: PERTH
THE COURT ORDERS THAT:
1. The applicant's claim for interlocutory relief is dismissed.
2. Costs are reserved.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
general division WAD 147 of 2009
BETWEEN: SHONA DIMITY MCLEAN
Applicant
AND: ADELAIDE BANK LIMITED
First Respondent
WESTPAC BANKING CORPORATION
Second Respondent
RAMS WESTPAC BANKING CORPORATION
Third Respondent
ST GEORGE WESTPAC BANKING CORPORATION
Fourth Respondent
PERMANENT CUSTODIANS
Fifth Respondent
JUDGE: SIOPIS J
DATE: 27 AUGUST 2009
PLACE: PERTH
REASONS FOR JUDGMENT
1 This is an application for an urgent injunction brought by the applicant, Ms Shona Dimity McLean, a property investor, to enjoin the sale of a property at 18 Ewen Street, Scarborough, which is due to take place at 1 pm on 29 August 2009. The respondent to this interlocutory application is the Adelaide Bank Limited. Ms McLean is the owner of the property. The Adelaide Bank has a mortgage over the property and has given instructions to a real estate agent to sell the property pursuant to its power of sale under the mortgage.
2 The originating application dated 25 August 2008, which has been filed by Ms McLean has only, at this stage, been served on the first respondent, the Adelaide Bank. I take it, although I do not have any evidence to that effect, that the other four respondents to the originating application have mortgages over one or more of the other properties identified by Ms McLean as being owned by her, and that these four respondents are also threatening to exercise their rights as mortgagees (but not imminently) in respect of the properties owned by Ms McLean.
3 The grounds of Ms McLean's claims against the five respondents are set out in her originating application. They are the following:
1. Since 2001, the conduct of banking in Australia has been regulated by the Australian Securities and Exchange Commission Act 2001, (CTH).
2. Although a Mortgage contains an attornment clause, and the Mortgage purports to grant the right to take possession of land and sell it quickly, this is State legislation, and where it is in conflict with the provisions of a Federal Act to a State Act must give way to that relevant Act.
3. An Equity of Redemption was accepted as existing in the case Barns V the Queensland National Bank (1906) 3 CLR 925, and it is beyond the competence after 1900 of a State Government to legislate to abolish that equity given the nature of a federated State.
4. The Provisions of 12CA (Appendix B1) and 12CB (Appendix B2) of the Australian Securities and Exchange Commission Act 2001, (CTH) make unconscionable conduct by a financial corporation illegal, and to use a State Act to defeat an equity owned by the applicant in Commonwealth property, owned in root or radical title by The Commonwealth Sovereign, is unconscionable conduct.
5. This Honourable Court has power under S 12GD Australian Securities and Exchange Commission Act 2001, (Cth) to issue an injunction.
4 Ms McLean seeks in the originating application an order restraining the named respondents from taking possession and selling the mortgaged properties for 12 months, "but securing the proceeds of any sale effected within that time, to pay the secured amounts to the Mortgagee".
5 The interlocutory relief sought in this application is for an interlocutory injunction restraining the Adelaide Bank "from taking possession, until 12 months have elapsed, and then only if they have not been paid in full or other arrangements made".
6 When the matter came before me yesterday for the first hearing, I adjourned the matter to give Ms McLean an opportunity to put evidence before me in support of her application. I also asked Ms McLean to notify the Adelaide Bank of the adjourned hearing.
7 Ms McLean has today filed a document headed "statement of facts". The statement of facts was witnessed by a justice of the peace. The statement of facts states that Ms McLean has assets which exceed her liabilities by $1.2 million. She also says that she had a disagreement with the Stirling City Council that prevented her from conducting her business without interference. As a result, her name entered the list of defaulters maintained by the credit bureau. As a direct result of the disagreement, Ms McLean says that her cashβflow regime was disrupted and she fell behind in repayments.
8 Ms McLean then says that without personal service upon her of any court process whatsoever, the Adelaide Bank proceeded to appoint an agent and "wants to proceed and sell the properties the subject of a Mortgage to them, onβ¦29 August 2009". This, says Ms McLean, will cause her great distress unless at least $1.045 million is realised at the auction. Ms McLean says that she has good reason to believe that within a reasonable time she can achieve that price. Ms McLean says that her repayments are in arrears and that she needs time to reorganise her portfolio of properties.
9 Ms McLean goes on to say that the rights of the Adelaide Bank were being "exercised subject to some State law of which I have had no notice", and that she acted with due diligence at the first opportunity to do so upon becoming aware of the Adelaide Bank's intention to sell her property, without further reference to her or an opportunity for her to set a reserve price. This, says Ms McLean, is unconscionable conduct under s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act).
10 Aside from a letter to the Adelaide Bank and advertisements for the sale of two properties, there was no other documentary evidence which was provided by Ms McLean in support of her application. Thus, I do not have a copy of the mortgage in front of me.
11 At the hearing today before me, Mr Diamond appeared for the Adelaide Bank.
12 Mr Diamond gave viva voce evidence from the witness box. He deposed that he is a solicitor who was instructed by the Adelaide Bank to issue a default notice under the mortgage in respect of each of the Scarborough property and another property. He said that he had drafted default notices under the Transfer of Land Act 1893 (WA) (the TLA) and sent them by registered mail to Mr Mason, Ms McLean's agent, in accordance with a written authority executed by Ms McLean appointing Mr Mason her agent. Mr Diamond said that he had examined the written authority from Ms McLean appointing Mr Mason the agent, before sending the notices of default. Mr Diamond went on to say that there had been no payments made in response to the notices of default. Ms McLean agreed in evidence that she had appointed an agent before the notices of default were issued by Mr Diamond on behalf the Adelaide Bank.
13 Ms McLean also gave viva voce evidence. However, there was no affidavit before the Court from Ms McLean's agent, Mr Mason.
14 Mr Diamond's evidence is quite consistent with the evidence of Ms McLean that she did not receive any notice, but that is because she had appointed an agent for that purpose.
15 The principles to be applied are those which are set out in the following observations of Gummow and Hayne JJ in Australian Broadcasting Commission v O'Neill (2006) 227 CLR 57 at 81-82, at [65]:
The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd. This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications the court addresses itself to two main inquiries and continued:
The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to reliefβ¦The second inquiry isβ¦whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted.
By using the phrase "prima facie case", their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. That this was the sense in which the Court was referring to the notion of a prima facie case is apparent from an observation to that effect made by Kitto J in the course of argument. With reference to the first inquiry, the Court continued, in a statement of central importance for this appeal:
How strong the probability needs to be depends, no doubt, upon the nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order he seeks.
(Footnotes omitted.)
16 It is now necessary to consider Ms McLean's prospects of succeeding at trial in respect of the three causes of action which I have discerned from the submissions and statements which Ms McLean has made to me. I have sought to articulate these causes of action as best I can.
17 The first cause of action which I understand Ms McLean to raise, is founded on a constitutional argument. I construe Ms McLean to contend that the powers which are given to mortgagees under the TLA and the Property Law Act 1969 (WA) are inconsistent with the provisions of s 12CA and s 12CB of the ASICAct. The consequence, as I understand Ms McLean's argument, is that by reason of s 109 of the Constitution, the State legislation, pursuant to which the Adelaide Bank has acted, is invalid, with further consequence that it has no entitlement to sell the property.
18 In my view, Ms McLean's contention is weak. The provisions of the State Acts do not engage at all with the unconscionability provisions of the ASIC Act. Each State Act, if valid, would not alter, impair or detract from the operation of the Commonwealth Act because it is quite possible for the provisions of the Commonwealth Act to have effect in circumstances where a mortgagee exercises the various powers provided for in the State Acts, when the circumstances warrant it.
19 It follows that the prospects of success of Ms McLean's claim on the constitutional contention are not sufficiently strong to warrant the grant of the interlocutory injunction sought.
20 The second cause of action appears to be founded on the contention that the Adelaide Bank has acted unconscionably in contravention of the ASIC Act in taking possession of the property and purporting to exercise its power of sale.
21 In oral evidence, Ms McLean says that she had tried to make some alternative arrangements to sell the property in order to discharge the debt due to the Adelaide Bank but was unable to do so.
22 Further, Ms McLean says that she would suffer distress if the Adelaide Bank sold the property now rather than in 12 months time, because she believed she could obtain a better price for the property within that period. It was accepted by Ms McLean that the mortgage has been in default for some time. In my view, the evidence does not make out even an arguable case that the Adelaide Bank in seeking to exercise its rights under its mortgage, has acted, or threatens to act, unconscionably.
23 On that basis, I find that there is an insufficiently strong case to support the giving of any injunctive relief on the basis of this cause of action.
24 I note that during argument Mr Diamond observed that the provisions of the ASIC Act referred to by Ms McLean, might not actually even apply to the Adelaide Bank in the circumstances of this case. However, in light of my findings I do not need to make findings on that contention.
25 The last cause of action is founded on Ms McLean's contention that the Adelaide Bank did not give Ms McLean notice or obtain an order for possession. As I have said, Mr Diamond who was not crossβexamined by Ms McLean, deposed that a default notice under the TLA was mailed to Ms McLean's agent. Ms McLean's evidence that she did not receive the default notice is consistent with the evidence of Mr Diamond, in that she accepts that she appointed the agent before the notice of default was issued. There was, as I have also said, no evidence from Mr Mason, Ms McLean's agent.
26 Ms McLean has failed to put any evidence before me which supports a contention that the Adelaide Bank has failed to comply with the terms of the mortgage or the statutory provisions, or otherwise acted unlawfully, in seeking to exercise its power of sale. Such evidence as there is, is from Mr Diamond, and is to the contrary effect.
27 In those circumstances, Ms McLean's contention in support of the third cause of action does not, in my view, raise a sufficiently strong case to justify the granting of the interlocutory injunction sought.
28 In light of my findings that Ms McLean has not made out a case which has sufficiently strong prospects of succeeding at trial to justify the making of the interlocutory injunction sought, there is no need to consider the balance of convenience.
29 However, the balance of convenience would, in any event, not have favoured Ms McLean.
30 First, the undertaking for damages given by Ms McLean is not in a proper form and does not undertake to compensate the Adelaide Bank and any party for losses which might be incurred if the Adelaide Bank was enjoined from selling the property, and Ms McLean was to lose at trial. Further, it is accepted that Ms McLean is in default on a number of mortgages and, therefore, there is a serious question as to whether she would be able to meet an undertaking for damages if she was to prevent the sale from proceeding and an aggrieved party was to claim on the undertaking, if she was to lose at trial.
31 Secondly, the property is an investment property and is vacant land. Ms McLean would be able to recover compensation if she was able to establish that the property was sold unlawfully by the Adelaide Bank and she has thereby suffered a loss. I note, however, that Ms McLean would need to give consideration to amending her application to formulate her claims with greater precision.
32 For those reasons, I dismiss Ms McLean's application for interlocutory relief.
I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.
Associate:
Dated: 3 September 2009
Counsel for the Applicant: The Applicant appeared in person.
Counsel for the First Respondent: Mr M Diamond
Solicitor for the First Respondent: CWS Lawyers
Date of Hearing: 27 August 2009
Date of Judgment: 27 August 2009
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Weeks v Commissioner of Taxation [2012] FCA 342
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FEDERAL COURT OF AUSTRALIA
Weeks v Commissioner of Taxation [2012] FCA 342
Citation: Weeks v Commissioner of Taxation [2012] FCA 342
Appeal from: The Taxpayer and Commissioner of Taxation [2011] AATA 499
Parties: CHERYL WEEKS v COMMISSIONER OF TAXATION
File number: QUD 210 of 2011
Judge: REEVES J
Date of judgment: 4 April 2012
Catchwords: TAXATION β whether a termination payment was a 'genuine redundancy payment' per s 83-175 Income Tax Assessment Act 1997 (Cth) β distinction between when redundancy of position and employee no longer being utilised in a position
ADMINISTRATIVE LAW β objection to private ruling of Australian Taxation Office β merits review by Administrative Appeals Tribunal β appeal to Federal Court of Australia per s 44(1) Administrative Appeals Tribunal Act 1975 (Cth)
ADMINISTRATIVE LAW β nature of an appeal under s 44(1) Administrative Appeals Tribunal Act 1975 (Cth) β need to identify a question of law β consideration of what constitutes a question of law β question of denial of procedural fairness before the Tribunal can constitute a question of law β no relevant question of law if issue not raised before the Tribunal
PRACTICE AND PROCEDURE β appeal from Administrative Appeals Tribunal β notice of appeal to state precise question or questions of law per Rule 33.12(2)(b) of Federal Court Rules 2011 β failure to identify a question of law β self represented litigant β construing questions of law β deviation from strict requirement to state question of law with precision
Legislation: Administrative Appeals Tribunal Act 1975 (Cth)
Income Tax Assessment Act 1997 (Cth)
Public Service Act 1999 (Cth)
Federal Court Rules 2011
Cases cited: Birdseye v Australian Securities and Investments Commission (2003) 76 ALD 321; [2003] FCAFC 232
Bishop v Secretary, Department of Education, Employment and Workplace Relations [2008] FCA 1118
Clements v Independent Indigenous Advisory Committee [2003] FCAFC 143
Comcare v Etheridge (2006) 149 FCR 522; [2006] FCAFC 27
Commissioner of Taxation v Glennan (1999) 90 FCR 538; [1999] FCA 297
Dibb v Commissioner of Taxation (2004) 136 FCR 388; [2004] FCAFC 126
Hartnett v Migration Agents Registration Authority [2004] FCA 50
Lambe v Director-General of Social Services (1981) 4 ALD 362
Minister for Immigration and Citizenship v SZMDS (2010) 240 CLR 611; [2010] HCA 16
The Queen v The Industrial Commission of South Australia; Ex parte Adelaide Milk Supply Co-operative Limited (1977) 16 SASR 6
SBBF v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCAFC 358
SBBS v Minister for Immigration and Multicultural and Indigenous Affairs (2002) 194 ALR 749; [2002] FCAFC 361
TNT Skypak International (Aust) Pty Ltd v Federal Commissioner of Taxation (1988) 82 ALR 175
Date of hearing: 2 February 2012
Place: Brisbane
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 32
Counsel for the Appellant: The Appellant appeared in person
Counsel for the Respondent: Mr Brian Cronin
Solicitor for the Respondent: Australian Government Solicitor
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION QUD 210 of 2011
APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL
BETWEEN: CHERYL WEEKS
Appellant
AND: COMMISSIONER OF TAXATION
Respondent
JUDGE: REEVES J
DATE OF ORDER: 4 April 2012
WHERE MADE: BRISBANE
THE COURT ORDERS THAT:
1. The appeal be dismissed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION QUD 210 of 2011
APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL
BETWEEN: CHERYL WEEKS
Appellant
AND: COMMISSIONER OF TAXATION
Respondent
JUDGE: REEVES J
DATE: 4 April 2012
PLACE: BRISBANE
REASONS FOR JUDGMENT
INTRODUCTION
1 Ms Weeks was, until relatively recently, an Executive Level 2.1 (EL2.1) employee working in the Australian Taxation Office (ATO). In March 2010, following negotiations between Ms Weeks and a senior officer of the ATO, she was offered a redundancy. That offer was made under cl 97 of the ATO (Executive Level 2) Agency Agreement 2009 (Agency Agreement) on the ground that she could no longer be effectively utilised in the ATO.
2 Ms Weeks accepted that offer and her employment was terminated on the grounds that she was "excess to the requirements of" the ATO under s 29(3)(a) of the Public Service Act 1999 (Cth).
3 Following the termination of her employment, Ms Weeks received a termination payment. Upon receiving that payment, she discovered that the ATO, as her employer, had deducted taxation from the payment at the rate of 16.5% on the basis that it was an Employment Termination Payment. The monetary amount of the deduction was $7,825. This deduction was later reflected in an income tax assessment the Commissioner of Taxation, the respondent, issued to Ms Weeks for the 2009/2010 financial year.
4 Ms Weeks considered that her termination payment was a "genuine redundancy payment" under s 83-175 of the Income Tax Assessment Act 1997 (Cth) (ITA Act) and, as such, was tax free. Based on that view, Ms Weeks sought a private ruling to that effect from the Commissioner. When that ruling was not to her satisfaction, she lodged an objection against it with the Commissioner. Since that objection had not been determined by the time her income tax assessment was issued for the 2009/2010 financial year, it was agreed that her objection would stand as an objection against both the private ruling and the 2009/2010 assessment. Ms Weeks' objection was subsequently unsuccessful. She then sought a merits review of that decision in the Administrative Appeals Tribunal. That was also unsuccessful. Now Ms Weeks has brought this appeal against the decision of the Administrative Appeals Tribunal.
MS WEEKS' EMPLOYMENT HISTORY
5 In his decision, the Tribunal Member recounted the history of Ms Weeks' employment with the ATO in some detail. A brief summary of that history will suffice for the purposes of this appeal.
6 Ms Weeks began her employment with the ATO in 1999. She has legal qualifications and experience and she was well-equipped to carry out a number of important roles including the implementation of the GST. She was initially employed in Canberra, but in 2005 she transferred her employment to the Brisbane office. There she took charge of litigation services because of her strong legal background. The Tribunal Member recorded (at [5]) that:
The taxpayer was obviously good at her job. She received a positive performance appraisal from her national manager in the mid-year review in March 2009 and in the annual review on 29 August 2009. She had also been asked to act as national director β an EL2.2 position β from late April 2009 while the national director undertook other duties.
7 Her difficulties began while she was acting as a national director in an EL2.2 position. It is unnecessary to essay those difficulties for the purposes of this appeal. It will suffice to say that they arose out of her relationship with other employees of the ATO in Adelaide and Brisbane. In his reasons for decision, the Tribunal Member recorded that those difficulties led to a situation where: "By mid-2009, the taxpayer said she felt under pressure to resign. She said she thought her superiors wanted her to leave." In early July 2009, Ms Weeks took recreation leave followed by a period of long service leave. She then took a period of leave without pay which eventually extended until March 2010. During this period, she came to the conclusion that she had become redundant at work. As a result, she consulted the terms of the Agency Agreement and took particular note of cl 97 thereof, which relates to EL2 officers "whose services can no longer be effectively used in their current job because of changes in technology or work methods or changes in the nature, extent or organisation of the ATO".
8 As a result, in October 2009 she sent an email to one of the national directors of the ATO in which she raised the possibility of her obtaining a voluntary redundancy. The national director subsequently responded to the effect that the ATO did not agree that hers was a voluntary redundancy situation. Ms Weeks then filed a Notice of Dispute in relation to that decision. Eventually, the responsible Assistant Commissioner decided to revisit the question of a voluntary redundancy and agreed to put forward a business case "seeking to justify a voluntary redundancy under clause 97 of the Agency Agreement". That led to the Assistant Commissioner forwarding a letter, dated 11 March 2010, to Ms Weeks containing a formal offer of redundancy. As the Tribunal Member recorded (at [21]):
The letter reiterated that "your services cannot effectively be utilised by the ATO in your current position and that alternative employment for you within the ATO is not available" and proceeded to make an offer of redundancy in accordance with the provisions of Clause 97 of the agency agreement.
9 Then the Tribunal Member recorded the final step in the process as follows (at [22]):
The final step in the process can be found in exhibit one at p 18. It is another letter from the assistant commissioner to the taxpayer. It says:
I,...delegate of the Commissioner of Taxation:
(1) being satisfied that you are, within the meaning of Clause 97 of the ATO (Executive Level 2) Agreement 2009, an employee whose services can no longer be effectively utilised;
(2) having fully considered all possible options for redeployment or retraining that could allow you to be retained in gainful employment and whether it is in the interests of the efficient administration of the Office to assign new duties to you under s 25 of the Public Service Act 1999; and
(3) having received your acceptance of an offer of voluntary redundancy;
Given notice to you, ... EL2.1, that your employment as an APS employee in the ATO is terminated on the grounds that you are excess to the requirements of the ATO (s 29(3)(a) of the Public Service Act 1999).
(Emphasis in original)
THE TRIBUNAL DECISION
10 In the first paragraph of the Tribunal's reasons for decision, the Tribunal Member set out the question he was asked to consider as follows:
I have been asked to decide whether [Ms Weeks' termination] payment was a genuine redundancy payment for the purposes of s 83-175 of the Income Tax Assessment Act 1997 β¦ The question is important because genuine redundancy payments within the meaning of that section are taxed more favourably than other payments that might be made to a person when they terminate their employment.
(Emphasis in original)
11 The Tribunal Member then recounted Ms Weeks' employment history with the ATO (summarised above). Having done that, he turned to consider "the law", under that heading. To begin that exercise, the Tribunal Member referred to the provisions of s 83-175(1) of the ITA Act and noted that a "genuine redundancy payment" within the meaning of that provision was "tax-free in the hands of the (former) employee". The Tribunal Member then stated that he was "satisfied the taxpayer was dismissed from employment", but identified the critical question as: "whether she was genuinely redundant". The Tribunal Member noted that the letter from the Assistant Commissioner (see at [9] above) appeared to put the question beyond doubt because: "The correspondence expressly referred to a 'voluntary redundancy' on the basis that the taxpayer's services could no longer be utilised." However, the Tribunal Member then turned to consider a submission made by the Commissioner about the effect of cl 97 of the Agency Agreement. The Tribunal Member noted a distinction contained in cl 97 (particularly cl 97.2) that was reflected in various authorities on the issue, including The Queen v The Industrial Commission of South Australia; Ex parte Adelaide Milk Supply Co-operative Limited (1977) 16 SASR 6 and Dibb v Commissioner of Taxation (2004) 136 FCR 388; [2004] FCAFC 126 at [33]β[44]. The Tribunal Member observed (at [29]) that those authorities:
β¦ make it clear that a redundancy occurs where an employer no longer requires that a job be done by anyone. That situation β where a job effectively disappears β must be distinguished from the situation in which the employer no longer wants a job done by the (former) employee in question.
12 The Tribunal Member then came to his ultimate dispositive conclusion on Ms Weeks' application as follows (at [30]):
The job in this case has not disappeared, even if the position number had changed. A range of functions in the area still had to be performed by someone at the EL2.1 level. It follows the employee's position is not redundant, even if the particular employee is no longer able to be utilised in that role. Given my findings of fact, it seems to me that is the end of the matter. The objection decision must be affirmed.
(Emphasis in original)
RELEVANT LEGISLATIVE PROVISIONS
13 It can be seen from the Tribunal's decision that the critical legislative provision in this appeal is contained in s 83-175 of the ITA Act. That section follows s 83-170, which sets out the tax-free treatment of genuine redundancy payments and early retirement scheme payments under the ITA Act. While it is unnecessary for present purposes to set out that section, it is appropriate to set out s 83-175(1). It is as follows:
A genuine redundancy payment is so much of a payment received by an employee who is dismissed from employment because the employee's position is genuinely redundant as exceeds the amount that could reasonably be expected to be received by the employee in consequence of the voluntary termination of his or her employment at the time of the dismissal.
(Emphasis in original)
14 It is also helpful to set out the provisions of s 29(3)(a) of the Public Service Act 1999 (Cth) and, while it is not strictly legislation, the relevant parts of cl 97 of the Agency Agreement. They are as follows:
(3) For an ongoing APS employee, the following are the only grounds for termination:
(a) the employee is excess to the requirements of the Agency;
And:
97.1 This clause only applies to ongoing EL2 employees who are no longer on probation.
An EL2 employee whose services can no longer be effectively used in their current job because of changes in technology or work methods or changes in the nature, extent or organisation of the ATO will be given support in considering career alternatives or will be able to leave the ATO with dignity and respect for the contribution they have made in the past.
97.2 These procedures are only to be used where an individual EL2 employee's job is still required and the EL2 employee will be replaced subsequent to action under this clause. Where the actual job is no longer required, the arrangements under clause 98 must be used.
A QUESTION OF LAW IS THE SUBJECT MATTER OF THE APPEAL
15 Under s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act), an appeal lies "to the Federal Court of Australia, on a question of law, from any decision of the Tribunal in that proceeding". Rule 33.12(2)(b) of the Federal Court Rules 2011 requires the notice of appeal to state: "the precise question or questions of law to be raised on the appeal". The addition of the word "precise" to this new Rule is obviously intended to reflect a point that has been emphasised in the authorities, that is, that the question of law is of critical importance in appeals under s 44(1) of the AAT Act. Indeed, the existence of a question of law is the subject matter of the appeal itself: TNT Skypak International (Aust) Pty Ltd v Federal Commissioner of Taxation (1988) 82 ALR 175 at 178 per Gummow J, Birdseye v Australian Securities and Investments Commission (2003) 76 ALD 321; [2003] FCAFC 232 (Birdseye) at [13] and Comcare v Etheridge (2006) 149 FCR 522; [2006] FCAFC 27 at [13]β[14].
MS WEEKS' QUESTIONS OF LAW
16 The history of Ms Weeks' matter set out above records that she has legal qualifications and experience. This may explain why she acted for herself before the Tribunal and at the hearing of this appeal. However, despite this legal background, it became apparent in oral submissions that Ms Weeks did not appear to be aware of the critical importance of identifying a question of law for the purposes of an appeal under s 44 of the AAT Act. This lack of awareness appears to have adversely affected the drafting of the questions of law in Ms Weeks' notice of appeal.
17 The four questions of law set out in her supplementary notice of appeal are as follows:
1. Whether a payment made by a Statutory Agency to an ongoing Australian Public Service (APS) officer, in relation to the termination of that officer's employment under paragraph 29(3)(a) of the Public Service Act 1999 on the grounds that the officer is excess to the requirements of the Agency, is an Employment Termination Payment under section 83-175 of the ITAA 1997.
2. Whether clause 97.2 of the ATO (Executive Level 2) Agreement 2009 (Agency Agreement) is invalid because it is inconsistent with clause 97.1 and is beyond the power of the Public Service Act.
3. Whether a redundancy payment, made to an ongoing APS officer in relation to the termination of that officer's employment following action under clause 97.1 of the Agency Agreement on the grounds that the services of the officer can no longer be effectively utilised by the ATO, is an Employment Termination Payment under section 83-175 of the ITAA 1997.
4. Whether a statutory agency, which has terminated the employment of an ongoing APS officer under paragraph 29(3)(a) of the Public Service Act on the grounds that the officer was excess to the requirements of the Agency, is authorised to make a payment to that officer out of the Consolidated Revenue Fund in relation to that termination, in circumstances where the statutory agency considers that the officer was not genuinely redundant.
(Emphasis in original)
18 The grounds relied upon in the supplementary notice of appeal are as follows:
1. The Tribunal erred in law in determining that the redundancy payment made to the applicant was not a "genuine redundancy payment".
2. The Tribunal erred in law in that it failed in its duty of procedural fairness by demonstrating bias in favour of the respondent in that it:
a. failed to consider the applicant's primary submissions that the proper approach to determining how section 83-175 of ITAA applies in the circumstances requires consideration of the relevant provisions of the Public Service Act;
b. omitted mention of the terms of the key relevant document, being the respondent's business case for making the applicant redundant, in which the respondent made unfavourable allegations in relation to the applicant despite these matters never having been raised with the applicant (as required by the Agency Agreement), and which were not relevant to the grounds for the proposed redundancy;
c. did not take into account the failure of the respondent, prior to the termination of the applicant's employment, to convene a mandatory meeting following the applicant's formal application under the dispute resolution clause of the Agency Agreement, thereby denying the applicant the opportunity to formally raise her employment concerns;
d. found that the applicant's application under the dispute resolution clause of the Agency Agreement had been 'dealt with in a separate process' when there was undisputed evidence that it had never been dealt with.
e. gratuitously referred in its findings to comments made orally by one of the respondent's witnesses casting doubt on the quality of the applicant's work performance.
3. The Tribunal erred in law by going behind the statutory notice in the Public Service Gazette of the termination of the applicant's employment on the grounds that the applicant was 'excess to the requirements of the Agency'.
4. The Tribunal erred in law in finding that the terms of clause 97.2 of the Agency Agreement were determinative of whether section 83-175 of ITAA 1997 applied to the termination payment.
5. The finding of the Tribunal, that the applicant was 'genuinely welcome to return to her role or something that closely approximated it', was so unreasonable that no reasonable Tribunal could have arrived at it because it amounted to a finding that the applicant was not redundant.
GENERAL PRINCIPLES
19 Before turning to consider the difficulties involved for Ms Weeks' appeal in these four questions of law, it is appropriate to identify with more precision what constitutes a question of law for the purposes of s 44 of the AAT Act. In Hartnett v Migration Agents Registration Authority [2004] FCA 50, Marshall J set out a helpful summary of the general principles on that issue (at [50]). For present purposes, the general principles as identified in that summary, together with some of the authorities referred to, are as follows:
(a) the question of law must be stated with precision as a true question of law: Birdseye at [18];
(b) this requirement is applied strictly: Lambe v Director-General of Social Services (1981) 4 ALD 362 at 364 and Bishop v Secretary, Department of Education, Employment and Workplace Relations [2008] FCA 1118 at [5];
(c) one should expect to find the links between the question of law, the circumstances of the particular case and the orders sought on the appeal in the specification of the grounds relied upon in support of the orders sought: Birdseye at [18];
(d) a question whether the AAT denied procedural fairness can constitute a question of law: Clements v Independent Indigenous Advisory Committee [2003] FCAFC 143 at [8].
NO QUESTION OF LAW ARISES IF THE ISSUE WAS NOT RAISED BEFORE THE TRIBUNAL
20 In addition to these general principles, it is of particular importance in this case to note the Full Court decision in Commissioner of Taxation v Glennan (1999) 90 FCR 538; [1999] FCA 297 at [82]. In that case, the Court held that: "as a general rule, there is no error of law if the AAT fails to address issues of fact and law not the subject of argument by the taxpayer". In other words, as the Court went on to observe in the next paragraph (at [83]), there will generally be no error of law such as to constitute a question of law for the purposes of s 44 of the AAT Act in relation to an issue that was not raised for consideration by the Tribunal and, therefore, was not the subject of any determination by the Tribunal.
21 This point applies with particular force in relation to two of the four questions of law set out in Ms Weeks' notice of appeal. That is so because Ms Weeks did not raise the issues set out in her second and fourth questions of law before the Tribunal. Those questions may be summarised as:
(a) Second question of law: the validity of cl 97.2 of the Agency Agreement because of its alleged inconsistency with cl 97.1 and it being beyond the power of the Public Service Act 1999;
(b) Fourth question of law: whether a payment can legally be made out of Consolidated Revenue for a redundancy under s 29(3)(a) of the Public Service Act 1999 where the statutory agency does not consider the officer was genuinely redundant.
22 Since Ms Weeks did not raise either of these issues before the Tribunal, neither of them was considered by it and, consequently, no opportunity arose for it to commit an error of law in relation to either of them, such that Ms Weeks could pursue an appeal under s 44 of the AAT Act in relation to it.
23 In any event, even if these two issues had been raised before the Tribunal such that an error allegedly made by the Tribunal in relation to them could be properly stated as questions of law in this appeal, in my view they are both misconceived. Clause 97.1 of the Agency Agreement provides for a process whereby an EL2 employee of the ATO can be made redundant. Clause 97.2 of the Agency Agreement makes it clear that the process set out in that clause is not to be used if the employee's position is to be made redundant. In that event, cl 98 of the Agency Agreement is to be used. It can therefore be seen that cl 97.1 may be validly linked with a redundancy of an employee under s 29(3)(a) of the Public Service Act 1999 and yet the employee's position remain unaffected. In this situation, it is the employee who is no longer required for the job by the employer, rather than the employee's position. As noted above, the latter situation is dealt with under cl 98 of the Agency Agreement. There is, therefore, no inconsistency between cl 97.2 and cl 97.1 and nor is the former beyond the power of the Public Service Act 1999. Further, an agency can validly make a payment for the redundancy of an officer under s 29(3)(a) of the Public Service Act 1999 and still retain that officer's position.
24 It follows that Ms Weeks' appeal, insofar as it relates to these two questions of law, must be dismissed.
NO "GENUINE REDUNDANCY PAYMENT" WHERE POSITION REMAINS
25 That leaves Ms Weeks' first and third questions of law. The difficulties with these two questions of law are that they both focus on the source of the authority to make the redundancy payment to Ms Weeks, viz s 29(3)(a) of the Public Service Act 1999 and cl 97.1 of the Agency Agreement, rather than the nature of the redundancy for which that payment was made. In this sense they raise similar issues to those raised in Ms Weeks' second and fourth questions of law (see above) and fail to address the critical question in this appeal, viz whether Ms Weeks' payment was made in relation to a "genuine redundancy" within the terms of s 83-175 of the ITA Act.
26 Despite the strictness of the requirement to state with precision a true question of law (see at [19] above), since Ms Weeks is self-represented and since, on a generous construction, these two questions of law could be said, at least in general terms, to raise the critical question in this appeal (see above), I propose to proceed on that basis. The generous construction I refer to would state these two questions of law in the following terms: If an employee is terminated under s 29(3)(a) of the Public Service Act 1999 or cl 97.1 of the Agency Agreement on the grounds that, as an employee, she is excess to the requirements of the ATO, in the sense that her services can no longer be utilised, does any payment made consequent upon that termination, fall within the expression "genuine redundancy payment" under s 83-175(1) of the ITA Act?
27 In my view, the answer to this question of law is plainly "no". This is so because, for the payment to be a "genuine redundancy payment" under s 83-175(1) of the ITA Act, the employee's position has to be made redundant. So much is clear from the language of s 83-175: "because the employee's position is genuinely redundant". More importantly, for the purposes of this appeal, I consider the Tribunal Member correctly identified this distinction where he highlighted the difference between a situation where an employer no longer requires a job to be done by any employee; and a situation where an employer no longer wants a job to be done by a particular (former) employee: see at [11] above. Having made this valid distinction, the Tribunal Member then found, as a matter of fact, that Ms Weeks' redundancy fell into the latter category: see at [12] above. Thus, the Tribunal Member has made no error of law in his construction of s 83-175(1) of the ITA Act and his finding of fact is not open to be reviewed in this appeal.
28 For these reasons, I do not consider the first and third questions of law as raised in Ms Weeks' notice of appeal, construed in the way set out above, demonstrate any error of law on the part of the Tribunal Member.
29 Before I leave this matter, it is appropriate for me to deal briefly with two other matters that Ms Weeks has raised in her grounds of appeal. There, Ms Weeks has raised allegations of bias and unreasonableness in the Tribunal's decision: see at [18]2 and 5 above respectively. While a failure to provide procedural fairness can involve a question of law for the purposes of s 44 of the AAT Act (see at [19](d) above), no such question of law is stated in Ms Weeks' four questions of law. Nor has unreasonableness in the Tribunal's decision been stated as a question of law. It follows that neither of these matters falls within the subject matter of this appeal (see at [15] above).
30 In any event, even if these allegations had been properly stated as questions of law, I do not consider there is any merit in either of them. The allegation of bias essentially reduces to a general disagreement on Ms Weeks' part with various aspects of the Tribunal's reasons for decision. Two things can be said about this approach. First, an allegation of bias of this kind is a serious allegation which must be clearly articulated and proved by admissible evidence: see, eg SBBS v Minister for Immigration and Multicultural and Indigenous Affairs (2002) 194 ALR 749; [2002] FCAFC 361 at [42]β[48]. I do not consider that this allegation of bias meets either of these two criteria. Secondly, it has been held that it will be a rare and exceptional case where bias can be demonstrated from published reasons for decision: see, for example, SBBF v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCAFC 358 at [16]. I do not consider this case is one of those rare and exceptional cases. I do not, therefore, consider there is any merit in Ms Weeks' allegation of bias on the part of the Tribunal Member.
31 As to the allegation of unreasonableness, that is limited to the Tribunal's finding that Ms Weeks was "genuinely welcome to return to her role or something that closely approximated it": see at [18]5 above. It was clearly open to the Tribunal Member on the material before him to make this factual finding and, while Ms Weeks may disagree with it, even strongly, that disagreement simply seeks to review the merits of that finding, rather than raise any vitiating unreasonableness in it: see, for example, Minister for Immigration and Citizenship v SZMDS (2010) 240 CLR 611; [2010] HCA 16. I do not, therefore, consider there is any merit in Ms Weeks' allegation of unreasonableness in the Tribunal's decision.
CONCLUSION
32 For these reasons, Ms Weeks' appeal must be dismissed.
I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.
Associate:
Dated: 4 April 2012
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federal_court_of_australia:fca/single/1997/1997fca0375
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1997-05-12 00:00:00
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Lamesa Holdings BV v Commissioner of Taxation [1997] FCA 375
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/1997/1997fca0375
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2024-09-13T22:45:53.524225+10:00
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CATCHWORDS
COSTS - indemnity or party and party - s 43 of the Federal Court Act β whether there is or should be a 'usual rule' in respect of costs - issue maintained until immediately prior to hearing and then abandoned - abandonment of issue as basis for indemnity costs - consideration of motivation for abandonment - prosecution of issues without merit
Federal Court of Australia Act 1976 (Cth) s 43
Federal Court Rules Order 62 Rule 4
Colgate-Palmolive Co v Cussons Pty Ltd [1993] 46 FCR 225
Re Sanchez Ex parte Smits [1994] 49 FCR 326
Henderson & Ors v Amadio & Ors (Heerey J, unreported, Federal Court of Victoria, 22 March 1996)
Marks v GIO[1996] 137 ALR 579
Cachia v Hanes [1991] 23 NSWLR 304
Seavision Investment SA v Everett [1992] 2 Lloyds Rep 260
LAMESA HOLDINGS BV -v- COMMISSIONER OF TAXATION
No. NG648 of 1996
EINFELD J
SYDNEY
12 MAY 1997
IN THE FEDERAL COURT OF AUSTRALIA)
NEW SOUTH WALES DISTRICT REGISTRY) No. NG648 of 1996
GENERAL DIVISION )
Between: LAMESA HOLDINGS BV
Applicant
And: COMMISSIONER OF TAXATION
Respondent
MINUTE OF ORDERS
The Court orders that:
1. The costs of the applicant applicable or pertaining to the Article 7 issue be paid by the respondent on a party and party basis.
Note: Settlement and entry of orders are dealt with in accordance with Order 36 of the Federal Court Rules.
EINFELD J
SYDNEY
12 MAY 1997
IN THE FEDERAL COURT OF AUSTRALIA)
NEW SOUTH WALES DISTRICT REGISTRY) No. NG648 of 1996
GENERAL DIVISION )
Between: LAMESA HOLDINGS BV
Applicant
And: COMMISSIONER OF TAXATION
Respondent
EINFELD J SYDNEY 12 MAY 1997
REASONS FOR JUDGMENT
Introduction
Judgment in this matter was delivered on 4 March 1997. There remains to be resolved only the question of costs with respect to an aspect of the respondent's case which was pleaded but abandoned immediately prior to the hearing. The applicant is seeking an order that its costs of and pertaining to this issue be paid by the respondent on an indemnity or solicitor and client basis. The respondent opposes such an order.
Background
The applicant, Lamesa Holdings BV (Lamesa), is a company incorporated in the Netherlands. It appealed against two amended assessments issued by the Commissioner of Taxation (the respondent) for the years of income ended June 30 1994 and June 30 1996 respectively. These amended assessments purported to include in Lamesa's assessable income profits from the sale of shares in an Australian company. It submitted that the profits from the sale of the shares were excluded from Australian tax by virtue of section 4 of the International Tax Agreements Act 1953 and the 1976 Netherlands-Australia Double Taxation Agreement (Netherlands DTA).
Article 7 of the Netherlands DTA provides that the profits of a Netherlands enterprise are taxable only in the Netherlands unless the enterprise carries on business in Australia through a permanent establishment situated here. Article 13 of the Netherlands DTA provides an exception to Article 7 where the income is derived from an alienation of real property.
There were two substantive issues which arose from these Articles. The first was whether Lamesa had a permanent establishment in Australia (the Article 7 issue). The second was whether the Article 13 exception applied in respect of the sale of shares (the Article 13 issue).
The Article 7 issue was not pursued by the respondent at the hearing and the Article 13 issue was therefore the only substantive matter argued. As the judgment in the matter showed, to give effect to the resolution of the Article 13 issue in favour of Lamesa, I ordered that its objections to the amended assessments be allowed in full and declared that no tax was payable in respect of the two income years in question. I ordered that the respondent pay Lamesa's costs in respect of the Article 13 issue on a party/party basis and that any submissions on Lamesa's claim for indemnity costs of the Article 7 issue should be made in writing within 28 days of the judgment being delivered. Those submissions have now been provided.
The law
The Court's jurisdiction to award costs arises from section 43 of the Federal Court of Australia Act 1976 (Cth), and the details are provided for in Order 62 of the Federal Court Rules. Section 43 provides:
(1) Subject to subsection (1A), the Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs shall not be awarded.
Order 62 rule 4(2) states:
(2) Where the Court orders that costs be paid to any person, the Court may further order that as to the whole or any part of the costs specified in the order, instead of taxed costs, that person shall be entitled to -
....
(d) a sum in respect of costs to be ascertained in such manner as the Court may direct.
Thus section 43 in combination with the rules confers on the Court a wide discretion to order costs. There is no doubt that an order to pay costs on an indemnity basis is within the ambit of this discretion. In Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, Justice Sheppard made a comprehensive examination of the authorities relating to indemnity costs. At 230 his Honour stated:
Notwithstanding the more specific provisions of some rules of Court, I do not consider that the power of this court to order costs to be taxed on one or other of the bases for taxation other than the party and party basis to be circumscribed in any way. As earlier said, I consider that the provisions of section 43 and the other provisions of the Act referred to confer on the Court a wide power to select an appropriate basis of taxation upon costs which it orders to be taxed.
This wide discretion cannot be reconciled with any artificial concept of 'a usual rule' where the 'starting point' in any analysis of costs is that the successful litigant will receive their costs on a party/party basis. In Marks v GIO137 ALR 579 at 586, it was said:
The question as to whether indemnity costs will be awarded must always be determined by analysis of the particular facts and circumstances of the case in question. I do not think that there is or should be a type of 'starting point' of party and party costs.
InRe Sanchez Ex parte Smits 49 FCR 326 at 326, the basis for dispensing with any notion of a 'usual rule' was further articulated:
The 'usual rule' that the successful party will receive an order for costs arose when no such legislative intention had appeared. It seems to me that this rule has been replaced by a statutory regime which leaves the matter in the unfettered discretion of each court to be exercised judicially in light of all the circumstances of the particular case. On the other hand, I agree that if there is nothing remarkable about the case, successful parties should expect to have their costs paid, at least on a party/party basis, by unsuccessful parties.
It is now well recognised that the award of costs on a party and party basis does not provide anything like a complete indemnity for the costs incurred in litigation: Marks; Cachia v Hanes [1991] 23 NSWLR 304;Henderson & Ors v Amadio & Ors (Heerey J, unreported, 22 March 1996); Seavision Investment SA v Everett [1992] 2 Lloyds Rep 260. An award of indemnity costs can therefore be viewed as akin to a penalty to be imposed for one or more particularly good reasons. Justice Sheppard in Colgate at 233 outlined some of the bases for the award of indemnity costs:
...the fact that proceedings were commenced or continued for some ulterior motive...or in wilful disregard of known facts or clearly established law...; the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions...; an imprudent refusal of an offer to compromise...
As I see the position, it is necessary also to have regard to the possible effect that an award of costs on an indemnity basis might have. In a case where the abandonment of a whole issue had the effect of narrowing or streamlining the case, and shortening the hearing, it seems to me that the imposition of a special penalty would be harsh indeed. Likewise, where a litigant decides that a point has been raised which for one reason or another cannot or should not be pressed, the effect of this penalty would be to encourage the prosecution of issues that are without merit or unlikely to succeed. The alternative of pressing on with an unworthy argument would be a waste of valuable and scarce Court resources, a far more heinous transgression then abandoning the point at or just prior to the hearing.
Of course this view must be balanced against the need to avoid parties, out of spite or even negligence, subjecting their opponents to needless preparation of issues that are not ultimately pursued. If facts are available to the Court which establish some motive or gross carelessness in a litigant, other than bona fide preparation of a case, for pursuing a subsequently abandoned issue up to hearing or a late stage prior to the hearing, at significant cost to the other side, it is in my opinion well within the Court's discretion to make an award of costs on an indemnity basis. In my view, such an ulterior motive or lack of care would have to be proved with a reasonable degree of certainty in order to avoid the situation where parties were induced to litigate points which should properly be abandoned for fear that they might otherwise incur a costs penalty.
To resolve this matter in the present case, it is necessary to analyse the events prior to the abandonment of the Article 7 issue in this case to decide if it warrants the exercising of the Court's discretion to award costs on an indemnity basis.
The history of the Article 7 issue
The respondent originally issued its notices of assessment to Lamesa in respect of the profits from the sale of the relevant shares on 17 January 1996. The hearing of this matter began on 16 December 1996. There is no question that, throughout this period, the respondent maintained, as one of the grounds on which Lamesa was liable to pay tax, that it had a permanent establishment in Australia. Similarly, there is no doubt that Lamesa necessarily incurred significant costs in preparing to meet this issue at the hearing and that, upon the issue being abandoned, its preparation on the point was rendered obsolete.
In putting forward its argument for the award of indemnity costs, Lamesa simply outlined the circumstances surrounding the progress of this issue and declared that they justified the exercise of the Court's discretion. There was no express contention that the circumstances pointed to some ulterior motive or that any of the other circumstances referred to in the cases justified the award here. In other words, the circumstances were left to speak for themselves with no yardstick being suggested for measuring the gravity of the transgression as should lead to an award of indemnity costs.
The particular circumstances
Lamesa submitted that the following actions of the respondent amount to circumstances which justified the exercise of the Court's discretion:
Β· the maintenance of an issue which was unsustainable up to the point of trial
Β· insistence on the applicant discharging its statutory burden of strict proof
Β· reluctance to commit to a position on permanent establishment until ordered to do so by the Court
Β· forcing the applicant to incur significant legal costs in the preparation of substantial evidence, including from three overseas witnesses
Β· reluctance to commit to a position on whether the evidence was disputed or whether the witnesses were required to attend for cross-examination
Β· abandoning the issue on the eve of the hearing
It seems to be implied that, because it was ultimately abandoned, the Article 7 issue never had any merit and was known by the respondent to be unsustainable throughout the period leading up to the hearing. Moreover, these assertions make a number of unproved allegations of fact which ignore the position that as the Article 7 issue was not pressed, neither they nor the merits of the issue have been subjected to the scrutiny of a hearing.
The respondent pointed to two principal factors that it said mitigated its initial pursuit and subsequent abandonment of the issue. Firstly, with respect to the allegation that the case was not particularised until the respondent was ordered to do so by Justice Hill on 11 September 1996, it was pointed out that the respondent's solicitor had then indicated his client's intention and purpose in pursuing the Article 7 case:
Your Honour, it is not a question of refining the case. It is a matter of specifying the matters that are requested and doing that in a way where we cover adequately, so that it is not alleged against us that we did not raise a point or argue a point. So we want to be careful in the weay (sic) in which we put our case.
This keenness to maintain all available options must be viewed in light of the fact that the respondent had already acceded to Lamesa's request for the hearing of the matter to be expedited so that it took place only four months after the filing of the appeal against the decisions on the objections. The respondent said that he was therefore not afforded the usual luxury of an extended period in which to prepare his case. He therefore decided, as he said was required of him by his statutory responsibilities, to maintain all possible causes of action until they were fully explored. It seems that the respondent was conscious of the words of Justice Heerey in Henderson & Ors v Amadio & Ors (unreported, 22 March 1996):
It can be said that both the law itself and the culture of adversarial litigation encourages, indeed almost compels, the raising of every possible issue which might achieve success. A litigant cannot keep a point in reserve to raise at a later time: Port of Melbourne Authority v Anshun Pty Ltd [1981] 147 CLR 589.
For this concept was exactly the situation that occurred in this case. The respondent was pursuing an issue in order to cover all the options available.
The second factor raised by the respondent was that the expenses incurred by Lamesa (including travelling to the United States to interview witnesses) indicated that it considered the issue required serious consideration and raised genuinely contentious matters.
Conclusion
On the facts available, this inference is at least as valid as those submitted by Lamesa. There is no evidence that the respondent was acting other than in the bona fide performance of his responsibility to protect the revenue of the Commonwealth. Yet, in order to justify an order for indemnity costs, the Court would have to be satisfied that the conduct of the respondent in abandoning the case, and his motivation for pursuing it for as long he did, were not merely forensic but were in some way reprehensible or without reasonable justification. Apart from the situation that such a serious finding could not be made without a full factual inquiry into the conduct of the matter, everything available in this case suggests the contrary.
Considering that none of the criteria referred to by Justice Sheppard existed, and that there was no analogous situation, an order for indemnity costs is, in my opinion, not appropriate in this instance. I believe that, in this case, the Court should adopt an approach to costs which would have been adopted had the Article 7 issue been fully pursued by the respondent and lost. On the material available to the Court, the result would have been to award costs to the successful applicant on a party/party basis. That is what I propose to order here.
Mr I.V Gzell QC and Mr R.L. Hamilton instructed by Freehill Hollingdale & Page Solicitors
For the applicant:
For the respondent: D.H. Bloom QC, G.T. Pagone QC and A.J. Payne instructed by Australian Government Solicitor
Dates of Hearing: 16 and 17 December 1996
Written submissions 9 April 1996
completed:
Date of judgment: 12May 1997
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federal_court_of_australia:fca/full/2005/2005fcafc0241
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2005-11-24 00:00:00
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NAZL v Minister for Immigration & Multicultural & Indigenous Affairs [2005] FCAFC 241
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/full/2005/2005fcafc0241
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2024-09-13T22:45:53.547905+10:00
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FEDERAL COURT OF AUSTRALIA
NAZL v Minister for Immigration & Multicultural & Indigenous Affairs [2005] FCAFC 241
MIGRATION β application to set aside orders of a Full Court entered on an appeal where the appellant did not appear
Federal Court Rules O 52 r 38A
NAZL v MINISTER FOR IMMIGRATION & MULTICULTURAL & INDIGENOUS AFFAIRS
NSD 808 of 2004
BRANSON, BENNETT AND GRAHAM JJ
24 NOVEMBER 2005
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD 808 of 2004
BETWEEN: NAZL
APPLICANT
AND: MINISTER FOR IMMIGRATION & MULTICULTURAL & INDIGENOUS AFFAIRS
RESPONDENT
JUDGES: BRANSON, BENNETT AND GRAHAM JJ
DATE OF ORDER: 3 NOVEMBER 2005
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The application to set aside the orders made by the Full Court on 18 November 2004 be dismissed.
2. The applicant pay the respondent's costs of the application.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD 808 of 2004
BETWEEN: NAZL
APPLICANT
AND: MINISTER FOR IMMIGRATION & MULTICULTURAL & INDIGENOUS AFFAIRS
RESPONDENT
JUDGES: BRANSON, BENNETT AND GRAHAM JJ
DATE: 24 NOVEMBER 2005
PLACE: SYDNEY
REASONS FOR JUDGMENT
THE COURT
1 The issue on the application presently before the Court is whether orders made by a Full Court on 18 November 2004 ('the first Full Court') should be set aside.
2 Those orders were duly entered on 25 November 2004 and were as follows:
'1. The appeal be dismissed.
2. The appellant pay the costs of the respondent, the Minister for Immigration and Multicultural and Indigenous Affairs.'
3 We heard and determined the application to set aside those orders on 3 November 2005. The orders of the Court were:
'1. The application to set aside the orders made by the Full Court on 18 November 2004 be dismissed.
2. The applicant pay the respondent's costs of the application.'
4 The parties were advised at the conclusion of the hearing that the Court would publish its reasons for judgment in due course. These are the Court's reasons for its judgment of 3 November 2005.
Background
5 The applicant was born in Pakistan on 5 November 1967. He is fluent in English, Urdu and Malay. He was married in Malaysia on 18 March 1998. On 11 December 2002 the applicant arrived in Australia from Malaysia travelling on a Pakistani passport issued to him in Kuala Lumpur on 27 July 1999.
6 On or about 8 January 2003 the applicant applied for a protection (class XA) visa. On 5 February 2003 that application was refused by the Minister's delegate.
7 By an application for review lodged with the Refugee Review Tribunal ('the Tribunal') on 5 March 2003, the applicant sought a review of the delegate's decision. By letter dated 15 September 2003 the applicant was invited to attend a hearing of the Tribunal on 23 October 2003. On 22 October 2003 the applicant's migration agent, Qaiser Zaidi of Southern Cross Careers, applied for a postponement of the Tribunal hearing on the basis of a medical certificate which the applicant had obtained and submitted to the Tribunal.
8 The Tribunal postponed its proposed hearing from 23 October 2003 to 28 October 2003.
9 A hearing, attended by the applicant, proceeded before the Tribunal on 28 October 2003. At that hearing the applicant produced documents reproduced on six pages which were said to contain three charge sheets referable to the applicant expressed partly in Urdu and partly in English ('the first round documents'). The six pages were without any apparent authentication.
10 On the day following the hearing it would appear that the applicant's migration agent sent three separate facsimiles to the Tribunal (together, 'the second round documents'). The first two facsimiles were incomplete. The first was a covering letter which was said to attach six pages being a 'translation of Police Reports which were handed to The Member [of the Tribunal] on the time of the hearing'. This facsimile appears to have been transmitted at 1.50 pm on 29 October 2003 and to have comprised only one page. A second facsimile appears to have been transmitted by the applicant's migration agent at 1.37 pm on the same day. This facsimile was of one page in length and appears to have been a second page of a translation of one of the police charge sheets. A third facsimile comprised five pages, said to be translations of two of the police charge sheets and the first page of the translation of the third charge sheet.
11 After the reasons for decision of the Tribunal member were signed on 6 November 2003, the applicant lodged further documents with the Tribunal on 18 November 2003, ('the third round documents'). What was lodged appears to have been further copies of the six pages originally tabled at the Tribunal hearing, now bearing stamps of an 'Oath Commissioner' in Karachi and the date stamp for 5 November 2003. One of the stamps bears the word 'Attested' to which a signature has been subscribed and another stamp bears the words 'Attested True Photo Copy'. No indication was provided by the 'Oath Commissioner' as to the identity or source of the documents of which the copies were said to be true photocopies. Other documents within the bundle apparently produced to the Tribunal on 18 November 2003 were further copies of the translations which had been faxed in bits and pieces to the Tribunal on 29 October 2003. The translations again bore stamps of the same 'Oath Commissioner', the word 'Attested' with a signature and a date stamp for 27 October 2003.
12 The Tribunal member decided not to recall his decision and to proceed with the handing down of it as planned on 3 December 2003. He recorded his reasons for this decision as follows:
'All these documents (now altered by stamps that were not on previously-presented copies of the same) have already been presented at the RRT Hearing and have been considered. The alterations to the documents do not give them any more weight; nor do the translations, for the documents were explained to the RRT at the RRT hearing.'
13 It is apparent that the Tribunal was referring to the third round documents and also to the second round documents.
14 In accordance with reasons dated 6 November 2003 and handed down on 3 December 2003, the Tribunal affirmed the decision not to grant a protection visa to the applicant.
15 The reasons of the Tribunal included the following:
'The Applicant tabled a photocopy of a FAX, purporting featuring the text of a police charge sheet. The document had the appearance of being a handwritten exercise set within a printed or desktop published pro-forma. The Applicant said it was a genuine charge sheet falsely implicating him in attempted murder and other crimes. The Tribunal put it to him that the document bore no signs of authenticity.
The Applicant then said that elsewhere he had a document stamped by the High Court in Pakistan, being an English translation of this document, saying that it was a true translation of a genuine charge sheet.
The Tribunal considered this, even though the Applicant failed to produce the translation. The Tribunal considered that the body authenticating the translation would not be competent to assess the genuineness of the original. The Tribunal also considered it implausible for the highest court in Pakistan to be using its time vetting the quality of translations.'
16 Under the heading 'Findings and Reasons' the Tribunal said:
'The Tribunal accepts that the Applicant is a national of Pakistan.
The Tribunal dismisses as fraud the so-called police report or charge sheet submitted by the Applicant at the hearing. Its provenance is highly dubious and its appearance is amateur and haphazard, lacking in reliable evidence of authentication.
Were the Tribunal wrong about the police charges, and it is highly confident that it is not, then it would still have to take into account the Applicant's claim that actions against his comrades, who in his account must have included him, were dropped after the union [a union of employees established for workers at the Holiday Inn Hotel in Karachi formed after the applicant left the employ of that hotel] was recognised by the courts. Thus there are strong grounds based in the Applicant's own assertions for finding that any mischief launched against him in 1991 by the police and the owners of the Holiday Inn has long-since been abandoned.
β¦
The Applicant is an unreliable witness in the present matter. The Tribunal is not satisfied that the Applicant faces a real chance of Convention-related persecution in Pakistan. He is not a refugee.'
Procedural history
17 By an application filed 6 January 2004 the applicant sought the issue of constitutional writs in respect of the decision of the Tribunal. The application was supported by an affidavit affirmed by the applicant on 6 January 2004 which included the following:
'5. The RRT failed to take in to consideration the merits of the case.
6. The RRT failed to act on proper principles of fairness and natural justice.
7. The RRT did not act in good faith to make this decision.
The Grounds of Appeal
(a) The decision made by the RRT was an improper exercise of the powers conferred by the Migration Act 1958 and migration regulations 1994 as amended.
(b) The decision involved an error of law being an incorrect interpretation of the applicable laws and incorrect application of the law to the facts.'
18 The applicant's application was heard and determined by the primary judge on 28 April 2004. The applicant appeared in person at the hearing before his Honour. The applicant relied upon both his oral submissions at the hearing and also written submissions to the Court. The primary judge ordered that the application be dismissed and that the applicant pay the respondent's costs.
19 In the reasons for judgment his Honour said:
'19. In his written submissions to this Court the applicant concentrated on two matters; the first concerned the authenticity of the police charge sheets and the second related to his alleged involvement with the members of MQM.
20. I shall deal with the second matter first. The submissions concerning the applicant's involvement with MQM do not go beyond inviting the Court to reach a different conclusion on the evidence that was before the Tribunal. It may be that a different Tribunal may have come to a different conclusion in relation to those matters. That is not a question upon which the Court should embark. The only question is whether or not any error in the way the Tribunal dealt with the allegations of involvement with MQM, indicate that there was some jurisdictional error on the part of the Tribunal. I do not consider that the submissions go anywhere near establishing a jurisdictional error in relation to the way in which the Tribunal dealt with the allegations of a fear of persecution arising out of involvement with MQM.
21. That is sufficient to dispose of the application. However, I shall say something briefly about the submissions concerning the police charge sheets.
22. β¦ Those documents were referred to by the applicant at the hearing before the Tribunal on 28 October 2003. The applicant's complaint is that the Tribunal had no regard to the documents in the course of the hearing, saying that on their face there was no guarantee that they were authentic. The applicant apparently said in the course of the hearing that he had a translation of the documents stamped by the High Court in Pakistan saying that they were true translations of genuine charge sheets.
β¦
31. The way in which the Tribunal dealt with the documents causes some disquiet. However, it does appear that notwithstanding that the decision was made without reference to the certified translations, the Tribunal did, after the event, have regard to them and concluded that its first view ought not to be changed. However, as I have already said, while there may be some disquiet arising from the way in which the Tribunal dealt with the documents, the ultimate decision of the Tribunal was not based upon the authenticity or otherwise of the documents.
32. The Tribunal concluded that even if there were charges made, as might be inferred from the police reports, the Tribunal did not consider that it was plausible that such charges against the applicant would still be current if he were to return to Pakistan after an absence of more than 10 years. In the circumstances, I am not persuaded that there was any error on the part of the Tribunal such as would constitute jurisdictional errorβ¦It follows in my view that the application should be dismissed.'
20 The grounds in the notice of appeal filed 18 May 2004 which were before the first Full Court were:
'That the learned single bench failed to appreciate the judicial error in the instant case, moreover, the learned single bench also failed to appreciate the documents so placed on the file page 60 of the court book, regarding the fact that the RRT decided the fate of the documents on 06/11/03 whereas the documents were received by them on 03/12/2003 i.e. a legal error on the part of RRT this means that the decision was made prior to receiving the documents. The document were received by them on 18/11/2003 and the decision was made on 06/11/2003.'
21 As has been noted above, the Tribunal received the third round documents two weeks before the Tribunal handed down its decision and had regard to them in the manner indicated above.
22 When the appeal came before the first Full Court on 18 November 2004, the applicant failed to appear. He did, however, fax a medical certificate to the Court indicating that he was not fit for work.
23 The applicant was contacted by a Deputy Registrar of the Court who reported that the applicant 'said he will see how he feels later on today and if necessary speak to the person who helped him with his appeal papers to see if he could attend the court on his behalf.'
24 At the hearing of the appeal on 18 November 2004 Ms Francois, who appeared for the Minister, sought an order under O 52 r 38A of the Federal Court Rules 'that the appeal be dismissed.'
25 The presiding judge responded:
'It should be added that the members of the bench have looked at the judgment appealed from, the decision of the Refugee Review Tribunal and the written submissions that were sent to the Court by the appellant. In the opinion of all of us there appears to be no substance in the appeal. Accordingly, the order of the Court is that the appeal be dismissed with costs.'
26 Approximately 20 minutes after the appeal had been dismissed by the first Full Court, a friend of the applicant, Mr Iqbel, arrived. His arrival was drawn to the attention of the Court which elected not to reconvene because the appeal had already been dismissed. Mr Iqbel was asked to inform the applicant of what had transpired.
27 The orders of the first Full Court were entered on 25 November 2004, no action having been taken by the applicant in the meantime.
28 The applicant filed a notice of motion on 2 December 2004 seeking to set aside the orders of the first Full Court. An affidavit in support was also filed on 2 December 2004. The notice of motion and affidavit would appear to have been accompanied by a document in which the applicant said:
'β¦ the RRT has gone beyond the jurisdiction which is vested with the RRT.
That the applicant has also challenged the validity of the jurisdictional error, the RRT has committed while dealing the above matter.
That the applicant has raised lot of legal issues which have been laid down by the applicant in the written submission β¦'
The matter came before Allsop J on 16 March 2005. Doubt having arisen as to the power of a single judge to hear and determine the application his Honour ordered on 3 June 2005 that '[t]he application to set aside the orders made on 18 November 2004 by the Full Court comprised of Wilcox J, Sackville J and Finn J be stood over to a date to be fixed before a Full Court.'
29 The parties agreed that, in the event that the orders made by the first Full Court on 18 November 2004 and entered on 25 November 2004 are set aside, the Court as presently constituted should immediately proceed to hear and determine the appeal. For this reason the Court heard the parties in full both on the application for an order setting aside the orders made by the first Full Court and on the merits of the proposed appeal should those orders be set aside.
30 Dr Griffiths SC who appeared with Mr Bova of counsel for the applicant pro bono, indicated that, if the application to set aside the first Full Court judgment were to succeed, the applicant would seek to file an amended notice of appeal and an amended application under s 39B of the Judiciary Act 1903 (Cth)to take the place of the application filed 6 January 2004 upon which the primary judge reached his decision.
31 Were the applicant to be given a 'second' chance or, arguably, a 'third' chance as proposed, the grounds of alleged jurisdictional error on the part of the Tribunal upon which the applicant would wish to rely would be as follows:
'(a) the decision was affected by apprehended bias with the consequence that there was a breach of procedural fairness;
(b) the appellant was denied procedural fairness because there was no probative evidence or other material to support the Tribunal's finding of fact that actions against the appellant's union comrades were dropped after the union was recognised by the court in Pakistan and that any charges against him had long since been abandoned; and
(c) the Tribunal failed to give real and genuine consideration to the documentary materials provided to it under cover of a letter dated 18 November 2003.'
32 Dr Griffiths indicated that the applicant's principal argument now was that the Tribunal brought to bear or gave the appearance of bringing to bear a closed mind on the authenticity of the documents produced by the applicant at the Tribunal hearing.
Consideration
Power Exercised by the First Full Court
33 Although the orders made by the first Full Court do not identify the rule pursuant to which the orders were made, we accept the applicant's submission that the first Full Court proceeded, as counsel for the respondent invited it to do, under O 52 r 38A. That rule relevantly provides:
'(1) If a party is absent when an appeal is called on for hearing, the Court may:
β¦
(d) proceed with the hearing, either generally or in relation to any claim for relief in the appeal.
β¦
(2) If the court proceeds with the hearing under paragraph (1)(d), the Court may
(a) set aside or vary any order made after so proceeding; and
(b) give directions for the further conduct of the appeal.'
34 We therefore proceed on the basis that this Full Court has power to set aside the orders made by the first Full Court but that this power is to be exercised on the basis that the first Full Court proceeded to hear the applicant's appeal. In this regard we note that the first Full Court referred to the decision of the primary judge, the notice of appeal and the written submissions of the parties (see [24] above).
Explanation for Failure to Appeal
35 The first Full Court noted that the medical certificate provided to the Court by the applicant 'required further elaboration if it was to be accepted as indicating Mr NAZL was not fit to participate and would arrange for someone to participate.' The reasons for judgment of Allsop J drew attention to the fact that '[t]he explanation for the absence of the appellant on 18 November 2004 does not take the matter beyond that recounted by the presiding judge on 18 November 2004.' Nonetheless no material additional to that which was before the first Full Court in explanation for the applicant's failure to appear on 18 December 2004 has been placed before this Full Court.
The New Ground of Appeal
36 As identified above, the case that the applicant wishes to advance if the orders made by the Full Court on 18 November 2004 are set aside is one of apprehended bias on the part of the Tribunal. Although the affidavit in support of the application before the primary judge said 'the RRT failed to act on proper principles of fairness and natural justice' it is conceded on behalf of the applicant that no claim of actual or apprehended bias was made at the hearing before his Honour. The transcript of proceedings before the Tribunal was not placed before the primary Judge or, indeed, before the first Full Court.
37 An allegation of apprehended bias was not raised in the notice of appeal nor in the written submissions to the first Full Court.
38 It is thus apparent that the present application is not intended to place the applicant in the position that he would have been in had he attended the hearing before the first Full Court. It is intended to facilitate his advancing a case that there is no reason to think he would have advanced had he attended that hearing. Arguably he seeks to be placed in a better position than he would have been in had he attended the hearing before the first Full Court.
Apprehended Bias
39 The allegation of apprehended bias is based upon the Tribunal's treatment of the 'three rounds' of documents sent to the Tribunal and the applicant's description of those documents. What the applicant now wishes to do is, in effect, to bring a fresh application under s 39B of the Judiciary Act 1903 (Cth) almost two years out of time (see s 477(1) of the Migration Act 1958 (Cth)).
40 To enable the proposed new grounds to have any prospects of success it would be necessary for the applicant to secure the admission into evidence on the hearing of the appeal of a transcript of the proceedings before the Tribunal on 28 October 2003. For the purposes of the hearing of the current application to set aside the orders of the first Full Court the transcript of the Tribunal hearing has been admitted into evidence. The passage relied upon to found the allegation of apprehended bias was the Tribunal response to what was said by the applicant at page 17 of the transcript:
'Applicant Yes, this is the fax I receive yesterday. The original is with my brother. Attested by the Sindh High Court. Translated by Sindh High Court. So the FIR record is ---
Member No, just a moment, there's no attestation as to the genuiness of this.
Applicant This is the one he faxed me before the translation,
Member But see, that's fine, you know what. I'll say this. Here you're in trouble and I'll tell you why you're in trouble.
Applicant Okay.
Member It's fine for a High Court to, it is a fine thing for a Notary Public or a solicitor or a proper person to certify the genuiness of a translation. All that that does is certify the correctness of the job of the translator, it is no guarantee as to the authenticity or authority of the document that was translated. Ok, now if ---'
41 The applicant proceeded to indicate to the Tribunal that 'β¦ if you want to check authenticity, you can check either from the Police Station with the reference number or you check from the Sindh High court.'
42 As we read that statement by the applicant, it is open to the interpretation that the applicant was saying that the original of the copy document (a faxed copy) that he gave the Tribunal had been attested. Clearly, if the original had borne an attestation, a copy of it should also have borne a copy of that attestation. Accordingly, the comment to that effect by the Tribunal was understandable. It also explains why the Tribunal, having commented on the absence of the attestation, was suspicious of a subsequent copy of the document which bore the attestation.
43 It may also be noted that none of the documents later produced by the applicant to the Tribunal were 'attested by the Sindh High Court', nor was there any indication that any of the translations were effected by the Sindh High Court.
44 Even if that was not the correct meaning of the applicant's statement to the Tribunal and the applicant meant that there was another original (with the Sindh High Court) to which the attestation of a true copy was attached, it is an interpretation that was available. Great difficulty attends the argument that adoption of it by the Tribunal demonstrates apprehended bias.
45 We are not satisfied that the ground of appeal set out in the proposed amended notice of appeal has a reasonable prospect of success.
CONCLUSION
46 We fully recognise the significance to the applicant of his claim to be entitled to a protection visa. We are also conscious of the many difficulties faced by unrepresented litigants and of the consequent need for courts to avoid unnecessarily strict insistence on compliance by them with rules of practice and procedure. Nonetheless, for the reasons set out above, on 3 November 2005 we concluded that it had not been demonstrated that the interests of justice called for the orders of the first Full Court to be set aside.
I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Branson, Bennett and Graham.
Associate:
Dated: 24 November 2005
Counsel for the Applicant: J E Griffiths SC and C N Bova
Legal Advocate for the Respondent: A Markus
Solicitor for the Respondent: Australian Government Solicitor
Date of Hearing: 3 November 2005
Date of Judgment: 3 November 2005
| 5,532 |
federal_court_of_australia:fca/single/1986/1986FCA0124
|
decision
|
commonwealth
|
federal_court_of_australia
|
application/pdf
|
1986-04-10 00:00:00
|
Davies, C.A. v. Pagett, R.C. [1986] FCA 124
|
https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/1986/1986FCA0124.pdf
|
2024-09-13T22:45:54.711067+10:00
|
CATCHWORDS
PRACTICE AND PROCEDURE - Interlocutorv judgment ~ Application to
set aside default judaement dismissed - Whether leave to appeal
should be granted - Substantial delays by applicant - Principles
governing exercise of discretion ~ Relevance of general concern
about delavs in prosecution of civil litigation.
Rules of Supreme Court (NT) 0.31 FΒ£.14
Cases considered: Evans v Bartlam (1937) A.C. 473, Halil v
Nominal Defendant (1966) 117 C.L.R. 423. Carr v Finance
Corporation of Australia Ltd. (1981) 147 C.L.R. 246, Adam P.
Brown Male Fashions Ptv. Ltd. v Philip Morris Inc. (1981) 148
c.L.R. 170, S.C.I. Operations Ptv. Ltd. v Trade Practices
Commission (1984) 53 A.L.R. 283. Attwood v Chichester [18781 3
Q.B.C. 722, Rosing v_ Ben Shemesh (19603 V.R. 173, National Mutual
Life Association of Australasia Limited v Oasis Developments Ptv.
Ltd. Β£19831 2 Qd.R. 441, Patsalidies v Magoulias (1984) 29 NTR 1.
No. NTG 18 of 1985
CAROL ANN DAVIES v RONALD CLYDE PAGETT
No. NIG 19 of 1985
CAROL ANN DAVIES v FRANCIS MARGARET PAGETT
No. NTG 20 of 1985
CAROL ANN DAVIES v IAN ROBINSON PAGETT (by his next friend
FRANCIS MARGARET PAGETT) .
Morling, Beaumont and Wilcox JJ
Darwin
10 April 1986
y
mens ene we meee Spe ee ce rq eee
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teen na aa
nad i
oF re ited
en
> o,f ar) 2
aS
IN THE FEDERAL COURT OF AUSTRALIA
)
)
NORTHERN TERRITORY OF AUSTRALIA ) No. NTG 18 of 1985
)
DISTRICT REGISTRY GENERAL DIVISION }
BETWEEN: CAROL ANN DAVIES
Appellant
AND: RONALD CLYDE PAGETT
Respondent
CORAM: MORLING, BEAUMONT and WILCOX JJ
PLACE: DARWIN
DATE: 10 APRIL 1986
MINUTES OF ORDER
THE COURT ORDERS THAT:
1. Leave to appeal be granted.
2. The appeal be allowed.
3. The orders made by the Supreme Court of the Northern
Territory on 16 July 1985 be set aside and in lieu
thereof it be ordered that:
cane py en vege
on Cae
ween ee re er ee os
roo
een a pt
SIT
ee
x, we
β_
be
(a) The default judgment entered on 29 June
1984 be set aside.
(b) The appellant's solicitors pay to the
respondent the costs of the respondent
incurred in entering the said default
judgment and in relation to the
application to set aside the said
judgment in the Supreme Court.
(c) The hearing of the action be expedited
and that the matter be listed forthwith
before a judge or master of the Supreme
Court for the purpose of giving such
directions as may be necessary or
desirable to ensure an early hearing of
the action.
The respondent pay the appellant's costs of the appeal.
The respondent have a certificate in respect of the
costs of the appeal under s.6(1) of the Federal
Proceedings (Costs) Act 1981.
Note: Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.
Suanannar tae
ater we
Ave
a Ce
veneer ame
gece eee ee eres
=
2 \
oe
Ae ee ne mee
ve
ali
of
en ee rece ree ons
oe" a. >.
cA
~ rey
IN THE FEDERAL COURT OF AUSTRALIA
)
)
NORTHERN TERRITORY OF AUSTRALIA ) No. NTG 19 of 1985
)
DISTRICT REGISTRY GENERAL DIVISION )
BETWEEN: CAROL ANN DAVIES
Appellant
AND: FRANCIS MARGARET PAGETT
Respondent
CORAM: MORLING, BEAUMONT and WILCOX JJ
PLACE: DARWIN
DATE: 10 APRIL 1986
MINUTES OF ORDER
THE COURT ORDERS THAT:
1. Leave to appeal be granted.
2. The appeal be allowed.
3. The orders made by the Supreme Court of the Northern
Territory on 16 July 1985 be set aside and in lieu
thereof it be ordered that:
oid
\e
ene ements OR Eg petro e co
aren
(a)
(b)
(c)
The respondent pay the appellant's costs of the appeal.
The respondent have a certificate in respect of the
costs of the appeal under s.6(1) of the Federal
The default judgment entered on 29 June
1984 be set aside.
The appellant's solicitors pay to the
respondent the costs of the respondent
incurred in entering the said default
judgment and in relation to the
application to set aside the said
judqment in the Supreme Court.
The hearing of the action be expedited
and that the matter be listed forthwith
before a judge or master of the Supreme
Court for the purpose of giving such
directions as may be necessary or
desirable to ensure an early hearing of
the action.
Proceedings (Costs) Act 1981.
Note:
Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.
Be oe re po
. 4
Perr agts
wort oe.
woo
"NGS
IN THE FEDERAL COURT OF AUSTRALIA
)
)
NORTHERN TERRITORY OF AUSTRALIA ) No. NTG 20 of 1985
)
DISTRICT REGISTRY GENERAL DIVISION )
BETWEEN: CAROL ANN DAVIES
Appellant
AND: IAN ROBINSON PAGETT (by
his next friend FRANCIS an
MARGARET PAGETT) :
Respondent a
CORAM: MORLING, BEAUMONT and WILCOX JJ
PLACE: DARWIN .
DATE: 10 APRIL 1986
MINUTES OF ORDER
' THE COURT ORDERS THAT:
MoM pores ey ore
wane
Prema)
1. Leave to appeal be granted. 3
on
2. The appeal be allowed. K
("
3. The orders made by the Supreme Court of the Northern *
Territory on 16 July 1985 be set aside and in lieu
thereof it be ordered that:
a ea re
rary
a
ceeen gear _
H iilin. |
(a) The default judgment entered on 29 June
1984 be set aside. 7
(b) The appellant's solicitors pay to the '
respondent the costs of the respondent
incurred in entering the said default
judgment and in relation to the
application to set aside the said ~
men ene
> oF
judgment in the Supreme Court.
(c) The hearing of the action be expedited
and that the matter be listed forthwith
before a judge or master of the Supreme
Court for the purpose of giving such
directions as may be necessary or
desirable to ensure an early hearing of
the action. ts
:
4. The respondent pay the appellant's costs of the appeal. '
5. The respondent have a certificate in respect of the
costs of the appeal under s.6(1) of the Federal
Proceedings (Costs) Act 1981.
Sella dinersemamtennaet?
s ele ates
Note: Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.
sore,
*
Vs
MIDST
i
IN THE FEDERAL COURT OF AUSTRALIA
NORTHERN TERRITORY OF AUSTRALIA
wee ewe
DISTRICT REGISTRY GENERAL DIVISTON
ON APPEAL FROM THE SUPREME,
COURT OF THE NORTHERN
TERRITORY OF AUSTRALIA
No. NTG '18 of 1985
BETWEEN: CAROL ANN DAVIES
Appellant
AND: RONALD CLYDE PAGETT
Respondent
{ No. NTG 19 of 1985
BETWEEN: CAROL ANN DAVIES
Appellant
AND: FRANCIS MARGARET PAGETT
Respondent
No. NTG 20 of 1985
BETWEEN: CAROL ANN DAVIES
Appellant
AND: IAN ROBINSON PAGETT (by
his next friend FRANCIS
MARGARET PAGETT)
Respondent
eae,
Ss tsa,
u
ae
we eee ly
Are : .
pte serey te
-, eae hk
qn rrr
coe β St tlhe es
te -
m& J
CORAM: MORLING, BEAUMONT and WILCOX JJ.
PLACE: DARWIN
DATE: 10 APRIL 1986
REASONS FOR JUDGMENT
THE COURT: The appellant seeks leave to appeal from orders of a
Judge of the Supreme Court of the Northern Territory dismissing
applications by the appellant that interlocutory judgments
entered in default of defence be set aside. The judge heard
together three separate applications, relating to judgments
obtained in each of three separate actions instituted by the
three respondents. The three matters share a common history and
raise similar issues. They have been heard together.
The history of the matters is as follows. In November
and December 1983 each of the respondents issued writs out of the
Supreme Court claiming damages from the appellant. The statement
of claim endorsed on each writ alleged negligence by the
appellant in the driving of a motor vehicle near Tennant Creek on
17 July 1983 causing it to collide with a vehicle in which each
of the respondents were riding. The writs were served on the
appellant on 6 December 1983.
On 27 February 1984 the appellant's solicitors entered
an appearance on her behalf. By telex dated 16 March 1984 the
respondents' solicitors informed the appellant's solicitors that,
if they proposed to file defences, they should do so within seven
votre
re ero
' or on
Son
wd
days "in default of which we will apply for judgment". Reference
was also made to medical expenses then being incurred by the
respondents. On 18 April 1984, the appellant's solicitors sent a
telex to the respondents' solicitors informing them that defences
were being "forwarded" that day.
No defences were filed or served. On 14 June the
respondents' solicitors wrote again, and after referring to the
fact that the defences had not been delivered they stated:
"Nearly half a year has now expired since your
client was served with the Summonses issued on
behalf of our client. In our opinion there
can be no excuse for your client's failure to
deliver Defences. Accordingly, unless the
same are delivered shortly application will be
made to have this matter set down for
hearing."
The implication was clear that judgments would be
sought. There being no response, praecipes for judgment were
filed and on 29 dune 1984 judgment was entered in each action in
default of defence. Four months thus elapsed between the date of
appearance and the date of judgment during which period two
letters requiring delivery of defence were received by the
appellant's solicitors.
On 3 July the respondents' solicitors forwarded copies
of the interlocutory judgments obtained to the appellant's
solicitors. They then stated:
ββ
a
a
ae ete
we ho
Vee
mec rr ore
, ome "SS
"We are seeking instructions as to the likely
amount of quantum prior to listing these
proceedings for hearing as to the assessment
of damages".
There were subsequent telephone conversations between
the solicitors. By letter dated 15 November 1984 the appellant's
solicitors wrote to the respondents' solicitors stating:
"We refer to previous correspondence and
discussions herein. We have now been advised
by our Alice Springs office that an
application to set aside the judgment entered
by the plaintiff will be made towards the end
of November."
This letter came from the Darwin office of the appellant's
solicitors, being signed by a partner in the firm. However, no
application was in fact filed in November or, indeed, until the
following May; almost eleven months from the date when the
judgments were entered.
The respondents' solicitors on the record, who were
acting as agents for principals outside the Territory, set about
obtaining instructions as to matters relevant to the assessment
of damages. In December 1984 they learned that the injuries
sustained by Mr Pagett might have more severe consequences than
were initially anticipated so that further medical examination
was desired, involving some delay. Although they prepared a
draft Certificate of Readiness, no steps were taken to set the
matter down for assessment of damages prior to the filing of the
application to set aside the interlocutory judgments on 20 May
1985.
Pan is ne ape,
aa ae eer
wet ee
"3,
10.
ll.
licen'
In support of the application, an affidavit was filed by
the appellant giving her version of the accident as follows:
On 17 July 1983 I was driving a Subaru Station Wagon
registered number N.T. 178-978 north on the Stuart
Highway.
I had left Alice Springs that morning at about 11.30
a.m. to travel to Tennant Creek, and had been
driving at about 100 km per hour for most of the way
except when I had to overtake other vehicles when my
speed would have risen to about 120 km per hour.
At about 3.30 p.m. I was 60 km south of Tennant
Creek and I saw ahead of me a vehicle towing a
trailer in the form of a small caravan.
I caught up with this vehicle and caravan and
followed behind for a few minutes before deciding to
overtake it.
I think the other vehicle was travelling a little
below 100 km per hour or I would not have caught up
with it.
I pulled over to the right-hand side of the bitumen
surfaced road and saw that there was not another
vehicle in sight. I then accelerated past and my
speed would have risen to about 120 km per hour.
I did not sound my horn as I relied upon the
vigilance of the other driver.
When I commenced to overtake, my vehicle had all
four wheels on the bitumen but seeing the road was
only some 12 to 15 feet wide, I pulled further right
with the two right wheels on the gravel shoulder.
As I drew up to the caravan, I saw that the caravan
was fishtailing and I gained the fleeting impression
that both the caravan and the towing vehicle were
unstable. I believe that the vehicle and caravan
were probably grossly overloaded which caused the
driver to have steering problems.
Feat ye,
ween
β
we
*
i
. a *
12. Suddenly the caravan hit the side of my vehicle and
I was conscious of a very hefty bump on my left
side. The bump caused my car to veer to the right
and roll over on the shoulder to the east of the
road. I think I probably tried to correct the
sharp turn to the right after I was hit and in doing
so rolled the car.
13. I was trapped in the car as I was unable to open the
door. The car was on its roof at the time but a few
minutes later another north-bound vehicle stopped
and got me out. It was then that I saw the other
vehicle and caravan were also on the shoulder just a
little further to the north of where my car came to
rest.
14. I later looked at the tyre marks on the road and
they clearly showed that the other vehicle had
veered right, hit my car and literally forced me off
the road."
Although, on the appeal, it was suggested that para.14
might be inadmissible evidence, no objection to its reception was
made at the hearing of the application. The appellant was not
cross-examined on her affidavit.
None of the respondents gave evidence on the
application, although their solicitor gave evidence, again
without objection, of their case as follows: '
"20. I am informed by my instructing principals that the
vehicle in which the Plaintiff was driving was not
grossly overloaded nor overloaded at all in the
circumstances.
L
21. j%I am informed the Plaintiff's vehicle was a brand
new 1983 Nissan Patrol.
22. %I am informed that at the time of the accident the
Plaintiff's caravan was fitted with an antisway
device involving a draw bar on the Plaintiff's
vehicle and special fittings on the tow bar.
epee qe
typ bee
wy
i TN al |
bene te
23. I have been informed by an officer of the NT Police re
Force that there was no statutory or regulatory
obligation for the Plaintiff's vehicle to be fitted
with caravan towing mirrors.
24. Iam informed that shortly before the accident the r
Plaintiff noticed the Defendant's motor vehicle in re
his rear vision mirror approaching the Plaintiff's
vehicle at a high speed.
25. I am informed that the Plaintiff believes that the t
Plaintiff's vehicle and caravan did not sway as the |
Defendant's vehicle overtook it but that the
Defendant's vehicle collided with the Plaintiff's i
t
F
|
caravan.
26. I am informed that at the time of the accident the
Plaintiff was driving at a speed of about 80
kilometres per hour.
27. %I am informed and verily believe that the Plaintiff
had driven in the vehicle in which he was driving
at the time of the accident from Dubbo to the scene |
of the accident with much the same load that he was .
carrying at the time of the accident and that until [.
the Plaintiff was involved in the accident the '
actual driving involved in his journey had been '
uneventful.
28. I am further informed and verily believe that the
scene of the accident was a straight flat roadway,
that at the time of the accident visibility was
clear and that at the time when the accident
happened the only two vehicles anywhere in sight Pa
were those of the Plaintiff and the Defendant." Ls
Order 31 v.14 provides that a judgment obtained by
default may be set aside by the Court or by a judge upon such
terms as to costs or otherwise as the Court or the judge thinks
fit. a
In considering whether the discretion conferred by Order
31 Β£.14 should be exercised in the present case, the learned 7
Judge cited the following well-known statement of principle by
Lord Wright in Evans v Bartlam (1937) A.C. 473 at p.489:
lee
"A discretion necessarily involves a latitude
of individual choice according to the
particular circumstances, and differs froma
case where the decision follows ex debito
justitiae once the facts are ascertained. In
a case like the present there is a judgment,
which, though by default, is a regular
judgment, and the applicant must show grounds
why the discretion to set it aside should be
exercised in his favour. The primary
consideration is whether he has merits to
which the Court should pay heed; if merits
are shown the Court will not prima facie
desire to let a judgment pass on which there
has been no proper adjudication."
tp aren eee
ops
sae op
Tass cen
After referring to the authorities in this area, the learned
Judge summed up the relevant considerations as follows:
"1. The length of delay between the time for delivery
of defence and the date of interlocutory judgment.
On this aspect the giving of notice of intention
to apply for judgment may be a relevant factor.
2. The length of delay between the entering of such
judgment and the application to set it aside.
3. The reasons for such delay. The defendant's own
contribution to the delay, as contrasted with
delay caused by his legal advisers, may fall for
consideration.
4. The evidence as to whether or not the defendant
may have a defence? The probability of a
successful defence need not be demonstrated and
the fact that the defendant's case may appear
weak, will seldom be a bar.
5. Whether the plaintiff will be prejudiced by
setting aside the judgment, the nature of the
prejudice being such that it cannot adequately be
compensated by an order for costs."
His Honour acknowledged that these considerations
indicated a philosophy that a defendant, who demonstrates that he
may have a defence, should not suffer judgment without the
seca te
ety ot
ween eee,
me al
opportunity of putting his case and being heard. But the learned
Judge refused the application because of a type of prejudice
which he described as follows:
"But there is in my view another type of
prejudice which falls for consideration and it
is a prejudice which cannot really be
ameliorated by way of costs. I refer to the
anxieties which accompany litigation in which
ordinary people become involved. The delays
experienced in our civil courts are a threat
to the administration of civil justice, they
tend to bring the law into disrepute. Such
delays promote confusion and frequently impede
the ultimate fact finding processes, as time
dulls memory. The Rules of Court were
designed to promote the orderly procedures of
litigation and the time limits imposed are
intended as an aid to reasonably prompt
disposal. Simple procedures are available to
gain extensions of time and the courts, as the
authorities illustrate, are very ready to set
aside orders based on minor infringements of
the rules or misunderstandings. But the
courts, in my view, will not serve the
community if they do not allow litigants to
utilise (within reason) the procedures
available, by the Rules, albeit such
procedures may lead to interlocutory judgment.
Frequently in these matters the courts will be
reluctant to bind persons who suffer by their
solicitors' omissions, but in the long run it
must be a matter of degree and where
solicitors are negligent clients may have
their remedies."
His Honour concluded that the delays of the appellant's
solicitors in failing to file a defence and in failing to move
expeditiously to set aside the default judgment were so "gross
and inexcusable" as to warrant the dismissal of the application.
The first question which arises is whether leave to
appeal should be granted since the dismissal of an application to
set aside a default judgment is, strictly speaking, an
Pema as:
| hm |
10.
interlocutory, not a final judgment; even if, in its practical
operation, it may well finally determine the position of the
parties (see Hall v Nominal Defendant (1966) 117 C.L.R. 423 at
p.440; Carr v Finance Corporation of Australia Limited (1981)
147 C.L.R. 246). The question raised by the application,
relating as it does to the type of prejudice which will justify a
yefusal of an application by a defendant to be let in to defend
upon the merits, is a general question of some importance. It is
worthy of the grant of leave to appeal and we propose to grant
that leave.
The resultant appeal is an appeal against the exercise
of a judicial discretion, so that the appellant can succeed only
if it be demonstrated that the judge at first instance acted upon
a wrong principle or allowed irrelevant matters to guide or
affect him or that his Honour did not take into account some
material consideration or that the result reached is unreasonable
or plainly unjust (see Adam P. Brown Male Fashions Ptv. Ltd. v
Philip Morris Inc. (1981) 148 C.L.R. 170 at P.176; S$.C.I.
Operations Pty. Ltd. v Trade Practices Commission (1984) 53
A.L.R. 283 at P.354).
Since the decision of the House of Lords in Evans v
Bartlam, supra, the settled course of authority in England and in
this country has emphasised, as fundamental to the exercise of
the judicial discretion to set aside a default judgment, the need
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for a defendant to show a prima facie defence on the merits. In
the language of Lord Wright, in the passage cited by the learned
Judge, this is "the primary consideration".
It is true, as Lord Atkin said in Evans v Bartlam (at
' p.480), that it is inappropriate to lay down rigid rules to
govern the exercise of the discretion. On the other hand,
speaking generally, the cases show that a defendant who has an
apparently good defence should not be refused the opportunity of
defending, even though a lengthy interval of time has elapsed,
"provided that no irreparable prejudice is thereby done to the
plaintiff (see Attwood v Chichester [18781 3 0.B.D. 722; Rosing
v_ Ben Shemesh Β£19601] V.R. 173; National Mutual Life Association
of Australasia Limited v Oasis Developments Pty. Ltd. Β£1983] 2
Qd.R. 441 at p.449.
In the present case, a total period of about 17 months
was lost by reason of the default of the appellant's solicitors.
However, the respondents disclaimed any specific prejudice on
this account. It was common ground that the ultimate disposition
of the principal proceedings was delayed because of other
factors, notably the need for further medical examinations. The
appellant's solicitors agreed to pay the costs thrown away
because of their default. Accordingly, the case was one in which
the appellant showed a prima facie defence and in which the
respondent was unable to demonstrate any particular prejudice by
reason of the delay of the appellant's solicitors in filing her
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defence. As we have indicated, the traditional view is that,
under such circumstances, a proper exercise of the judicial
discretion calls for the setting aside of any default judgment.
His Honour did not apply the traditional view. In the
passage in his reasons which we have already quoted he referred
to the delays commonly experienced in civil litigation, which he
rightly described as being a threat to the administration of
justice and as tending to bring the law into disrepute. He
referred, in general terms and without suggesting that his
remarks were particularly applicable to the plaintiffs in these
proceedings, to "the anxieties which accompany litigation in
which ordinary people become involved". He rightly emphasised
the role intended to be played by the Rules of Court in the
efficient disposal of litigation and the importance of adherence
to the time limits prescribed by the Rules.
We agree entirely with his Honour's description of the
delays in this case as "gross and inexcusable". Each of the
defences intended to be filed in these actions is in a common
form. The drafting of such defences should have occupied little
of the time of a competent solicitor. The solicitors for the
appellant had ample opportunity to prepare and file their
defences even before they were -- twice -- warned by the
respondents' solicitors that, in default of defences,
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13.
interlocutory judgments would be entered. Those warnings should
have alerted them to the necessity to enter defences immediately.
No satisfactory explanation has been given as to their failure to
do so.
The 11 month delay in making the application to set
aside the interlocutory judgments -- a matter which weighed
heavily with his Honour -- is even more inexcusable. Any
competent solicitor would have been aware of the importance, in
the interests of his or her client, of making such an application
forthwith. But not only did the particular solicitor handling
the matter in the appellant's solicitors' Alice Springs office --
apparently an associate of the firm -- neglect his obvious duty;
no action -- certainly no effective action -- was taken by the
partner in the Darwin office of the firm, who was aware that the
application had not yet been made, to ensure that the omission
would speedily be rectified.
It is, however, another question whether concern about
the extent of delays, either ina particular case or generally,
should, in the absence of prejudice in the particular case, be
taken into account in exercising a discretion to set aside a
default judgment. The fundamental duty of the Court is to do
justice between the parties. It is, in turn, fundamental to that
duty that the parties should each be allowed a proper opportunity
to put their cases upon the merits of the matter. Any limitation
upon that opportunity will generally be justified only by the
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14.
necessity to avoid prejudice to the interests of some other
party, occasioned by misconduct, in the case, of the party upon
whom the limitation is sought to be imposed. The temptation to
umpose a limitation through motives of professional discipline or
general deterrence is readily understandable; but, in our
opinion it is an erroneous exercise of the relevant discretion to
yield to that temptation. The problem of delays in the courts,
egregious as it is, must be dealt with in other ways: for
example, by disciplinary actions against offending practitioners
and by a comprehensive system of directions hearings or other
pre-trial procedures which enable the Court to supervise progress
-- and, more pertinently, non-progress -- in all actions. In
this respect we note, and respectfully endorse, the remarks made
py O'Leary J, as the Chief Justice then was, in Patsalidies v
Magoulias (1984) 29 NIR 1 at p.7.
In our opinion the discretion exercised by his Honour
miscarried. It being established that there was, in each action,
a prima facie defence upon the merits and prejudice in none of
the particular cases having been shown, the learned Judge should
have set aside the judgment in accordance with the approach
indicated by the reasoning in Evans v Bartlam, supra.
In the result, we would allow the appeal but impose
terms as to costs and make orders to minimize any further delay
in finalising the proceedings. We propose to order first that
the appellant's solicitors pay the costs of entering the judgment
nr
15.
and of the application before the learned Judge and, secondly,
that the hearing of the actions be expedited, that the matters be
listed forthwith before a judge or master of the Supreme Court
for the purpose of giving such directions as may be necessary or
desirable to ensure early hearings of the actions.
As to the costs of the appeal itself, costs must follow
the event. However, the respondents should have a certificate in
respect of these costs under s.6(1) of the Federal Proceedings
(Costs) Act 1981.
I certify this and the fourteen (14)
preceding pages to be a true copy of
the Reasons for Judgment of
their Honours Mr Justice Morling,
Mr Justice Beaumont and Mr Justice Wilcox
Associate: Miklli Vy,
Date: 10 April 1986
Counsel for Appellant: Mr T Pauling QC
with Mr T Riley
Solicitors for Appellant: Messrs Poveys
Counsel for Respondents: Mr G Hiley
Solicitors for Respondents: Messrs Cridland & Bauer
Date of Hearing: 7 April 1986
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| 7,159 |
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1998-07-24 00:00:00
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Khan, Zia Ur-Rehman v Minister for Immigration & Multicultural Affairs [1998] FCA 1180
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/1998/1998fca1180
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2024-09-13T22:45:55.262896+10:00
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IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY VG652 of 1997
BETWEEN: ZIA UR-REHMAN KHAN
Applicant
AND: THE MINISTER FOR IMMIGRATION AND MULTICULTURAL AFFAIRS
Respondent
JUDGE: FINN J
DATE OF ORDER: 24 JULY 1998
WHERE MADE: MELBOURNE
THE COURT ORDERS THAT:
The application be dismissed with costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY VG652 of 1997
BETWEEN: ZIA UR-REHMAN KHAN
Applicant
AND: THE MINISTER FOR IMMIGRATION AND MULTICULTURAL AFFAIRS
Respondent
JUDGE: FINN J
DATE: 24 JULY 1998
PLACE: MELBOURNE
EX TEMPORE REASONS FOR JUDGMENT
This application can be dealt with shortly. It is for an order of review under Part 8 of the Migration Act 1958 ("the Act") of a decision of the Refugee Review Tribunal of 24 October 1997 affirming a decision that the applicant, Zia Ur-Rehman Khan, not be granted a protection visa.
Of the variety of the grounds advanced in the application only three have been prosecuted (although I will refer to a fourth which was in effect abandoned during submissions). Those grounds are:
(i) the Tribunal committed an error of law in applying the real chance test in that while it made a range of findings it failed to consider at all or give sufficient weight to particular evidence;
(ii) the Tribunal constructively failed to exercise its jurisdiction (Guo Wei Rong v Minister for Immigration and Ethnic Affairs (1996) 135 ALR 421 at 433-434) in that in not considering the matters as in (i) above, it failed to consider all matters relevant to its proper exercise of jurisdiction; and
(iii) the Tribunal did not act according to substantial justice and merits of the case and so failed to observe the procedures it was required to observe, the relevant failure being that referred to in (i) and (ii) above.
It is, of course, well accepted that it is not part of this court's function in a proceeding of the present type to engage in merits review. This, unfortunately, is the actual burden of this application.
The Tribunal's Findings and Decision
So clearly misconceived is this application that I consider it unnecessary to recount the Tribunal's narrative of the facts in extensive detail. The following will suffice.
(i) Mr Khan is a Pakistan national who is a Mohajir from Karachi. He completed a degree in Pakistan and worked in Karachi in a family owned business.
(ii) From 1986 he was a member of the All Party Mohajir Students' Organisation ("the APMSO"). That body is associated with the Mohajir Quami Movement ("the MQM"). He became the person in charge of publicity at his college and in that role he publicised the organisation. He did not have a prominent organisational role in the APMSO and he saw himself as being "small fry".
(iii) Mr Khan claimed he was arrested on 10 August 1995; was accused of inciting violence and creating a general disturbance at a demonstration; and was detained for 28 days during which time he was seriously mistreated.
(iv) Mr Khan further claimed that his release was procured by bribery; he then went into hiding for 10-15 days after which he left for Australia. He said he was still in serious pain as a result of his detention when he arrived in Australia.
(v) Mr Khan asserted that his brother, sister and parents had been arrested and tortured as a consequence of the authorities pursuing him. He claimed an arrest warrant had been issued against him in relation to three murders.
(vi) A cousin who came to Australia with him gave corroborating evidence of Mr Khan's story.
The Tribunal did not accept the applicant's evidence, nor the cousin's evidence in corroboration, in relation to any of the claims and assertions made in (iii) to (v) above. This adverse finding as to Mr Khan's credibility was not challenged in the present proceeding.
Of the applicant's situation at the time of leaving Pakistan, the Tribunal concluded:
"In assessing all the material before it the Tribunal is not satisfied that the applicant was detained in 1995 or at any other time by reason of his political opinion. It notes that the applicant was never charged with any offence and that he left Pakistan on his own passport. The Tribunal finds that the applicant was not of interest to the Pakistani authorities for any Convention reason when he departed Pakistan."
The Tribunal then went on to consider "country information" as it related to discrimination against Mohajirs. This constitutes the largest single portion of the reasons. Its burden can be captured in the following:
"(a) Aforementioned country information demonstrates a protracted and violent struggle between Mohajirs and rival ethnic groups to which both sides unnecessarily contributed. A resurgence of that violence caused chaos in Karachi, especially in 1995. The State was either unable or unwilling to quell the ethnically based violence there. A disturbingly large number of Mohajirs and others were killed or otherwise harmed in Sind province.
(b) Violence involving the MQM over the past two years 'has receded'
β¦
(c) The report of Dawn, dated 27 August 1997 and submitted by the applicant, confirms the continuance of some strife in Karachi, although it is not clear from that report that the three murders reported arose from political rivalry rather than from random acts of violence. There is nothing in that report to indicate that the applicant himself faces a similar risk by reason of his political opinion."
Having considered recent developments resulting in a political accord between the MQM and the Pakistan Muslim Movement, the Tribunal concluded:
"In view of the aforementioned information and the particular circumstances of this case, the Tribunal finds that the prospect of the applicant being persecuted due to his former support of the MQM is remote."
The Tribunal then went on as it said it was "required" to do, to consider the risk to Mr Khan on a country as a whole basis, its conclusions to that point having been directed in my view to the circumstances in Sindh and particularly in Karachi. It noted that the situation elsewhere in Pakistan for Mohajirs was "considerably more settled" and, if Mr Khan feared for his safety in Karachi or elsewhere in Sindh, it would not be unreasonable to expect him to relocate to another part of Pakistan. In this the Tribunal noted his age, education and work experience.
Thus the Tribunal concluded:
"In considering all the circumstances of this case, including cumulatively, the Tribunal finds that the applicant does not have a well-founded fear of persecution for a Convention reason."
The Applicant's Case
The case as pursued at the hearing turns pivotally upon the following proposition in the applicant's written submissions and/or on the material to which it refers:
"The Tribunal had before it but failed to consider at all or give sufficient weight to the following evidence:
(1) evidence submitted by the Applicant that a colleague of his had been killed by police for attempting to flee Pakistan;
(2) evidence in "country information" that violence against MQM supporters has not ceased since 1995, albeit that it has receded;
(3) evidence submitted by the Applicant in a "Dawn" report that politically motivated killings were continuing."
The evidence referred to in (1) was contained in a letter sent by a migration agent to the Department of Immigration and Multicultural Affairs. It relied upon information supplied by Mr Khan and friends of his who also were visa applicants.
Of the three matters referred to, it is simply incorrect to claim that the Tribunal failed to consider matters (2) and (3). The Tribunal referred to the Dawn report expressly in its reasons. And a fair reading of its reasons β see Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 β would not suggest that it found that violence against MQM supporters had ceased. At best, the applicant's complaint in relation to (2) and (3) can only be as to the weight given the evidence and that is simply a matter for the Tribunal itself: Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1985) 162 CLR 24 at 41.
As to the evidence relating to the first of the three matters, it was not referred to in the Tribunal's reasons. The Tribunal is required by s 430 of the Act to set out in its reasons its findings on any material questions of fact and to refer to the evidence or other material on which the findings were based. It is not obliged to refer to every matter that may have some relevance to the issue(s) to be decided: cf Steed v Minister for Immigration and Ethnic Affairs (1981) 37 ALR 620 β the more so when it has made adverse credibility findings against the person proffering the evidence. Even if it be said that the particular evidence in question in this case could be elevated to the level of a relevant consideration β and I do not suggest it was β the failure to have regard to it does not provide a ground of judicial review under the Act: s 476(3)(e).
Notwithstanding the various ways in which it has been put as I have noted at the outset of these reasons, the applicant's case is that the Tribunal was bound to consider the totality of the evidence and the "cumulative effect" of the evidence: Sun Zhan Qui v Minister for Immigration and Ethnic Affairs (1997) 151 ALR 505 at 550. If it fails to do so, so it is claimed, then (a) it "fails to address the correct question committed to it for decision": Guo Wei Rong v Minister for Immigration and Ethnic Affairs, above, at 434; (b) there is an "unjust exclusion" of evidence bearing on the issue to be determined: cf Guo Wei Rong, above, at 461; and (c) there is a failure to act according to the substantial justice and merits of the case seemingly because the Tribunal then fails to make a decision on the issues clearly posed for it as to whether there was a "real chance" of persecution: Li v Minister for Immigration and Multicultural Affairs (1997) 144 ALR 179 at 198.
I do not consider that it has been established that the Tribunal in some way, wittingly or otherwise, failed correctly to address the Convention question required by the Act to be answered in the circumstances of this case. It clearly did so. There was not constructive failure to exercise its jurisdiction. It may have failed at least explicitly to have addressed a piece or pieces of evidence that may (or may not) have been relevant and credible. But that is another matter. It does not result in a reviewable error even if, as I have noted, that evidence could be independently elevated to the status of a relevant consideration: cf s 476(3)(e) of the Act.
I likewise am unable to accept that a failure to advert to a particular matter of itself results in an incorrect application of the law to the facts. The argument the applicant advances seems to be that if not all the evidence is considered explicitly then, when the law is applied, it is being applied to something less than the material to which it should be applied, hence there is an error in its application. The critical matter in this would seem to be that if what is said to be relevant evidence is not referred to in the reasons expressly or impliedly, such an error can be inferred. Section 430 does not impose so onerous an obligation in relation to reasons for decision as this submission requires. Likewise the submission itself, if accepted, would render superfluous in administrative law generally the more limited ground of judicial review of failure to take a relevant consideration into account and, under the Act, it would by a circuitous route negate the provisions of s 476(3)(e) of the Act.
Insofar as the applicant's submission is based on s 420(2)(b) of the Act, Li's case and Eshetu v Minister for Immigration and Multicultural Affairs (1997) 145 ALR 621, it fails for the reasons (i) that a decision was, on any view "actually made in respect of the significant issues posed in the case"; Li's case, at 198, and (ii) that the applicant has not pointed to any breach of s 420(2)(b) "procedural element" such as would ground a claim under s 476(1)(a) of the Act: see Velmurugu v Minister for Immigration and Ethnic Affairs (1998) 48 ALD 193; and insofar as reliance is placed upon a "substantive element" arising from s 420(2)(b), the complaint made has to be one founded on a ground in s 476 of the Act and that relied upon β error of law because of the failure to consider the three matters referred to above β is not made out for the reasons I have already given. What is being sought is no more than merits review.
I reject the applicant's submissions and would dismiss the application.
I would note finally that the applicant sought initially at the hearing - as also in written submissions β to ascribe error to the Tribunal's reasons because of the allegedly objectionable manner in which it considered the availability of the option to relocate within Pakistan if the applicant had fears for his safety in Karachi.
When it is recognised that the Tribunal, before considering this matter, had in its reasons focussed all but exclusively on the circumstances in Sindh and Karachi, its comments in relation to Pakistan more generally (which it said it was "required" to make) and to the possibility of relocation in any event seem quite unobjectionable. I understood counsel for the applicant to have conceded as much during submissions and, in effect to have abandoned this challenge. If such was not his intention, then I would reject the submission. It simply misapprehends the structure of reasons of the Tribunal and the place of the comments on relocation within that structure.
I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn
Associate:
Dated: 24 July 1998
Counsel for the Applicant: A. Flower
Solicitor for the Applicant: Fernandez Canda & Co.
Counsel for the Respondent: P Booth
Solicitor for the Respondent: Australian Government Solicitor
Date of Hearing: 22 July 1998
Date of Judgment: 24 July 1998
| 3,112 |
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2016-02-17 00:00:00
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Commonwealth of Australia v CTC Resources NL; In the Matter of CTC Resources NL [2016] FCA 112
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2016/2016fca0112
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2024-09-13T22:45:55.329802+10:00
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FEDERAL COURT OF AUSTRALIA
Commonwealth of Australia v CTC Resources NL; In the Matter of CTC Resources NL [2016] FCA 112
File number: NSD 1200 of 2015
Judge: FOSTER J
Date of judgment: 17 February 2016
Catchwords: CORPORATIONS β whether an application for an order winding up the defendant should be adjourned until the determination of an appeal filed by that defendant against the judgment which is the foundation of the creditor's statutory demand upon which the winding up application is based β whether, in the event that no adjournment is granted, an order winding up the defendant in insolvency should be made β relevant considerations discussed
Legislation: Corporations Act 2001 (Cth), ss 459A, 459C, 459E, 459G, 459H, 459P, 459R, 459S, 467
Judiciary Act 1903 (Cth), s 64
Trade Practices Act 1974 (Cth), s 52
Cases cited: Adamopoulos v Olympic Airways SA (1990) 95 ALR 525
Auckland Harbour Board v The King [1924] AC 318
Barnes v Addy (1874) LR 9 Ch App 244
British American Tobacco Australia Ltd v Western Australia (2003) 217 CLR 30
Commonwealth v Burns [1971] VR 825
Commonwealth v Crothall Hospital Services (Aust) Ltd (1981) 54 FLR 439
Commonwealth v Davis Samuel Pty Ltd (No 7) (2013) 282 FLR 1
Commonwealth v Davis Samuel Pty Ltd (No 8) [2014] ACTSC 312
Commonwealth v Hamilton [1992] 2 Qd R 257
CTC Resources N/L v Commonwealth of Australia [2015] VSC 238
Endresz v Australian Securities and Investments Commission (No 2) (2015) 228 FCR 334
Jekos Holdings Pty Ltd v Australian Horticultural Finance Pty Ltd [1996] FCA 619
Shmee Pty Ltd v Bresam Investments Pty Ltd [2009] VSC 657
Date of hearing: 5 February 2016
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 90
Counsel for the Plaintiff: Mr JA Hogan-Doran
Solicitor for the Plaintiff: The Australian Government Solicitor
Counsel for the Defendant: Mr M Kalyk
Solicitor for the Defendant: Irongroup Lawyers
ORDERS
NSD 1200 of 2015
IN THE MATTER OF CTC RESOURCES NL (ACN 009 061 036)
BETWEEN: COMMONWEALTH OF AUSTRALIA
Plaintiff
AND: CTC RESOURCES NL (ACN 009 061 036)
Defendant
JUDGE: FOSTER J
DATE OF ORDER: 17 FEBRUARY 2016
THE COURT ORDERS THAT:
1. The application for an adjournment of the winding up application be refused.
2. The defendant be wound up in insolvency under the provisions of the Corporations Act 2001 (Cth).
3. Peter McCluskey of Ferrier Hodgson, Level 43, 600 Bourke Street, Melbourne, Victoria be appointed official liquidator of the defendant.
4. The plaintiff's costs be costs in the liquidation of the defendant.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
FOSTER J:
1 By its Originating Process, the plaintiff, the Commonwealth of Australia (Commonwealth) seeks an order pursuant to s 459A and s 459P of the Corporations Act 2001 (Cth) (Act) winding up the defendant, CTC Resources NL (ACN 009 061 036) (CTC), in insolvency and consequential relief. The Commonwealth relies upon the failure on the part of CTC to comply with a creditor's statutory demand dated 22 December 2014 issued by it under s 459E of the Act and served upon CTC on 22 December 2014. The amount claimed in that statutory demand was $12,715,615.17.
2 On 12 January 2015, CTC filed an application under s 459G(1) of the Act in the Supreme Court of Victoria in which it sought an order setting aside the statutory demand. On 29 May 2015, Associate Justice Efthim dismissed that application with costs (CTC Resources N/L v Commonwealth of Australia [2015] VSC 238 (CTC No 1). On 29 June 2015, pursuant to s 459H of the Act, his Honour reduced the amount claimed in the statutory demand from $12,715,615.17 to $11,915,856.31.
3 The decision in CTC No 1 had the following consequences for the Commonwealth's application to wind up CTC:
(a) First, the Court must presume that CTC is insolvent except so far as the contrary is proven for the purposes of the present application (s 459C of the Act);
(b) Second, CTC may not, without the leave of the Court, oppose the Commonwealth's claim that it be wound up on a ground that:
(i) CTC relied on for the purposes of the application which it made in CTC No 1 (s 459S(1)(a)), or
(ii) CTC could have so relied on but did not so rely on for the purposes of that application (s 459S(1)(b)); and
(c) Third, the Court is not to grant leave under s 459S(1) of the Act unless it is satisfied that the ground sought to be relied upon by CTC in opposition to the Commonwealth's claim is material to proving that CTC is solvent.
4 The amount claimed by the Commonwealth against CTC in the statutory demand was founded upon two judgments and two sets of orders of the Supreme Court of the Australian Capital Territory (ACT Supreme Court) in proceeding No SC 75 of 1999 (Commonwealth v Davis Samuel Pty Ltd (No 7) (2013) 282 FLR 1 delivered on 1 August 2013) (the principal judgment) and Commonwealth v Davis Samuel Pty Ltd (No 8) [2014] ACTSC 312 delivered on 21 November 2014 (the second judgment)). In that proceeding, CTC was the sixth defendant. There were thirty defendants in total and one third party. As I have already mentioned, the amount of the judgment ordered by the ACT Supreme Court against CTC was $12,715,615.17.
5 On 23 December 2014, twelve of the defendants filed a Notice of Appeal against the principal judgment and the second judgment and the orders made by the Court to give effect to those judgments (ACTCA 67 of 2014) (the appeal). CTC is the second appellant in that appeal. There are 88 Grounds of Appeal in the Notice of Appeal. Many of the grounds are relied upon by all appellants. By its appeal, CTC seeks orders setting aside the judgment at trial as well as the consequential costs orders. It also seeks to overturn the trial judge's decision to dismiss a Cross-Claim to which it was a party/cross-claimant.
6 The present application was first returned before a Registrar of the Court on 11 November 2015. On that occasion, the proceeding was referred to a judge. It was subsequently docketed to me. The proceeding was first listed before me on 4 December 2015 when I fixed it for final hearing before me on 5 February 2016. On 4 December 2015, I also made appropriate case management directions in order to ensure that the application would be ready for hearing on 5 February 2016.
7 When the matter was called on before me on 5 February 2016, Counsel for CTC applied to have the hearing of the Commonwealth's winding up application adjourned until the resolution of CTC's appeal in the ACT Court of Appeal. Alternatively, CTC sought an adjournment for a shorter period of time (until shortly after 11 April 2016) in order to enable this Court to gain a clearer picture of the likely future progress of CTC's appeal.
8 I informed Counsel for the parties that I was minded to hear and determine CTC's application for an adjournment at the same time as hearing and determining the Commonwealth's winding up application because most, if not all, of the matters raised in support of CTC's request for an adjournment were also relevant to its opposition to the making of a winding up order (assuming that its application for an adjournment were to be refused and assuming that I were to grant leave to CTC to argue certain grounds of opposition under s 459S).
9 Counsel for CTC responded to my suggestion by submitting that he would wish to have a little time to consider his client's position were I to refuse CTC's application for an adjournment of the Commonwealth's winding up application. I informed Counsel that I was not prepared to grant such time as he should have been in a position to deal immediately with the Commonwealth's winding up application since that application had been listed for final hearing for some time and he should have proceeded upon the basis that there was no guarantee that the hearing would be adjourned. Counsel accepted this but then submitted that, in addition to the arguments which he had put in writing, he would wish to contend that the Commonwealth's application was an abuse of process. I shall return to this argument later in these Reasons. Counsel conceded that he did not wish to put on further evidence in support of this additional argument. I then proceeded to hear CTC's adjournment application and the Commonwealth's winding up application.
10 By these Reasons for Judgment, I determine CTC's adjournment application (which I propose to refuse) and the Commonwealth's winding up application (to which I intend to accede).
The Commonwealth's Case in Chief
11 The Commonwealth read five affidavits in chief. By those affidavits, the Commonwealth proved:
(a) Service of the statutory demand on CTC on 22 December 2014 and the terms of the judgment of the ACT Supreme Court upon which that demand was based;
(b) The dismissal of CTC's application to set aside the statutory demand and the reduction of the amount claimed therein;
(c) CTC's failure to pay the reduced amount claimed in the statutory demand;
(d) The amount due under the ACT Supreme Court judgments as at 6 October 2015 (viz $11,908,285.45 plus interest);
(e) Service of the Originating Process and all supporting affidavits on CTC;
(f) Notification on 7 October 2015 to Australian Securities and Investments Commission (ASIC) of the filing of the Commonwealth's winding up application;
(g) The consent of Peter McCluskey of Ferrier Hodgson to act as liquidator of CTC dated 10 July 2015 and service of the formal document recording Mr McCluskey's consent upon CTC on 28 October 2015; and
(h) Publication on 27 October 2015 on ASIC's website of notice of the Commonwealth's application to wind up CTC.
12 The above matters comprise all of the matters which the Commonwealth was required to prove in chief in order to establish a prima facie entitlement to the relief which it claims.
13 CTC did not contend that the Commonwealth had failed to prove those matters. Its case was that the Court should adjourn the proceeding or, in the alternative, if its application for an adjournment is refused, that the Court should decline to make a winding up order on discretionary grounds.
14 CTC read and relied upon two affidavits sworn by Peter Cain, its solicitor. It did not file any Notice of Grounds of Opposition to the making of a winding up order against it.
The Relevant Facts
15 CTC is a public company with 70,075,000 ordinary shares on issue. It has approximately 1200 members. CTC does not currently trade. It has not traded since January 1999 when the ACT Supreme Court initially granted freezing orders over certain assets of CTC.
16 CTC has no assets. Its liabilities comprise the judgment debt to the Commonwealth and a secured debt of approximately $1 million owed to a related party, Kamanga Holdings Pty Ltd (Kamanga). Kamanga is not presently pressing for repayment of its loan. The only Financial Statements of CTC tendered in evidence before me were the statements for the year ended 30 June 2002. These were the last such statements ever prepared by CTC.
17 CTC submitted that:
β¦ the only remaining value in [CTC] is in its appeal rights in the ACT Proceedings, including its potential claim for damages as a result of [the making of certain freezing orders against it on 19 February 1999].
18 The freezing orders granted against CTC on 19 February 1999 restrained it from dealing in any way with any part of the moneys the subject of the ACT Supreme Court proceeding No SC 75 of 1999, namely
(a) The sum of $6,000,000 remitted by the Reserve Bank of Australia to CTC on or about 17 April 1998 (the April Funds); and
(b) The sum of $2,725,000 remitted by the Reserve Bank of Australia to Davis Samuel Pty Limited, the first defendant, on or about 22 September 1998 (the September Funds).
19 Those orders also restrained CTC "from dealing with or dissipating in value any asset acquired by [CTC] through the use of any part of the April Funds or the September Funds".
20 Those orders were made by consent. They were interlocutory. The Commonwealth gave the usual undertaking as to damages in support of the making of those orders.
The Impugned Conduct
21 In 1996, the Commonwealth decided to sell certain government owned businesses. As part of the process of closing those businesses, trust accounts were established to receive income and meet expenses. These accounts were administered by the Department of Finance.
22 In 1998, the Department of Finance engaged Callform Pty Ltd (Callform) to provide "accrual accounting services" and "Financial and Management Accounting Services" for some of these accounts. Callform in turn engaged David Muir to provide those services.
23 On 17 April 1998, Mr Muir used stolen computer access details to cause the improper transfer of $6 million of Commonwealth funds from these accounts to CTC. Following receipt of these moneys, CTC made a series of transfers of the moneys to various persons and entities associated with CTC. These transfers were for the private benefit of the Endresz family and their associates. They were used for (inter alia) the purchase of real and personal property. Some moneys were also paid to the benefit of Mr Muir.
24 On 24 September 1998, Mr Muir caused the further improper transfer of $2,725,000 to Davis Samuel Pty Ltd. Most of these funds were used to acquire a listed mining company, TNG Limited (TNG). TNG is the second respondent in the appeal. $60,000 of the funds was transferred to CTC.
The ACT Supreme Court Proceedings
25 On 29 January 1999, the Commonwealth commenced proceeding No SC 75 of 1999 in the ACT Supreme Court against thirty defendants, including CTC.
26 On 19 February 1999, the freezing orders to which I have referred at [18]β[20] above were made by the Court. In effect, those orders were a continuation of orders made earlier, in January 1999.
27 The principal cause of action pleaded by the Commonwealth against most of the defendants (including CTC) was that Mr Muir and Callform breached their fiduciary duties to the Commonwealth and, as a consequence, the defendants (including CTC) were liable under one or both limbs of Barnes v Addy (1874) LR 9 Ch App 244. The Commonwealth also pleaded four additional causes of action, namely that:
(a) Mr Muir and Callform breached their equitable duties of confidence which they owed to the Commonwealth;
(b) The April transfer of funds and the September transfer of funds were both made ultra vires;
(c) The April transfer of funds and the September transfer of funds were paid under an operative mistake; and
(d) The conduct of Mr Muir amounted to misleading and deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth).
28 Various defendants (including CTC) cross-claimed against the Commonwealth for damages arising from the making of the freezing orders against those defendants. These damages claims were framed as actions for breach of an alleged contract made in April 1998 in relation to the April funds transfer, negligence in the supervision of Mr Muir and breaches of s 52 of the Trade Practices Act. The amount claimed was $127.4 million. As I have already noted, his Honour dismissed the Cross-Claim with costs.
29 The trial judge found CTC, and other defendants, liable on both the first and second limbs of Barnes v Addy in respect of the moneys that were transferred to them. His Honour also found CTC and others liable for moneys had and received upon the basis that the money was received pursuant to a mistake and was ultra vires. Thus, his Honour gave judgment against CTC for the amount which he ordered upon the basis that CTC was liable to the Commonwealth on all of the causes of action pleaded against it.
30 These findings were ultimately reflected in the orders made on 1 August 2013 and on 21 November 2014.
31 In finding for the Commonwealth on the additional cause of action to which I have referred at [27(b)] above, the trial judge relied upon the principles explained by the Privy Council in Auckland Harbour Board v The King [1924] AC 318 (Auckland Harbour Board).
32 CTC has never applied for a stay of the enforcement of the ACT Supreme Court judgment ordered against it. Rather, it has confined its response to the principal judgment and the second judgment to the filing of the Notice of Appeal to which it is a party on 23 December 2014.
The Appeal in the ACT Court of Appeal
33 In their Notice of Appeal, the appellants have raised many challenges to the primary judgment and to the second judgment. The appeal will inevitably be fact intensive.
34 It should be noted for present purposes that the Notice of Appeal as filed does not include any ground of appeal challenging the correctness of Auckland Harbour Board and thus the correctness of his Honour's reasons and orders founded upon that case. CTC submitted that it was taking steps to amend its Notice of Appeal so as to raise a fresh ground of appeal in which it will challenge the correctness of Auckland Harbour Board.
35 The appeal has not been pursued expeditiously. As at late 2015, the only step of any moment taken by the appellants was to file a draft Index for the Appeal Books. That Index has not yet been finalised although CTC submits that it will be finalised by 29 February 2016, as directed by the ACT Court of Appeal.
36 On 26 November 2015, the Commonwealth filed an Application for an order that the appellants show cause as to why the appeal should not be dismissed for want of prosecution. TNG has foreshadowed a similar application.
37 On 16 December 2015, following a series of defaults on the part of the appellants and the filing of the Commonwealth's Application seeking the dismissal of the appeal for want of prosecution, Murrell CJ listed the appeal in the May 2016 sittings in order to deal with a discrete application foreshadowed by the appellants. Her Honour did not list the appeal itself for hearing in those sittings. The Application listed by her Honour concerns a discrete claim not found in the present grounds of appeal to the effect that the trial judge lacked jurisdiction to determine many of the causes of action that he purported to determine in the matter because, while leave had been granted to bring those causes of action, they were not incorporated into the Originating Application but were merely disclosed in the pleadings. This point was never taken at trial. The foreshadowed application has not yet been filed. In any event, it does not affect CTC as appropriate relief was claimed against it in the Originating Application.
38 On 16 December 2015, Murrell CJ also provisionally set down the Commonwealth's Show Cause Application and TNG's foreshadowed Show Cause Application for hearing on 11 April 2016. It appears that those Applications were listed provisionally in order to accommodate the possibility of further defaults on the part of the appellants.
39 The appellants have expressed a desire that the current Notice of Appeal be amended. There is some evidence suggesting that Counsel has been briefed to advise on and draft appropriate amendments. There was no evidence that Counsel have been retained generally to conduct the appeal. On 16 December 2015, Murrell CJ ordered that the appellants file any Amended Notice of Appeal by 29 February 2016. That leave did not authorise an amendment to raise a ground of appeal by which CTC challenged the Auckland Harbour Board principle or the trial judge's conclusions based upon the application of that principle.
Some Other Matters
40 CTC placed before me evidence of a number of other related matters which have distracted its controllers from diligently attending to the prosecution of the appeal. It is not necessary to explain these other matters in any detail. It is sufficient for present purposes for me to record that, during 2015, the individual appellants who stand behind CTC have had to attend to a number of other significant sets of proceedings (including bankruptcy proceedings) which have occupied their time and sapped their financial resources and individual energies.
41 The Commonwealth read and relied upon an affidavit sworn by Zita Maree Rowling on 4 February 2016. Ms Rowling is the AGS lawyer with the conduct of this matter on behalf of the Commonwealth. At pars 10 to 17 of that affidavit, Ms Rowling explains those steps which remained to be carried out by the parties to the appeal before the appeal would be ready to be listed for hearing. At pars 15 to 17, Ms Rowling said:
15. Based upon the breadth of issues in the grounds of appeal as filed, and the length, complexity, volume of material and range of issues at first instance, it is my opinion that any appeal is likely to require in excess of 5 days to hear.
16. Further, given the above requirements, it would in my opinion take some months of preparation after the Notice of Appeal is finalised for the matter to be ready to be listed for hearing.
17. Having regard [sic] those matters, to the state of the listings for the May 2016 sittings of the ACT Court of Appeal and to the fact that the ACT Court of Appeal sits for only 2 weeks each sitting (held in February, May, August and November of each year), I believe that there could be no hearing of the ACT Appeal before some date in 2017.
CTC's Submissions
42 CTC submitted that, if successful on appeal, it would not only be relieved of its liability to the Commonwealth but would also have a valuable claim against the Commonwealth for damages under the undertaking for damages given by the Commonwealth in support of its application for the freezing orders granted against CTC in January and February 1999. CTC accepts that this claim would only arise at all if the ACT Court of Appeal decides that the freezing orders granted against CTC should never have been granted. For all practical purposes, the Court of Appeal would not come to that view unless it were satisfied that the trial judge erred in ordering the judgment which he ordered to be entered against CTC.
43 The foreshadowed claim on the undertaking as to damages is a claim which is made in addition to the claims for damages made by CTC and others in their Cross-Claim. The Cross-Claim was dismissed by the trial judge. The dismissal of the Cross-Claim is challenged on appeal. It was submitted that CTC's prospects in overturning the trial judge's decision on the Cross-Claim are at least arguable.
44 The particular loss claimed by CTC on the undertaking as to damages is the difference between the true value of a claim which it argues it had against Australian Securities Exchange for wrongfully delisting it in 1991 and the amount for which it settled that claim years later ($500,000). The Exchange had delisted CTC because it took the view that it was not authorised by or under the listing arrangements which applied to it to conduct a lottery bonds business in which it was then interested. The proposition is that CTC was forced to compromise that claim by the making of the freezing orders against it and that the compromise was $127 million less than the true value of the claim.
45 CTC advanced five reasons as to why the Court should adjourn the Commonwealth's winding up application until the determination of the appeal. These reasons were:
(a) CTC is no longer trading nor does it have any assets. In those circumstances, the usual rationale for the judicial reluctance to adjourn a winding up application is not applicable;
(b) CTC has no assets and its only prospect of acquiring any value is by pursuing its rights of appeal in the ACT Court of Appeal. There is no benefit to the Commonwealth in winding up CTC and any prejudice caused by an adjournment is minimal;
(c) The prejudice to CTC if the winding up application is not adjourned may well be significant. It may be shut out of its appeal;
(d) CTC is challenging the judgment debt in good faith and with relative diligence in the circumstances; and
(e) The grounds of appeal relied upon by CTC are arguable and the appeal cannot be characterised as inarguably hopeless.
46 CTC placed specific reliance upon the provisions of s 467(1)(b) of the Act as providing the relevant source of power to grant the adjournment which it seeks.
47 CTC advanced detailed submissions made both in writing and orally in support of the five reasons which it had articulated as reasons justifying an adjournment of the Commonwealth's Application.
48 I will address those submissions as necessary when I come to consider both the adjournment application and the Commonwealth's application that CTC be wound up.
The Commonwealth's Submissions
49 The Commonwealth made the following submissions in opposition to the grant of any adjournment:
(a) No stay of the enforcement of the judgment debt has been sought from the ACT Supreme Court;
(b) There is no evidence to support any of the grounds of appeal raised in the Notice of Appeal or to support CTC's consequential claim under the undertaking as to damages;
(c) At present, there is no ground of appeal sufficient to raise a contention challenging the findings of the trial judge based upon the Auckland Harbour Board principle. Even if, in due course, leave to raise such a contention is granted, the point is hopeless. Unless CTC has an arguable case in respect of this foreshadowed ground, its appeal will fail;
(d) The appeal has not been pursued expeditiously;
(e) CTC is effectively moribund and should be removed from the Register. It has not traded for over 15 years and, apart from its highly speculative claim on the undertaking as to damages provided by the Commonwealth in the ACT Supreme Court proceeding, has no assets;
(f) If there is merit in CTC's appeal, those who stand to gain from success in that appeal should fund it. Those persons are already themselves appellants in the appeal so that the additional cost of funding CTC would be minimal; and
(g) The appeal against the trial judge's dismissal of CTC's Cross-Claim is hopeless. The causes of action are fanciful and were never likely to succeed. The appeal against his Honour's detailed findings dismissing the Cross-Claim is hopeless.
Consideration and Decision
50 The Commonwealth is entitled to rely upon the presumption of insolvency created by CTC's failure to comply with the Commonwealth's statutory demand. CTC's attempt to have that demand set aside was unsuccessful. For the purposes of the Commonwealth's winding up application, the Court must presume that CTC is insolvent except so far as the contrary is proved for the purposes of the winding up application. For reasons which I will explain later in these Reasons, I consider that CTC has not proved that CTC is solvent.
51 The provisions of s 459S of the Act then fall for consideration. That section provides:
459S Company may not oppose application on certain grounds
(1) In so far as an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the company may not, without the leave of the Court, oppose the application on a ground:
(a) that the company relied on for the purposes of an application by it for the demand to be set aside; or
(b) that the company could have so relied on, but did not so rely on (whether it made such an application or not).
(2) The Court is not to grant leave under subsection (1) unless it is satisfied that the ground is material to proving that the company is solvent.
52 In the present case, CTC submits that it has lodged an appeal from the principal judgment and the second judgment, that that appeal is being pursued on genuine grounds, that that appeal has been and continues to be prosecuted with relative diligence and that its prospects are arguable. CTC accepts that, because it raised these matters in support of its application to set aside the statutory demand, it requires leave under s 459S(1) in order to traverse these matters again at the hearing of the winding up application. Its contention is that the existence and strength of the appeal are matters which are critical to assessing CTC's solvency. This last submission is correct. Therefore, to the extent that leave is required, I grant leave to CTC to re-agitate these matters for the purposes of the hearing before me.
53 The evidence led by CTC as to its financial position was as follows:
(a) As at 30 June 2002, it was not trading at all. It had a deficit of assets over liabilities of $6,146,902 with unpaid trade creditors owed $202,490 and total assets of $55,588; and
(b) As at late 2015 and also at the present time, I infer, it is not trading (having not traded at all since 1999) and has no assets. Its only liabilities are the balance of the judgment debt owed to the Commonwealth (almost $12 million plus interest) and approximately $1 million owed to the secured creditor Kamanga. Kamanga is not pressing for payment of the debt owed to it.
54 It is obvious from the circumstances described at [53] above that CTC is insolvent unless it succeeds in its appeal against the principal judgment and the second judgment and also recovers damages under the undertaking as to damages given to the Court by the Commonwealth in order to support the freezing orders made against CTC and others in January and February 1999 or under its Cross-Claim, the dismissal of which is under appeal in the appeal.
55 Thus, my assessment of the strength of CTC's appeal is critical to my determination as to whether CTC has adduced sufficient evidence to rebut the presumption of insolvency raised by s 459C.
56 In addition, it seems to me that my assessment of the strength of CTC's appeal, my findings concerning CTC's conduct of the appeal and my findings as to when that appeal is likely to be heard are also critical factors in the exercise of my discretion in relation to the adjournment of the Commonwealth's winding up application.
57 Counsel for CTC addressed the strength of its case on appeal under four headings:
(a) Delay;
(b) Barnes v Addy;
(c) Auckland Harbour Board; and
(d) Mistake.
58 The principal judgment is 543 pages long and comprises 2,394 separate paragraphs. The second judgment is 121 pages long and comprises 527 separate paragraphs together with several pages of schedules.
59 The grounds of appeal grouped under subpars (a), (b) and (d) in [57] above are fact intensive. The trial before the trial judge occupied three months of court time. There are thousands of pages of transcript and many exhibits. The Commonwealth submitted that CTC had not supported any of its grounds of appeal with evidence. It submitted that, for this reason, the fact intensive grounds of appeal cannot be assessed.
60 I am prepared to assume, for the purposes of my consideration of the matters presently before the Court, that the fact intensive grounds of appeal are not unarguably hopeless. However, I wish to make clear that I do not intend to convey by making that assumption that I have evaluated those grounds at all.
61 The Commonwealth submitted that, for CTC to succeed in its appeal, it was required to succeed in overturning the trial judge's conclusions in respect of all causes of action relied upon by the Commonwealth. Success in relation to some, but not all, of those causes of action would not be sufficient. In particular, the Commonwealth submitted that, in order for CTC to overturn the judgment entered against it in the ACT Supreme Court, it was obliged to overturn the trial judge's conclusion that the judgment could be supported on a stand-alone basis because of the reasoning in Auckland Harbour Board, which was adopted and followed by his Honour. This much was, I think, accepted by Counsel for CTC.
62 The Commonwealth went on to submit that, at the present time, CTC had not raised any challenge to his Honour's reasoning based upon that decision. Nor has it sought leave to amend its Notice of Appeal in order to raise such a contention. The Commonwealth also submitted that, as a matter of substance, any argument to the effect that the reasoning of the trial judge based upon Auckland Harbour Board is erroneous would be bound to fail.
63 The principle followed by the trial judge in the present case as stated in Auckland Harbour Board is conveniently encapsulated in the following passage (at 326β327 of the report)
β¦ it has been a principle of the British Constitution now for more than two centuries, a principle which their Lordships understand to have been inherited in the Constitution of New Zealand with the same stringency, that no money can be taken out of the consolidated Fund into which the revenues of the State have been paid, excepting under a distinct authorization from Parliament itself. The days are long gone by which the Crown, or its servants, apart from Parliament, could give such an authorization or ratify an improper payment. Any payment out of the consolidated fund made without Parliamentary authority is simply illegal and ultra vires, and may be recovered by the Government if it can, as here, be traced.
64 In Commonwealth v Crothall Hospital Services (Aust) Ltd (1981) 54 FLR 439 (Crothall), the Full Court adverted to the possibility that s 64 of the Judiciary Act 1903 (Cth) had the effect of destroying the Commonwealth's cause of action for the recovery of money based upon the Auckland Harbour Board principle. In Crothall, Ellicott J said that the better view is that the section does not have this effect. He went on to say that, given that he had concluded that the principle had no operation in the case with which he was dealing, it was unnecessary to express a concluded view on the matter.
65 Blackburn and Deane JJ agreed with Ellicott J.
66 The Auckland Harbour Board principle was endorsed by Newton J in Commonwealth v Burns [1971] VR 825 (Burns) at 827.
67 The effect of s 64 and Burns was approved by the High Court in British American Tobacco Australia Ltd v Western Australia (2003) 217 CLR 30 at 65 [82]β[83] per McHugh, Gummow and Hayne JJ with whom Callinan J agreed at 90 [172].
68 In its submissions, CTC submitted that public policy did not require a broad operation of the Auckland Harbour Board doctrine. CTC went on to articulate arguments in support of that general proposition.
69 However, the present state of the law is squarely against the submissions made by CTC on this point. In particular, the High Court judgment in British American Tobacco Australia Ltd v Western Australia stands as firm authority against the arguments raised by CTC.
70 CTC also argued that the transfer of funds effectuated by Mr Muir were in fact authorised in any event. This contention runs counter to specific findings made by the trial judge at [1741]β[1742] of the principal judgment. As presently advised, I see no arguable basis for upsetting that finding.
71 It seems to me tolerably clear that, in the circumstances of the present case, Parliament only allowed appropriation for a purpose designated by the Minister. If the purpose for which the funds were used was not designated by the Minister, it follows ipso facto that the funds were not appropriated for a proper purpose.
72 Specific reliance was placed upon a decision of the Supreme Court of Queensland in Commonwealth v Hamilton [1992] 2 Qd R 257. That case is distinguishable because the defendant in that case brought himself within the parliamentary authorisation notwithstanding his fraudulent actions. In the present case, there was no specified purpose for which the funds could have been paid to CTC, whether by deception or otherwise.
73 CTC has not yet raised a challenge to the Auckland Harbour Board principle. Were it to try to do so, it would meet significant opposition at the leave stage and, ultimately, in the event that leave were granted, would have no real prospect of succeeding in the arguments which it has foreshadowed in support of the proposition that the principle has no application in Australia. Given that, in order to succeed in its appeal, CTC must successfully challenge the trial judge's acceptance of the Auckland Harbour Board principle, I have come to the conclusion that CTC has no real prospect of succeeding in its appeal. It is not necessary to consider other grounds of appeal.
74 If that be the case, for obvious reasons, there is no substance in the foreshadowed claim for damages under the undertaking as to damages given by the Commonwealth in support of the freezing orders which it obtained against CTC.
75 It necessarily follows from these conclusions that, contrary to submissions made on its behalf, CTC is insolvent. That being so, ordinarily it should be wound up unless there is good reason not to wind it up at all or, at least, not to wind it up now.
76 At [2227]β[2314] of the principal judgment, the trial judge addressed the Cross-Claim made by various defendants including CTC. His Honour comprehensively rejected all causes of action relied upon by the cross-claimants. His Honour found that there was no contract as pleaded and, even if such a contract had been made, the Commonwealth had not breached it. His Honour also found that there was no duty of care as alleged and no loss or damage as alleged. The latter finding was, in part, based upon a conclusion that the report of Profin Consulting relied upon by CTC at the trial had no evidentiary value or foundation. Without that report, there was no evidence at all of loss or damage flowing from the causes of action pleaded in the Cross-Claim. His Honour held that, even if the other hurdles which stood in the way of CTC's Cross-Claim could be overcome, there was simply no evidence of any loss. For similar reasons, his Honour rejected the cross-claimants' claim under the Trade Practices Act.
77 On appeal, CTC will have to confront all of these findings, including the finding that there was no evidence of loss or damage.
78 In argument before me, Counsel for CTC focussed upon CTC's claim under the undertaking as to damages rather than its prospects of appeal in relation to the Cross-Claim which his Honour had dismissed. At times, I rather thought that Counsel had fairly much abandoned that Cross-Claim as a lost cause.
79 Doing the best I can on the evidence before me and the submissions made to me, I am of the view that CTC's prospects of overturning the trial judge's decision in relation to its Cross-Claim are very poor indeed. I do not consider CTC's appeal in relation to that Cross-Claim to be arguable.
80 I now turn to address the other discretionary factors raised by the parties in relation to the two applications with which I am dealing.
81 CTC is almost certainly insolvent as a matter of fact. In any event, the Commonwealth is entitled to rely upon the presumption of insolvency which arises under s 459C of the Act. There is no actual barrier to CTC resuming trading if its directors see fit. There is no undertaking from the directors or the shareholders to take steps to ensure that CTC does not trade. During argument, Counsel for CTC mentioned that he may be able to secure undertakings from the directors of CTC to the effect that they will ensure that it does not trade. However, no such undertakings have been proffered. CTC is insolvent with a substantial deficit of assets over liabilities. It has long since ceased to trade. These factors weigh heavily in favour of its being wound up.
82 It does not necessarily flow from the circumstance that a winding up order is made that CTC's appeal will be stultified. Mr Cain, the solicitor for CTC, has sworn an affidavit in which he said that CTC's appeal was currently being funded by those associated with it. The funders were not identified. Those persons (whoever they are) have not given evidence before me. There is no reason, at the moment, why I should conclude that those persons will cease funding CTC if it is wound up. Furthermore, if the liquidator appointed to CTC forms the view that the appeal should be pursued, then there is no reason why it would not be pursued if appropriate funding was forthcoming. Of course, should the liquidator form the view that the appeal should be abandoned for lack of merit or for lack of funds or that the grounds to be relied upon should be truncated substantially, these are outcomes which are worthy and which ought not be regarded as undesirable. In this regard, the Commonwealth emphasised that it was in the interests of all parties to the appeal that the appeal be run efficiently and in respect of only those grounds which had some arguable prospect of success.
83 The appeal has not been prosecuted with any diligence. The reasons proffered by CTC go some way to explaining the delay although they do not fully do so. Further, it is quite clear that, if the appeal survives the current want of prosecution applications, a hearing date will not be allocated for quite some considerable time and certainly not until next year (2017).
84 I do not put much weight on the submission advanced on behalf of CTC that the Commonwealth has nothing to gain by winding up CTC and the prejudice to CTC may well be significant. The matters which I have discussed at [82]β[83] above satisfactorily answer these contentions.
85 I am conscious that the Act requires a winding up application to be determined within six months after it is made (s 459R(1)) unless that period is extended under s 459R(2). Before granting an extension, the Court must be satisfied that there are special circumstances justifying the extension. No such circumstances exist here. In any event, the authorities make clear that the Court should not ordinarily adjourn the hearing of a winding up application let alone do so for any extended period of time.
86 Counsel for CTC also submitted that it was an abuse of process for the Commonwealth to seek to wind up CTC in the circumstances of this case. He submitted that there was no utility in a winding up order being made and that the Commonwealth was pursuing the winding up of CTC in order to stultify the appeal. For reasons already explained, I reject these submissions. The Commonwealth is entitled to seek to wind up CTC. Such action is a legitimate use of the Court's processes in the circumstances of this case.
87 Finally, much was made in CTC's submissions of the decision of the Full Federal Court in Endresz v Australian Securities and Investments Commission (No 2) (2015) 228 FCR 334, the decision of the Supreme Court of Victoria in Shmee Pty Ltd v Bresam Investments Pty Ltd [2009] VSC 657 and the decision of Drummond J in Jekos Holdings Pty Ltd v Australian Horticultural Finance Pty Ltd [1996] FCA 619.
88 Each of these cases provides an example of the way in which, depending upon all relevant circumstances, a court might exercise its discretion in relation to the adjournment of a winding up application. Critical to the reasoning of those decisions in which the Court allowed adjournments were the circumstances that the company was diligently pursuing its appeal, that the appeal was brought on genuine grounds, that the appeal was not inarguably hopeless, that a winding up order had no utility, that the true objective of the applicant was probably to seek to terminate the appeal proceedings and that funding for the appeal was in place. For the reasons which I have explained, most, if not all, of these considerations are not present in this case. The observations made by Burchett and Gummow JJ in Adamopoulos v Olympic Airways SA (1990) 95 ALR 525 (Adamopoulos) at 531β532 provide useful guidance as to the considerations which the Court should take into account when considering an application to adjourn a bankruptcy proceeding and thus a winding up proceeding. In that case, their Honours said that a bankruptcy court should not proceed to sequestrate the estate of a debtor if an appeal is pending against the judgment relied on as the foundation of the bankruptcy proceedings provided that the appeal is based on genuine and arguable grounds. In the present case, I have concluded that the appeal is not likely to succeed. Adamopoulos is distinguishable for that reason.
Conclusion
89 For all of the above reasons, I have decided to refuse CTC's application for an adjournment. In light of that decision, there is no reason not to wind up CTC. I will therefore make a winding up order.
90 There will be orders accordingly.
I certify that the preceding ninety (90) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster.
Associate:
Dated: 17 February 2016
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Agha v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCA 164
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FEDERAL COURT OF AUSTRALIA
Agha v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCA 164
MIGRATION β habeas corpus β real likelihood or prospect of removal from Australia in the reasonably foreseeable future β burden of proof - satisfaction to a sufficient degree in the context of determining the personal liberty of the applicants β consideration of the expertise of persons responsible for the conduct of Australia's international relations - drawing inferences from expert opinion and communications between Australian government and government of a foreign state
EVIDENCE β hearsay exception - where evidence relevant to another purpose β expert opinion β specialised knowledge based on experience
COSTS - person detained should not be deterred by the prospect of a costs order from seeking his or her liberty
Evidence Act 1995 (Cth) s 60 & 136
Migration Act 1958 (Cth) s 198
Agha v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 1512 referred to
Attorney General UK v Heinemann Publishers Australia Pty Limited (1988) 165 CLR 30 referred to
Cabal v United Mexican States (No 6) (2000) 174 ALR 747 applied
Haney v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 1555 applied
Hussain v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 1513 referred to
Minister for Immigration and Multicultural and Indigenous Affairs v Al Masri (2003) 197 ALR 241 applied
Petrotimor Companhia de Petroleos S.A.R.L. v Commonwealth of Australia (2003) 197 ALR 461 referred to
Qasim v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 1569 referred to
R v Home Secretary; ex parte Khawaja [1984] 1 AC 74 applied
Rahmatullah v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 1573 referred to
SHMB v Goodwin [2003] FCA 1053 referred to
SPKB v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 546 referred to
SPKB v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCAFC 296 referred to
SPKB v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 1116 referred to
SPKB v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCAFC 295 referred to
WAIS v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCA 1625 referred to
D Clark & G McCoy Habeas Corpus: Australia, New Zealand, The South Pacific, Federation Press 2000
ZAMAN AGHA v MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
N 1836 of 2003
MOHAMMAD ADIL v MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
N 1983 of 2003
MOHAMMAD KAZIM KAZIMI v MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
N 1984 of 2003
MOHAMMAD HUSSAIN v MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
N 1995 of 2003
JACOBSON J
SYDNEY
2 MARCH 2004
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY N
BETWEEN: ZAMAN AGHA N 1836 of 2003
APPLICANT
AND: MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
RESPONDENT
JUDGE: JACOBSON J
DATE OF ORDER: 2 MARCH 2004
WHERE MADE: SYDNEY
MINUTES OF ORDER
THE COURT ORDERS THAT:
The application be dismissed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY N
BETWEEN: MOHAMMAD ADIL APPLICANT N 1983 of 2003
AND: MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS RESPONDENT
JUDGE: JACOBSON J
DATE OF ORDER: 2 MARCH 2004
WHERE MADE: SYDNEY
MINUTES OF ORDER
THE COURT ORDERS THAT:
The application be dismissed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY N
BETWEEN: MOHAMMAD KAZIM KAZIMI APPLICANT N 1984 of 2003
AND: MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS RESPONDENT
JUDGE: JACOBSON J
DATE OF ORDER: 2 MARCH 2004
WHERE MADE: SYDNEY
MINUTES OF ORDER
THE COURT ORDERS THAT:
The application be dismissed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY N
BETWEEN: MOHAMMAD HUSSAIN APPLICANT N 1995 of 2003
AND: MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS RESPONDENT
JUDGE: JACOBSON J
DATE OF ORDER: 2 MARCH 2004
WHERE MADE: SYDNEY
MINUTES OF ORDER
THE COURT ORDERS THAT:
The application be dismissed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY N
BETWEEN: ZAMAN AGHA N 1836 of 2003
APPLICANT
AND: MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
RESPONDENT
BETWEEN: MOHAMMAD ADIL APPLICANT N 1983 of 2003
AND: MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS RESPONDENT
BETWEEN: MOHAMMAD KAZIM KAZIMI APPLICANT N 1984 of 2003
AND: MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS RESPONDENT
BETWEEN: MOHAMMAD HUSSAIN APPLICANT N 1995 of 2003
AND: MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS RESPONDENT
JUDGE: JACOBSON J
DATE OF ORDER: 2 MARCH 2004
WHERE MADE: SYDNEY
REASONS FOR JUDGMENT
Introduction:
1 These are four applications for relief in the nature of habeas corpus directed to the Minister to cause her to release the applicants from immigration detention. They raise common questions of fact and law and were heard together.
2 The applicants are young men who claim to be Afghan nationals. They have been in detention for approximately three years since their arrival in Australia without identification documents in 2001. I will refer to them by their surnames because, for reasons mentioned below, it is unnecessary to apply the provisions of s 91X of the Migration Act 1958 (Cth) ("the Act").
3 Mr Agha is detained in Port Hedland and Messrs Adil, Kazimi and Hussain are in detention in Baxter. Each of them requested voluntary return to Afghanistan during 2002, that is to say approximately 18 months ago. However, the Afghan authorities have informed the Department of Immigration Multicultural and Indigenous Affairs ("DIMIA") that they have not been able to identify the applicants as Afghan nationals. Accordingly, the Afghanistan Embassy has not issued passports or travel documents to enable the applicants to travel to Afghanistan.
4 These proceedings were commenced by applications filed in November 2003. Each of the applications seeks the applicant's release from detention upon the basis that although his detention in 2001 was lawful, he was unlawfully detained at the date of filing the application.
5 The question which arises in each case is whether there is a real likelihood or prospect of the applicant's removal from Australia to Afghanistan in the reasonably foreseeable future. This is the second limitation on the power of detention referred to by the Full Court in Minister for Immigration and Multicultural and Indigenous Affairs v Al Masri (2003) 197 ALR 241 ("Al Masri") at [136]. The first limitation to which the Full Court referred at [135], namely that the Minister's purpose must be the bona fide purpose of removal is not in issue in these proceedings.
6 The Afghanistan Embassy has informed DIMIA that on the basis of information supplied by Messrs Agha, Adil and Hussain, it has been unable to identify them at the national or district levels in Afghanistan. It has therefore informed DIMIA that, in the absence of further investigation, it will not issue passports or documents known as one-way travel documents which would enable them to return to Afghanistan.
7 Mr Kazimi's position is slightly different because in December 2003 the Embassy informed DIMIA that his case might fall within the criteria for which he could be considered to qualify for the issue of a one-way travel document.
8 However, these applications do not turn upon the precise state of the negotiations between the Australian Government and the Government of Afghanistan for the repatriation of the applicants to that country. This is because there was a body of evidence which I admitted under s 60 of the Evidence Act 1995 (Cth) of communications between DIMIA and the Afghanistan Embassy (and also communications between DIMIA and the International Organisation for Migration) about the establishment of an Afghan identity checking unit known by the acronym IDCU.
9 DIMIA has been informed by the Afghan Embassy that the IDCU will be fully operational by early February 2004 and that it will have the facilities to be able to conduct on the ground enquiries to verify the identities of the applicants in the villages of Afghanistan in which they claim to have lived.
10 The question of whether the Al Masri condition has been satisfied depends upon whether I am prepared to infer from the communications between officers of DIMIA and the Afghan embassy (and also communications between DIMIA and the International Organisation for Migration to which I refer later) that there is a real likelihood or prospect of the applicants' removal in the reasonably foreseeable future. Ms Mathews, an officer of DIMIA gave evidence that, based upon those communications, there was such a likelihood or prospect. The application also turns upon whether I accept Ms Mathews' opinion. Another officer of DIMIA, Mr Stannard, gave evidence of his opinion that there was a real likelihood that Mr Kazimi would be returned. There was also evidence from another DIMIA officer, Mr Wallace, of his communications with the Afghan Embassy about each of the applicants.
The Applicants
11 Each of the applicants claims to have lived in a village remote from Kabul. Mr Agha and Mr Hussain claim to have come from Nangarhar province, Mr Adil from Uruzgan province and Mr Kazimi claims to have come from Ghazni province.
12 Each of the applicants arrived in Australia by boat. Mr Agha arrived in June 2001, Mr Adil and Mr Kazimi arrived in March 2001 and Mr Hussain arrived in January 2001. As I have said, they arrived without travel documents.
13 Shortly after arrival in Australia, each of the applicants applied for a protection visa but each application was unsuccessful before the delegate and the Refugee Review Tribunal ("the RRT"). Mr Agha did not seek judicial review and the applications for judicial review brought by Messrs Adil, Kazimi and Hussain were ultimately unsuccessful.
14 During 2002 the Australian Government established the Afghanistan Voluntary Reintegration Program ("the Program") under which Australia provides financial assistance to Afghanis who return to their country voluntarily. Each of the applicants has requested voluntary return to Afghanistan pursuant to this program. Each has signed a request that the Minister remove him from Australia as soon as reasonably practicable.
15 Messrs Adil, Kazimi and Hussain signed their requests for removal to Afghanistan in July 2002. Mr Agha signed his request in September 2002.
The Applicants' attempts to obtain travel documents
16 At the time of their requests for voluntary return to Afghanistan, that is in July 2002 in the cases of Messrs Adil, Kazimi and Hussain, and in September 2002 in the case of Mr Agha, each applicant applied to the Afghanistan Embassy for the issue of a passport.
17 Between that time and about November 2003 officers of DIMIA tried to facilitate communication between the applicants and the Embassy to check their passport applications. They also made suggestions to the applicants as to the steps they might take to provide information to the Embassy which would improve their prospects of obtaining passports.
18 Each of the applicants was interviewed by an officer of the Afghanistan Embassy within about a week of the date on which the passport application was lodged. Since then there have been many communications between DIMIA and the Embassy but it is unnecessary to record all of the details.
19 It is plain that there has been substantial delay in dealing with the position of the applicants and of other similarly placed persons. The issue of one way travel documents in lieu of passports was put forward as a possible solution to the impasse between the Australian authorities, who wish to secure repatriation, and the Afghan Government which did not accept that the detainees were entitled to Afghan nationality. Ms Mathews gave evidence of her understanding that this solution was agreed to by the Afghan Refugees Affairs Minister following a visit to Australia and Nauru in June 2003.
20 Ms Mathews' evidence was that the one way travel document, which falls short of evidence of citizenship, was designed by the Afghan authorities to speed up the return of failed asylum seekers claiming to be nationals of Afghanistan. The document would be issued to people who claimed to be from Afghanistan but whose identity could not be positively verified because of incomplete records in an area, so long as they met a security check. However, the document would not be issued to persons whose claimed identity was not supported by or was contrary to records which were intact when it was expected that the records would confirm their identity.
21 On 9 October 2003 Ms Mathews wrote to Mr Stannard and others referring to discussions she had held with the Afghan Embassy about further interviews to be undertaken by the Embassy with persons in detention who were awaiting travel documents. Ms Mathews' email requested Mr Stannard's assistance in arranging the interviews. The email stated that Mr Qassem, who is the First Assistant Secretary of the Embassy, would conduct the interviews by phone. It also said that a priority list of detainees in Baxter had been identified.
22 On 30 October 2003 Mr Wallace sent an email to Mr Qassem requesting interviews with a list of eleven detainees at Baxter. The list included Messrs Adil , Kazimi and Hussain. Mr Qassem was asked to provide Mr Wallace with the dates and times of interviews for the purpose of considering the grant of one-way travel documents.
23 On 31 October 2003 Mr Wallace sent a similar letter to Mr Qassem requesting an interview of Mr Agha at Port Hedland.
24 On 11 November 2003 Mr Qassem sent an email to Mr Wallace stating that the Embassy had received correspondence from Kabul about Mr Agha and Mr Hussain. The email stated that the Embassy had been informed that the authorities at the "District levels" where Mr Agha and Mr Hussain claimed to have lived were not able to verify the authenticity of their past residence in those areas.
25 On 13 November 2003 Mr Qassem agreed to interview Messrs Adil, Kazimi and Mr Hussain at Baxter but he indicated that Mr Agha, who was at Port Hedland, would not be interviewed.
26 On 17 November 2003 Ms Mathews sent an email to Mr Qassem thanking him for letting DIMIA know about the difficulty in verifying the identities of Mr Agha and Mr Hussain. She asked whether the Embassy had decided that those persons had not met the requirements for the grant of Afghan passports. She also asked whether it would be possible to assess them for one-way travel documents with further enquiries then being undertaken on their arrival in Afghanistan.
27 On 19 November 2003 Mr Qassem sent an email to Ms Mathews stating that the cases of three individuals had been closed and the investigation as to their Afghan nationalities had been halted. The list included Mr Agha. It does not appear to have included Messrs Adil, Kazimi or Hussain.
28 Entries on the DIMIA data base indicate that on 20 November 2003 Mr Qassem held interviews with Mr Adil, Mr Kazimi and Mr Hussain.
29 On 20 November 2003 Mr Wallace sent an email to Mr Qassem asking whether Mr Agha had mentioned in his initial passport interview that he had a sister in Jalalabad and whether the authorities in Afghanistan had investigated the claim.
30 On 21 November 2003 Mr Qassem responded to this enquiry stating that Mr Agha had mentioned his sister and another close relative. However, he stated that the authorities in Afghanistan had checked the registers without success. He said that the only further investigation option with Mr Agha's case and other similar cases would be to initiate "an extensive foolproof investigation" which would involve interviews with local people on the ground by the proposed IDCU. Mr Qassem also stated that the process of checking through normal Interior Ministry channels for Mr Agha had come to an end and the case could only be reactivated through the IDCU whenever it was established.
31 On 4 December 2003 Mr Qassem sent an email to Mr Wallace stating that the Afghan authorities had not been able to trace the identities of Messrs Agha, Adil and Hussain. The email stated that this meant that the relevant authorities had "already and exhaustively" gone through the process of identity checking in the conventional way. The email continued as follows:-
"Investigation, with a fair bit amount realistic hope of conclusive results, on the cases of these men could only be reinitiated through the proposed ID checking unit whose mandate is envisaged to be extensive enough to include wider ranging measures than the hitherto conventional and normal ones have been administratively entrusted to undertake.
At this stage, we cannot conclusively rule out, only as much as we cannot rule in, their Afghan nationality because the existing system in Afghanistan inherently is not designed to undertake the level of investigation due to these cases."
32 Later on 4 December 2003 Mr Qassem sent a further email to Mr Wallace stating that the Embassy had not received a communication from Kabul about Mr Kazimi and that his case might fall within the criteria for consideration of the issue of a one-way travel document.
33 On 5 December 2003 Mr Qassem sent an email to Mr Wallace stating that the recent interviews which he conducted at Baxter were not about nationality but were about "security profiles" which were to be provided to security agencies in Afghanistan.
34 On 10 December 2003 Ms Mathews sent an email to Mr Qassem setting out her understanding of the present position about travel documents for Mr Agha, Mr Adil and Mr Hussain. She said that her understanding was that the authorities in Kabul were not able to identify them and that the Embassy was concerned that the information provided by the applicants may not have been correct. Ms Mathews also said it was her understanding that Mr Qassem would be prepared to send further information about those persons to Afghanistan and that if this allowed the authorities to identify them, a travel document would be issued.
35 Mr Qassem replied by email on the same day confirming Ms Mathews' understanding of the position concerning Messrs Agha, Adil and Hussain. He also said that while acknowledging that Mr Kazimi could qualify for a one-way travel document, he could not put a timeline on the process. He said that it was likely that the process of enquiries about a one-way travel document would be overtaken by the establishment of the IDCU which would expedite the process.
36 On 13 January 2004 Mr Stannard sent an email to Mr Qassem referring to a meeting of 9 January 2004 at which Mr Qassem said he would like to further interview Mr Agha about his passport application.
37 The meeting of 9 January 2004 to which Mr Stannard referred seems to have been a meeting at the Embassy attended by Mr Qassem, Ms Mathews, Mr Stannard, Mr Wallace and another DIMIA officer. Counsel for the applicants tendered a written record of the meeting which I admitted as a confidential exhibit.
38 The record of the meeting of 9 January 2004 refers to the process for verifying the identities of passport applicants. I will refer to it again to the extent necessary when dealing with the evidence relating to the IDCU.
39 On 14 January 2004 Mr Stannard sent an email to Mr Qassem stating that, as agreed at the meeting of 9 January 2004, a list of persons regarded as top priority for the IDCU was attached. The list contains the names of 22 persons. The applicants are numbered 1 to 4 on the priority list.
40 Since 14 January 2004 each of the applicants has provided new material to facilitate his identification. This includes fingerprints and photographs.
The IDCU
41 Ms Mathews gave evidence that the proposal for the establishment of the IDCU was first discussed with Afghan officials in September 2002 during a visit by DIMIA officials to Afghanistan. The effect of her evidence was that it was agreed between the governments that the IDCU would be established to facilitate the return of failed asylum seekers to Afghanistan and that Australia would provide funding.
42 On 14 November 2002 the then Minister, Mr Ruddock, approved a submission which was prepared by Ms Mathews recommending the commitment of AUD 200,000 to fund a dedicated unit within the Afghan Interior Ministry to undertake identity and nationality checking required to support the assessment of passport applications by failed Afghan asylum seekers in Australia and Nauru.
43 Ms Mathews' evidence was that, in February 2003, documents were provided to DIMIA by the Government of Afghanistan outlining the possible structure of the IDCU. However, she said that the documents were difficult to interpret and that there were difficulties for DIMIA to respond to the proposal.
44 It is clear that, for whatever reason, the cases of the present applicants and the question of the establishment of the IDCU were not advanced in communications with the Afghan authorities until about October 2003.
45 On 27 October 2003 Mr Mahmoud Saikal, the Afghan Ambassador to Australia, sent an email to Ms Rosemary Greaves and Mr Dominic English of DIMIA. Mr Greaves was Ms Mathews' superior officer and Mr English was Ms Mathews' predecessor in her current position in DIMIA.
46 Mr Saikal set out a list of immediate needs for the IDCU. The list consisted of items of equipment such as cars, computers, mobile phones, satellite phones and faxes and also salaries and travel allowances for 27 people for a period of six months. Estimates of the costs of these items were stated in US dollars. The total was USD 140,000 which at the then current exchange rate was approximately AUD 200,000.
47 On 30 October 2003, Mr Richard Danziger, Chief of Mission of the International Organisation for Migration ("IOM") in Afghanistan sent an email to Mr English agreeing to assist DIMIA with the establishment of the IDCU.
48 During November 2003 there were discussions between DIMIA, the IOM and the Afghan authorities about the establishment of the IDCU. A draft document apparently considered by the IOM in late November 2003 was tendered by the applicants.
49 The draft document states that the purpose of the IDCU is to enhance the capacity of the Afghan authorities to identify persons for the issue of travel documents. The first draft of the document stated that the IOM would provide interim financial reports on the expenditure of funds. It would appear from the draft that the IOM did not want to have a role in providing authoritative reports to DIMIA on the expenditure of the funds.
50 On 17 December 2003 the Australian Government transferred AUD 200,000 to the IOM for the establishment of the IDCU.
51 On 9 January 2004 at the meeting to which I referred at [37] above, Mr Qassem explained the process of verification of identity. The record of the meeting indicates that the DIMIA officials were informed of procedures which would provide additional capacity of the IDCU to verify the identity of passport applicants.
52 On 13 January 2004 Amr Taha of the IOM in Kabul sent an email to Ms Mathews attaching minutes of a meeting between IOM and IDCU officials in Afghanistan. The minutes included a list of the names of 17 persons comprising the IDCU unit and gave the status of items purchased as at 13 January 2004. The list indicated that cars, computers and printers had been purchased but satellite phones and faxes and mobile phones were yet to be acquired.
53 The minutes stated that the IDCU administrative director had assured the IOM that the IDCU would be up and running by early February and that the IDCU was awaiting "a couple of cases" from Australia to "test" the operations of the IDCU.
54 On 15 January 2004 Mr Qassem sent an email to Ms Mathews attaching a document explaining the operations of the IDCU. The document states that the IDCU is a new establishment within the Interior Ministry of the Government of Afghanistan. It states that a joint commission of five Members oversees the daily operation of the IDCU and provides further information about the administration of that unit.
55 The document also states that office space had been made available within the Interior Ministry, that the office is furnished and that four vehicles have been purchased. It states that the communication equipment had not yet been purchased but that the joint commission was looking forward to seeing the IDCU fully operational by February 2004.
56 The document also contains information about identity checking procedures. A confidentiality order was made in respect of that part of the document. It is sufficient to say that the document includes a statement as to what will be done to trace the identity of persons who have lived outside Afghanistan for a period of time.
57 On 20 January 2004 Mr Danziger sent an email to Ms Mathews stating that the IOM, as an intergovernmental organisation established under international law, has immunity from jurisdiction in Australia. The email states that the IOM will not appear before the Court in these proceedings but it consents to the information provided to DIMIA on 13 January 2004 being submitted to the Court, (i.e. as evidence).
Ms Mathews' Evidence
58 Ms Mathews is the Acting Director Middle East & Africa section of DIMIA. She was an Assistant Director of that section from June 2002 to November 2003. Her primary responsibility since mid 2002 has been to develop arrangements with the Afghan Government for the return to that country of failed asylum seekers. In that capacity, she has had discussions with officials of the Afghan Government about measures to expedite the return of nationals.
59 Ms Mathews has first-hand knowledge of the steps which were taken to establish the IDCU. She has liaised with the IOM and personally arranged for the transfer of the sum of $200,000 to the IOM in December 2003.
60 She gave evidence that her discussions with the Afghan Embassy, the IOM and the officials responsible for the IDCU indicate to her that they have a strong commitment to the IDCU working effectively. She believes that the IDCU has the equipment to carry out its functions and that it will be able to meet its objectives.
61 Ms Mathews was not familiar with the files of the applicants. Thus she did not know their personal details and was unaware which provinces in Afghanistan they claimed to come from. She had not therefore considered whether there might be security issues in those provinces which might prevent the IDCU from being able to conduct enquiries in that region.
62 Nevertheless, Ms Mathews saw no reason why the IDCU would not be able to carry out enquiries in areas where there had been concerns about security. She referred in particular to Ghazni and said that the IOM had returned asylum seekers to that province in December 2003 and January 2003.
63 In Ms Mathews' opinion the information she has been provided by the Afghan authorities about the establishment of the IDCU will allow "remaining doubts" about the identity of the applicants to be resolved and they will be issued with travel documents in "the near future" if their claims about their identities are correct. This opinion was based on her written communications with the Afghan authorities which I have set out above. She also relied on oral discussions with the IOM and Afghan officials which she referred to in her oral evidence.
64 Ms Mathews gave evidence that about 500 persons have returned voluntarily from Australia to Afghanistan since about mid-2002. Based upon this, it is her opinion that if the applicants' identities can be verified, they will be able to return to Afghanistan. She is of the view that, upon the basis of what she has been told about the imminent establishment of the IDCU, verification should be able to be made "within the reasonably foreseeable future".
65 Ms Mathews' evidence was that the sum of AUD 200,000 provided to the IOM is expected to last for six months. The email from Mr Saikal of 27 October 2003 is to the same effect because the budget for salaries is calculated for a six month period.
66 Although the funds have been placed in the hands of the IOM, Ms Mathews' opinion is that the Australian Government will be able to exercise influence over the work of the IDCU because Australia has provided the funding for the project.
Mr Wallace's evidence
67 Mr Wallace holds the position of Removals Officer in the Removals Policy and Operations Section of the Unauthorised Arrivals and Detention Operations Branch of DIMIA. He has held this position since August 2003.
68 Mr Wallace did not express an opinion as to the likelihood of the applicants' return to Afghanistan. He gave evidence of his communications with the Embassy and with the applicants about the grant of travel documents to the applicants. He gave evidence of his knowledge of the identification system which will be carried out by the IDCU. However he has not been personally involved in the steps taken to establish that unit.
Mr Stannard's evidence
69 Mr Stannard is the Assistant Director of the Removals Policy and Operations Section in the Unauthorised Arrivals and Detention Operations Branch of DIMIA. He manages the return of failed Afghan asylum seekers to Afghanistan. He has held this position for eight months. During that time he and his staff have handled the removal of 31 Afghanis to Afghanistan.
70 He gave evidence that in his opinion there is a real likelihood or prospect of removal of Mr Kazimi to Afghanistan within "the reasonably foreseeable future". His opinion was based upon his personal knowledge of the return to Afghanistan of persons who claimed to be Afghan nationals. This included 21 cases where one-way travel documents were issued. He was also aware that the Afghan Government has issued a total of about 500 passports or travel documents to failed asylum seekers.
71 It was put to Mr Stannard in cross-examination that he did not express a similar opinion in relation to the cases of Messrs Agha, Adil and Hussain. He said he held his opinion about Mr Kazimi because the Afghan Embassy had advised that it was still considering a one-way travel document.
72 Nevertheless, he said in re-examination that it was his understanding that the IDCU will look at the other three cases to determine what conclusion the Afghan Government should reach as to whether Messrs Agha, Adil and Hussain are Afghan nationals.
The Al Masri Principle
73 As the Full Court observed in Al Masri at [86] the right to personal liberty is among the most fundamental of common law rights and it is also among the most fundamental of universally recognised human rights; see also D Clark & G McCoy Habeas Corpus: Australia, New Zealand, The South Pacific, Federation Press 2000 at 16 β 17.
74 Their Honours were aware that the limitation on the detention power which is in issue in the present case depends upon an assessment of external circumstances but they considered that these difficulties could be addressed by the Court having appropriate regard, inter alia, to the expertise of those persons who are responsible for the conduct of Australia's international relations; see at [129] β [130].
75 I have referred above to the two limitations on the detention power which the Court expressed at [135] and [136] and it is unnecessary to state them in further detail.
76 Their Honours, on two occasions in the judgment pointed out that the second limitation on the detention power cannot be availed of by a detainee who does not cooperate with the authorities in the process of removal; see at [137] and [176]. See also WAIS v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCA 1625 (French J) ("WAIS"). This exception does not apply in the present cases because it is conceded by the Minister that the applicants are now cooperating with the authorities.
77 The Full Court observed at [175] that the second limitation on the detention power is not likely to have frequent application. As their Honours stated, the conclusion that there is no real likelihood or prospect of removal in the reasonably foreseeable future is one that will not be lightly reached.
78 Their Honours noted at [176] that it is for an applicant to adduce evidence which puts in issue the legality of the detention and the evidentiary burden then shifts to the Minister. Their Honours said that this burden may be discharged on the balance of probabilities.
79 I accept that the degree of probability must be such that the Court is satisfied to a sufficient degree bearing in mind that what is in issue is the personal liberty of the applicants; see R v Home Secretary; ex parte Khawaja [1984] 1 AC 74 ("Khawaja") at 113-114.
Recent authorities on the application of the Al Masri principle
80 Most of the recent decisions are interlocutory. However Mansfield J's decision in SPKB v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 546, affirmed on appeal [2003] FCAFC 296, appears to be a final decision. In it, Mansfield J was satisfied upon the basis of evidence of a departmental officer that there was a realistic prospect of removal in the next few weeks; at [23] β [24]. See also SPKB v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 1116; SPKB v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCAFC 295; SHMB v Goodwin [2003] FCA 1053; Qasim v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 1569; Rahmatullah v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 1573; Hussain v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 1513 and Agha v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 1512.
81 In Haney v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 1555 ("Haney"), Selway J said at [14] that the question which arises is whether the Department's optimism that there is a real likelihood or prospect of removal from Australia in the reasonably foreseeable future is justifiable.
82 His Honour stated at [21] that in Haney the applicant had been liable for removal for nearly three years. He observed that the evidence indicated that there had not been a real likelihood of removal at all times during that period. Thus, the Al Masri condition had not been satisfied at all times during the period. But, as his Honour said, that was not the question before him. The question was, as in this case, whether his detention was presently unlawful.
"As soon as reasonably practicable"
83 The requests for removal signed by each of the applicants in 2002 triggered the obligation under s 198(1) of the Act to remove the applicants as soon as reasonably practicable.
84 As French J said in WAIS at [58] what is reasonable is to be determined, inter alia, by reference to the practical difficulties involved in the necessary arrangements which require the cooperation of other countries. His Honour observed that:-
"Provided arrangements are being sought generically or specifically by reference to the applicant with reasonable expedition it is difficult to see how delays beyond the control of the Minister and his officers can be taken into account in determining what period for removal falls outside the scope of the term "as soon as reasonably practicable" in s 198."
Decision in the present cases
85 Counsel for the Minister accepted, without necessarily admitting, that the applicants' evidence was probably sufficient to put in issue the legality of the detention so that the evidentiary burden shifted to the Minister. I am satisfied in each of these proceedings that the Minister has discharged the evidentiary burden that there is a real likelihood or prospect that the applicant will be removed from Australia to Afghanistan in the reasonably foreseeable future. In coming to that view I have applied the standard of proof referred to in Khawaja. The reasons I have come to this view are two-fold.
86 First, I accept the opinion of Ms Mathews that upon the basis of what she has been told about the establishment of the IDCU, the work to be carried out by this body will allow remaining doubts about the identity of the applicants to be resolved well before the expiration of the six month period for which funding has been made available. Thus, if the applicants are who they say they are, their identities will be able to be verified and travel documents will be issued.
87 Second, it seems to me that this inference is to be drawn, to the requisite standard, from the communications between DIMIA and the Afghan Embassy and DIMIA and the IOM.
88 In my opinion Ms Mathews clearly had specialised knowledge of the steps which have been taken to establish the IDCU and the likelihood that it will be able to carry out its function upon the basis of her close involvement in the setting up and funding of this body. Her opinion was not displaced by any of the matters which were put to her in cross-examination. I accept that in giving her evidence she was doing her best to assist the Court.
89 As I said above, in Al Masri at [130] the Full Court noted that where a Court has to determine the question of whether there is a real prospect it can have regard to the expertise of persons who are responsible for the conduct of Australia's international relations. Ms Mathews did not have the ultimate responsibility for decisions taken by the Australian Government to fund the IDCU. She acted on instructions from the Minister or under delegated authority. But she held discussions with senior Afghan officials and senior IOM officers about the establishment of the IDCU and it is plain that she had close involvement with the Afghan authorities and the IOM in putting in place the necessary steps. Thus, in my opinion, she had a sufficient degree of responsibility for Australia's relations with Afghanistan on this topic to fall within the type of expertise envisaged by the Full Court.
90 Mr Stannard is not as well qualified as Ms Mathews but I do give his opinion some weight and have taken it into account in reaching the view that there is the necessary likelihood or prospect of removal.
91 It seems to me that the view expressed by Selway J in Haney is correct and that the question which arises is whether the Minister has a proper basis for considering that there is a real likelihood or prospect of removal taking place in the reasonably foreseeable future. In my view, the Minister does have such a basis, firstly, because of Ms Mathews opinion and, secondly, because this conclusion must in any event flow from the information which has been provided to DIMIA by the Afghan Embassy and the IOM.
92 The Al Masri limitation has two conditions each of which involves an element of speculation. The first is that there must be a "real likelihood or prospect". This does not mean that removal will happen. Nor does it mean that removal must be more likely than not. In my opinion all that is required is that there be a likelihood which is not remote and which is not far fetched or fanciful.
93 The second condition is that there must be a likelihood of removal in the reasonably foreseeable future. This is not a fixed period. It must be determined according to the facts of each particular case. Here, Ms Mathews initially expressed a view in terms of the ultimate question, that is, "the reasonably foreseeable future". But in cross-examination she said that she expected the verification checks to be completed well within six months. Given the practical considerations involved in travel and communications in Afghanistan, a period of at least three to four months would be within the reasonably foreseeable future.
94 Moreover, Ms Mathews pointed to instances where passports or travel documents had been issued within a period of 6 weeks after identity had been verified. When this is added to the period which may be taken to conduct on the ground enquiries in Afghanistan, Ms Mathews' views as to the reasonableness of the period satisfy the Al Masri test.
95 In any event, it is an inescapable inference from the communications between DIMIA and the Embassy and the IOM that there is a real likelihood or prospect of the removal of the applicants within the requisite period provided they are who they claim to be. The Embassy and the IOM have informed DIMIA that the IDCU will be fully operational by the present time. DIMIA was told that by 13 January 2004 some of the necessary equipment had been purchased and 17 persons had been engaged as staff. A senior IDCU officer is recorded as having assured the IOM that the IDCU would be up and running by early February 2004.
96 Moreover, the Embassy has informed DIMIA that the applicants have been given top priority on the list of 22 persons who will be processed by the IDCU.
97 As I said at [8], I admitted the communications between DIMIA and the Embassy and DIMIA and the IOM under s 60 of the Evidence Act. Ordinarily, the effect of this would be that the representations made in the communications, other than second hand or more remote hearsay, would be evidence of the facts which the maker of the representation intended to assert.
98 I was not asked to make a direction under s 136 limiting the use to be made of the evidence. However, the case was conducted on the basis that the communications were not proof of the facts stated but only of the communications themselves. The communications were relevant to a fact in issue, namely, whether there was a reasonable prospect of removal. Thus, although I did not make a formal direction under s 136, I have proceeded upon the basis that the communications are not evidence of the facts stated. Nevertheless, the communications provide a sufficient basis for me to draw the inference which I have that there was a real prospect. As the Full Court said in Al Masri at [175], the contrary conclusion is one that will not be lightly reached.
99 It is true that the authorities in Kabul have previously closed the cases of Messrs Agha, Adil and Hussain but those applicants have now provided fresh information including fingerprints and photographs. The Afghan authorities have stated that they are willing to make on the ground enquiries based on the additional information. There is nothing to suggest that they will not.
100 The applicants did not object to or challenge the evidence that the sum of AUD 200,000 has been remitted to the IOM. There is nothing to suggest that the IDCU in cooperation with the IOM will not, or has not used the funds and the equipment and staff acquired with it to seek to verify the identify of each of the applicants. Nor is there anything to suggest other than that the steps to verify their identities will not occur expeditiously, subject to the practicalities of the situation. On the evidence before me, I would infer that the steps are already underway.
101 Counsel for the applicants submitted that the security concerns in Afghanistan, particularly in the regions in which the applicants say they lived, are so great that serious doubts exist as to whether the IDCU will be able to make enquiries in those areas.
102 Mr Gormly, counsel for the applicants, pointed to country information about the rule of the warlords in areas outside Kabul and to other evidence of lawlessness in Afghanistan. He also referred me to a UNHCR information sheet dated 15 January 2004 which stated that as a result of increased insecurity for UN staff, the UNHCR had temporarily suspended the facilitation of returns from Pakistan. The document also stated that UNHCR field monitoring in Uruzgan, Ghazni and Nangarhar (ie the provinces from which the applicants claim to come) had been suspended.
103 There was also evidence that a UNHCR worker had been killed in Ghazni toward the end of 2003.
104 However, it should be noted that the UNHCR document deals with the facilitation of returns from Pakistan. In any event it stated that so long as the security situation stabilised then facilitated returns will resume in early 2004.
105 Moreover, Ms Mathews gave evidence that there have been returns of asylum seekers to Ghazni province in December 2003 and January 2004. I would infer from this that there are reasonable prospects that security concerns will not stand in the way of the return of the applicants.
106 Nor in my opinion does the evidence support a finding that security concerns will seriously impede the ability of the IDCU to conduct on the ground enquiries. Ms Mathews suggested that it is westerners who have the most to fear from the remnants of the Taliban or from other lawless groups operating in Afghanistan. In any event, the evidence before me is that DIMIA has been informed that the IDCU will have satellite phones and satellite faxes. Ms Mathews' evidence, which I accept, is that the IDCU will be able to use this equipment if it is unable to send personnel to the areas in vehicles to conduct on the spot enquiries.
107 Mr Gormly also submitted that the IDCU would not be able to carry out its tasks because there are no proper records in Afghanistan of birth registrations. Nor was there, in his submission, any proper currently operating system of ID cards. He relied upon country information referred to in a decision of the RRT dated 25 November 1998.
108 However, it seems to me that the short answer to this submission is that the information provided to DIMIA about the manner of operation of the IDCU is that on the ground enquiries, coupled if necessary with satellite communications, are designed to overcome any deficiencies in the written records of identification.
109 Finally, Mr Gormly submitted that in the cases of Agha, Adil and Hussain the Afghan authorities had prejudged their applications for Afghan nationality. Accordingly, he said that there was no reasonable prospect of their return. However, in my opinion, that finding would be contrary to the evidence before me. The evidence is that the authorities in Afghanistan are prepared to re-open the cases with new information provided by those applicants. Indeed, the fact that DIMIA has been informed that the IDCU has been established with funds provided by the Australian Government negatives any suggestion of prejudgment. So too does the fact that the applicants have been placed at the top of the priority list.
110 In any event, the submission that the Afghan Government has prejudged the issue, is probably not justiciable; see Attorney General UK v Heinemann Publishers Australia Pty Limited (1988) 165 CLR 30 at 40; Petrotimor Companhia de Petroleos S.A.R.L. v Commonwealth of Australia (2003) 197 ALR 461 (per Black CJ and Hill J) at [46] ff.
S 91X of the Act
111 The applicants do not contend that s 91X applies to these proceedings and do not seek to have their identities suppressed. These proceedings do no relate to the applicants in their capacity as persons who applied for protection visas or to any of the other capacities referred to in s 91X(1). Accordingly, I do not require them to be identified by a pseudonym. Hely J took the same course in the interlocutory applications brought by Mr Agha and Mr Hussain.
Orders
112 It follows that I propose to order that the applications in each of these proceedings be dismissed.
113 Although the Minister has been successful, it seems to me that it is not appropriate to order the applicants to pay the costs. In my view, the following statement of principle made by Goldberg J in Cabal v United Mexican States (No 6) (2000) 174 ALR 747 at [22] is apt:-
"Although an order for costs is made to compensate a successful party for the expenses incurred in responding to an application or proceeding, that principle of compensation should yield in favour of the principle that a person detained by authority of the State should not be deterred by a potential costs order from seeking his or her liberty. There is a public interest in ensuring that persons detained against their will should not have any impediment put in their way which will inhibit them in seeking their liberty. In my view that public interest outweighs the general rule that a successful party is to be compensated for its costs by the unsuccessful party. In particular is this so where the costs are incurred by the State under whose authority the person is detained."
114 In any event, I would not have made a costs order against the applicants in the exercise of my discretion because it seems to me that at the time when these proceedings were commenced and, indeed, up to the time when the Minister filed the affidavits of Ms Mathews, Mr Wallace and Mr Stannard on 22 January 2004, there was insufficient evidence to support a finding on a final basis that there was a real likelihood or prospect of the applicants' return to Afghanistan.
115 Indeed, in light of the considerable delay on the part of DIMIA in taking the necessary steps to support the establishment of the IDCU, it seems to me to be likely that it was the commencement of these proceedings by the applicants which prompted DIMIA to take the necessary steps to fund the IDCU and to put the applicants at the top of the priority list.
I certify that the preceding one hundred and fifteen (115) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.
Associate:
Date: 2 March 2004
Counsel for the Applicants: J Gormly
Solicitor for the Applicants: R C Balding
Counsel for the Respondent: S Lloyd
Solicitor for the Respondent: Australian Government Solicitor
Date of Hearing: 4 - 6 February 2004
Date of Judgment: 2 March 2004
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Abuothman v Commissioner of Taxation [2007] FCA 1026
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FEDERAL COURT OF AUSTRALIA
Abuothman v Commissioner of Taxation [2007] FCA 1026
TAXATION β appeal from objections decision β first application filed by the applicant while subject to an administration order under Guardianship and Administration Act 1990 (WA) β whether application validly filed β selective attention by respondent to role of administrator β alleged advice from Department for first application to be made in name of applicant - second application filed outside time limit β whether any power to extend time
Administrative Appeals Tribunal Act 1975 (Cth) ss 29, 29(7)
Taxation Administration Act 1953 (Cth) s 14ZZN
Guardianship and Administration Act 1990 (WA) ss 64, 69, 69(3), 71, 77, 84
Guardianship and Administration Act 1986 (Vic) s 52
Re Barnes [1983] 1 VR 605
Bayeh v Deputy Commissioner of Taxation (1999) 100 FCR 138
David by Her Tutor the Protective Commissioner v David (1993) 30 NSWLR 417
Re "DDM" file number 02/0352; Ex Parte the Full Board of the Guardianship and Administration Board (2003) 27 WAR 475
Johnson v Staniforth [2002] WASCA 97
Kimberley-Clark Australia Pty Ltd v Commissioner of Taxation (1994) 28 ATR 47
McVey v St Vincent's Hospital (Melbourne) Ltd [2005] VSCA 233
McVey v St Vincent's Hospital (Melbourne) Ltd [2006] HCATrans 169
JAMILE AZIM ABUOTHMAN v COMMISSIONER OF TAXATION
WAD 51 OF 2007
NICHOLSON J
5 JULY 2007
PERTH
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY WAD 51 OF 2007
BETWEEN: JAMILE AZIM ABUOTHMAN
Applicant
AND: COMMISSIONER OF TAXATION
Respondent
JUDGE: NICHOLSON J
DATE OF ORDER: 5 JULY 2007
WHERE MADE: PERTH
THE COURT ORDERS THAT:
1. The application dated 8 February 2007 filed on 8 March 2007 be dismissed.
2. The application dated 5 April 2007 and received on that date be dismissed.
3. Costs reserved for submission by each party, the respondent to file and serve written submissions on costs within 7 days if he intends to seek costs and the applicant to file and serve written submissions in response within 7 days of service of the respondent's submissions.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY WAD 51 OF 2007
BETWEEN: JAMILE AZIM ABUOTHMAN
Applicant
AND: COMMISSIONER OF TAXATION
Respondent
JUDGE: NICHOLSON J
DATE: 5 JULY 2007
PLACE: PERTH
REASONS FOR JUDGMENT
1 By an application (the first application) dated 8 February 2007 and filed on 8 March 2007 the applicant seeks to appeal against the objection decision described as follows:
'Objection Reference Number: 5524626 against Amended Assessment on 02 November 2006 for the following periods:
Year ended 30 June 1993
Year ended 30 June 1994
Year ended 30 June 1996'
The first application states that the manner in which the decision is to be varied is:
'By allowing the objection lodged to the extent of allowing the following interest deductions:
$30 000 for Year ended 30 June 1993
$40 200 for Year ended 30 June 1994
$43 000 for Year ended 30 June 1996'
2 By a further application (the second application) dated 5 April 2007 and received at the Court on that date but not treated as filed the applicant again asserted an appeal in the same terms.
3 The respondent contends that the first application was not valid because at the time it was made the applicant was subject to an administration order under the Guardianship and Administration Act 1990 (WA) (the Act). The respondent further contends that the second application is not valid because it is out of time and there is no power to extend time.
4 The applicant contends that the respondent was aware at all times that he had an administrator appointed but chose to exclude the administrator from the proceeding on numerous occasions and only now relies on the appointment of the administrator when the effect of it may be to preclude the applicant appealing to this Court. He also alleges he made the first application in his own name on advice from an officer of the respondent's department, the Australian Taxation Office. He claims that the effect of the respondent's contentions being upheld would be to condemn him to bankruptcy without any right of appeal.
5 The respondent relies on written submissions and on the affidavit of Mr Devaney, a level 5 Australian public servant employed in the Legal Services Branch, Debt Litigation Area of the Northbridge Office of the Australian Taxation Office and an affidavit of M/s Redknap, the Acting Director of the MEI Technical Business Unit in the Upper Mount Gravatt Office of the Australian Taxation Office and, at the time of her dealings with the applicant, a Technical Advisor in that Unit.
6 The applicant relies on submissions to the effect set out above and on his affidavit.
THE ADMINISTRATION ORDER
History of the administration orders
7 At the time the applicant filed the first application he was subject to an order under the Act made by the State Administrative Tribunal (the Tribunal) on 11 April 2006 which provided that:
'Amin Haddad of 12 Garland Court, Kardinya, Western Australia be appointed limited administrator of the estate of the represented person with the following functions:
(a) The administrator is to bring and defend action, suits and other legal proceedings in the name of the represented person including the power to settle such actions.'
8 The administration order made on 11 April 2006 was made on review under s 84 of the Act of an earlier administration order dated 11 April 2005.
9 The administration order made on 11 April 2006 was itself reviewed under s 84 of the Act by the Tribunal on 4 April 2007 and was revoked on that day.
10 Although the administration order of 11 April 2006 does not set out in its terms the basis upon which that order was made, that is set out in an earlier administration order made by the Guardianship and Administration Board (the predecessor of the Tribunal under the Act), on 18 November 2002. This order was itself an order made upon review of an earlier administration order dated 27 April 2000. The administration order of 18 November 2002 which appointed a limited administrator on the same basis as the administration order of 11 April 2006, sets out that the Guardianship and Administration Board was satisfied that the applicant:
'(a) remains unable, by reason of mental disability to make reasonable judgments in respect of matters relating to part of his estate; and
(b) is in need of an administrator of his estate; and
(c) cannot have such need met by other means less restrictive of his freedom of decision and action.'
Relevant statutory provisions
11 The Tribunal is empowered to make an administration order under s 64 of the Act. That section relevantly provides:
'64(1) Subject to section 4, where the State Administrative Tribunal is satisfied that a person in respect of whom an application for an administration order is made under section 40 β
(a) is unable, by reason of a mental disability, to make reasonable judgments in respect of matters relating to all or any part of his estate; and
(b) is in need of an administrator of his estate,
the Tribunal may by order declare the person to be in need of an administrator of his estate, and if it does so shall appoint-
(c) a person to be the administrator; or
(d) persons to be joint administrators,
as the case may require, of the estate of the person in respect of whom the application is made.
(2) Where under subsection (1) the State Administrative Tribunal declares that a person is in need of an administrator of his estate, it shall declare the matter or matters set out in paragraph (a) of that subsection of which it is satisfied.
(3) An appointment under subsection (1) β
(a) may be made subject to such conditions and restrictions as the State Administrative Tribunal thinks fit;
(b) may, subject to section 52 of the Public Trustee Act 1941, include requirements as to the giving of security to the executive officer and the manner in which it is to be given.
[(c) deleted].'
12 Section 84 of the Act empowers the Tribunal to review orders periodically and provides:
'84. The State Administrative Tribunal shall β
(a) when it makes a guardianship order or an administration order or any order amending, continuing or replacing an order specify a period, not exceeding 5 years from the date of the order, within which the order shall be reviewed; and
(b) ensure that the order is reviewed accordingly.'
13 Section 69 of the Act deals with the authority of the administrator and provides:
'69(1) Subject to section 64(3)(a), the administrator has, or the joint administrators have, in respect of the estate of the represented person, such of the functions provided for by this Act as the State Administrative Tribunal vest in him or them, or directs him or them to perform, in the administration order.
(2) An administrator may on behalf of a represented person execute all such documents and do all such things as are necessary for the performance of the functions vested in him.
(3) An action taken, decision made, consent given or other thing done by an administrator in the performance of the functions vested in him has effect as if it had been taken, made, given or done by the represented person and he were of full legal capacity.
(4) Nothing in this Act vests the estate of a represented person in an administrator.'
14 Section 71 of the Act deals with the authority which may be confirmed on an administrator and provides:
'71(1) The State Administrative Tribunal may, under section 69, vest plenary functions in the administrator of the estate of a represented person.
(2) Where plenary functions are vested in an administrator he may perform, or refrain from performing, in relation to the estate of the represented person, or any part of the estate, any function that the represented person could himself perform, or refrain from performing, if he were of full legal capacity.
(3) Where the State Administrative Tribunal does not under section 69 vest plenary functions in an administrator, it may, under that section, authorise the administrator to perform any specified function, including one or more of those set out in Part A of Schedule 2.
(4) The State Administrative Tribunal may require a function to be performed by an administrator and may give directions as to the time, manner or circumstances of the performance.
(5) In exercising its jurisdiction, under this Part the State Administrative Tribunal may take a liberal view of the best interests of the represented person as mentioned in section 4(2)(a), and in particular may, if the circumstances so require, empower an administrator to make a payment or enter into a transaction of a kind described in section 72(3) on behalf of the represented person.'
15 Part A of Sch 2 to the Act which sets out the various specified functions includes at item 15 the following function:
'15 To bring, and defend, actions, suits and other legal proceedings in the name of the represented person.'
16 Section 77 of the Act is in the following terms:
'77 Represented person incapable of dealing with estate
(1) So long as there is in force a declaration by the State Administrative Tribunal under section 64(1) that a person is in need of an administrator of his estate, that person is β
(a) incapable of entering into any contract or making any disposition in respect of his estate or any part thereof or interest therein; or
(b) subject to Part 9, appointing or conferring any power on an agent or attorney in respect thereof;
except to the extent that the administrator, with the consent of the Tribunal, in writing authorises him to do so.
(2) Any money or property the subject of an attempted dealing by a represented person contrary to subsection (1) may be recovered by the administrator in any court of competent jurisdiction.
(3) Nothing in this section affects β
(a) any contract for necessaries entered into by a represented person; or
(b) any contract or disposition by a represented person made for adequate consideration with, or in favour of, any other person who proves that he acted in good faith and was unaware that that person was a represented person; or
(c) anything done under a power of attorney by a person who proves that he acted in good faith and was unaware that the donor of the power was a represented person.
(4) Nothing in this section affects any legal incapacity attaching to a represented person by reason of infancy.
(5) For the purpose of this section the acceptance of payment of the whole or any part of a debt shall be deemed to be a disposition in respect of the estate.'
Relevant case law
17 The respondent relies on the consideration of s 77 of the Act by the Full Court of the Supreme Court of Western Australia in Re "DDM" file number 02/0352; Ex Parte the Full Board of the Guardianship and Administration Board (2003) 27 WAR 475. The Full Court there overruled an earlier decision of the Full Court of the Supreme Court of Western Australia in Johnson v Staniforth [2002] WASCA 97. The principal issue in "DDM" 27 WAR 475 was whether s 77(1)(a) of the Act had any application to a will made by a testator who was subject to an administration order under s 64 of the Act. The Full Court found that s 77(1)(a) had no application to a will made by a testator the subject of an administration order on the basis that the making of a will did not involve any disposition in respect of the estate or any part thereof or interest therein (as any disposition under the terms of a will would only take place following the death of the testator and because the functions which could be conferred on an administrator under the Act did not include the power to make a will or other testamentary writing).
18 The leading judgment, with which the other members of the Full Court concurred, was that of Heenan J. In relation to the meaning of s 77(1)(a) of the Act Heenan J stated at [43] and [44]:
'43 In the present case, therefore, the duty of the court is to ascertain the meaning which Parliament intended to be given to the word "disposition" in s 77(1))(a) of the Act, rather than to import a meaning given to the word "disposition" in some different statutory context or attributed to it in some decision dealing with differing considerations. In this regard it seems essential to appreciate that the Guardianship and Administration Act is intended to provide for the guardianship of adults who need assistance in their personal affairs, for the administration of the estates of person who need assistance in their financial affairs β¦ and to make provision for a power of attorney to operate after the donor has ceased to have legal capacity, and for connected purposes (see the long title to the Act). From this, and an examination of the entire Act, it is obvious that the legislation is designed for the protection of adult persons whose faculties may be impaired, for any reason, and who are therefore in need of protection and assistance so as to ensure that their financial affairs and other welfare is not jeopardised by improvident, or ill-considered personal decisions or action, or by unscrupulous or ill-advised influence of relatives, friends and others who may deliberately or inadvertently exploit the vulnerability of the person in need of assistance and protection.'
44 These ends can be achieved, when it comes to dealing with the property and financial affairs of the person in need of assistance, by ensuring that any financial property or commercial transactions which would, or might, jeopardise the financial security or interests of the disabled person, are only effective when performed by a properly appointed administrator and with the Board's consent. The emphasis is on conserving the property and financial resources of the disabled person to ensure that they are available for his or her own needs, welfare and enjoyment and are not dissipated. These seem to be the primary objectives of the legislation and all the provisions of the Act can be seen to have meaning and effect as leading towards the achievement of those purposes. In the main, these will be accomplished by conserving the resources and property of the person under administration for use to his or her own advantage or, in cases where expenditure or imminent disposition of property are necessary or advantageous, by scrutinising the transaction to see that it is justifiable or provident having regard to all the circumstances, bearing always in mind the continuing and future needs of the person whose estate is under administration.'
19 There are, however, other authorities of relevance. In McVey v St Vincent's Hospital (Melbourne) Ltd [2005] VSCA 233 the Court of Appeal of the Supreme Court of Victoria was called upon to consider the validity of a notice of appeal issued by an appellant who was subject to an administration order. The Court (Eames JA, with whom Ashley JA and Hollingworth AJA agreed) held the notice of appeal was void. The reasoning of the Court was as follows:
'[15] The first question which arises is whether the notice of appeal issued in those circumstances was valid. By s 58B(1)(b) of the Act, upon appointment as administrator it is the duty of the administrator, inter alia, "to manage the affairs of the represented person and to exercise all rights statutory or otherwise which the represented person might exercise if the represented person had legal capacity". Pursuant to s 58B(2)(l) an administrator may, in the name of and on behalf of the represented person, bring and defend actions and other legal proceedings in the name of the represented person. By s 50(1) the administrator is empowered to sign and do all such things as are necessary to give effect to any power or duty vested in the administrator.
[16] Section 52(1) provides that where an administration order has been made the represented person, until revocation of that order, "is to the extent that the represented person's estate is under the control of the administrator, deemed incapable of dealing with, transferring, alienating or charging her or his money or property or any part thereof or becoming liable under any contract without the order of the Tribunal or the written consent of the administrator". By s 52(2) every dealing by a represented person "in respect of any part of the estate which is under the control of the administrator is void and of no effect and the money or property the subject of the dealing, transfer, alienation or charge by any represented person is recoverable by the administrator in any court of competent jurisdiction".
[17] There is no definition of "estate" for the purpose of s 46(1)(a)(ii) (fn 2 The word "estate" is, however, defined in s 3 of the State Trustees (State Owned Company) Act 1994 to mean "real and personal estate" and by s 35 of that Act a new Div 3A of Pt 5 was inserted into the Guardianship and Administration Act 1986, one of the new provisions being s 58B, in the terms in which it now appears.) but the lodging of a notice of appeal rendered the applicant liable to orders as to costs and in lodging his notice of appeal while the administration order continued the applicant was dealing with that part of his estate which was the subject of the order, namely such rights as were concerned in legal proceedings against St Vincent's. In my opinion, he was not empowered to take that step, nor, indeed, was he empowered to file a summons seeking an adjournment of the hearing of the s 23A application, because that step was also taken when the administration order applied to the proceedings. That conclusion is consistent with authority.
[18] The terms of s 54H and s 54I of the repealed Public Trustee Act 1958 were in nearly identical terms to those of s 52(1) and (2) of the Guardianship and Administration Act 1986. In Re Barnes, A Protected Person (fn 3 [1983] 1 VR 605, at 608.) Beach J held, citing the decision of the Court of Appeal in Re Walker (fn 4 [1905] 1 Ch 160.), that whilst a person was subject to a protection order the estate of that person could be dealt with only by the Public Trustee. Beach J quoted with approval the words of Eve J in Re Marshall(fn 5 [1920] 1 Ch 284 at 288β9.) who, in applying the decision of the Court of Appeal held that were the situation otherwise "this unsatisfactory result would follow, that the affairs of the person of unsound mind, although put under the control of one person, the receiver, would in fact be controlled by two persons β namely, the person of unsound mind and the receiver."
[19] The analysis by Beach J of the effect of the legislative provisions was accepted by all members of the New South Wales Court of Appeal in David by Her Tutor The Protective Commissioner v David and Anor (fn 6 (1993) 30 NSWLR 417, at 432, per Kirby P; at 438β9, per Sheller JA (with whom Priestley JA agreed).
[20] In my opinion, therefore, the notice of appeal was void (as was the summons whereby application was made for an adjournment). That defect of the notice of appeal might, however, be capable of being overcome.'
A subsequent application to the High Court for special leave to appeal was refused: McVey v St Vincent's Hospital (Melbourne) Ltd [2006] HCATrans 169. In dismissing the application Hayne J on behalf of himself and Crennan J said that there was no reason to doubt the correctness of the conclusions reached by the Court of Appeal.
20 In David by Her Tutor the Protective Commissioner v David (1993) 30 NSWLR 417 consideration was given to the effect of an order committing the management of an estate of a protected person to the Protective Commissions under the Protected Estates Act 1983 (NSW). Sheller JA (with whose reasons Priestley JA agreed) said at 438-439, after reference to the decision of Beach J in Re Barnes [1983] 1 VR 605:
'It is true that s 54(1) of the Public Trustee Act 1958 provided, subject to immaterial exceptions, that every dealing transfer or alienation or charge by any protected persons should be void and of no effect. There is no equivalent provision in the Protected Estates Act 1983. But, in my opinion, such a section would do no more than confirm the effect of committing the management of a person's estate with express consequential powers, authorities and duties to the Protective Commissioner.'
Respondent's submissions
21 The respondent submits that by reason of the terms of s 77 of the Act the applicant was incapable of dealing with his estate in respect of the specified function which was the subject of the administration order of 11 April 2006, that is, bringing and defending actions, suits and other legal proceedings including the power to settle such actions.
22 There is no evidence before the Court that the administrator of the applicant's estate as at 8 March 2007 had, with the consent of the Tribunal, authorised the applicant in writing to commence the proceeding WAD 51 of 2007.
23 Although not expressly stated in the administration order of 11 April 2006, the respondent submits that it can be inferred from the terms of the administration order of 11 April 2006 which continued the appointment of the limited administrator that the Tribunal remained satisfied of the matters set out in Order 2 of the administration order of 18 November 2002.
24 The respondent further submits that consistently with the terms of ss 77 and 69(3) of the Act the making of the administration order of 11 April 2006 has the effect that the administrator was empowered to bring and defend actions, suits and other legal proceedings in the name of the applicant and that the applicant was thereby incapable of bringing and defending actions, suits and other legal proceedings in his name whilst the administration order remained in force. If the applicant remained capable of bringing and defending actions, suits and other legal proceedings in his own name whilst the administration order was in force, this would render otiose the administration order of 11 April 2006 and defeat the only purpose for which that administration order was made.
25 The respondent submits that, consistently with the legislative intention found by the Full Court of the Supreme Court of Western Australia, the effect of s 77(1)(a) is that the particular functions in respect of the estate of the persons subject to the administration order which was vested in the administrator by s 69 of the Act can only be performed by the administrator and that the person who is the subject of the administration order is legally incapable of performing those functions whilst the administration order is in force.
26 The respondent also submits that as the administration order of 11 April 2006 was in force at the time the applicant purported to commence the proceedings WAD 51 of 2007 he was not legally capable of commencing those proceedings at that date and the proceedings should, accordingly, be dismissed.
27 In supplementary submissions the respondent addressed the effect of the McVey [2005] VSCA 233case. He argues that the decision supports the submissions of the respondent on the invalidity of the application. It is pointed out that the administration order in McVey [2005] VSCA 233, like the order in issue here, was limited to the conduct of legal proceedings in respect of the applicant. It is contended that although the wording of the relevant section of the Guardianship and Administration Act 1986 (Vic) s 52 is in different terms to the corresponding s 77 of the Act, the reasoning of the Victorian Court of Appeal is equally applicable to the applicant's position. Additionally it is argued that the reference in McVey [2005] VSCA 233 to Re Barnes[1983] 1 VR 605and to David 30 NSWLR 417 are consistent with the respondent's earlier submission to the effect that if the applicant were to remain legally capable of bringing legal proceedings while the administration order was in force it would defeat the only purpose for which the administration order had been made.
Applicant's submissions
28 The applicant is a self-represented person who could not be expected to address the submissions of law raised by the respondent. The applicant's submissions are directed to two aspects of fact.
Inadvertence by respondent to administrator
29 The first issue of fact is that the applicant says the respondent was aware at all times of the appointment of his administrator but chose to exclude his administrator from the proceeding on numerous occasions. In his affidavit he states:
'1. The Australian Taxation Office brought a bankruptcy proceeding against me in June 2006 with no involvement of my Administrator (β¦), which show evidence that the Tax Office dealt with me alone.
2. I went and saw my local Member of Parliament (Mr Denis Jensen) and the Tax Office credited me with $8 367.81 (β¦). On the 15th August, 2006 a cheque for the amount of $8 367.81 was sent c/o Mr Amin Haddad, Administrator (β¦). The Tax Office excluded my Administrator from this matter, but released the above cheque care of my Administrator.
3. On the 8th January, 2007 a 'Notice of Decision on Objection' was sent to Mr Eric Veder, my Accountant. The notice was sent to Mr Veder's P.O Box (β¦).
I was not provided with any personal notification of this notice and neither was my Administrator. I was made aware of this 'decision' by Mr Veder on the 15th February, 2007, when Mr Veder gave me a copy of this 'notice'.
4. On the 15th January, 2007, the Tax Office issued a 'Notice of Income Tax Audit', which was sent to Mr Veder (β¦).'
30 The respondent submits that at least in the case of items 3 and 4 the Australian Taxation Office would not, even on the applicant's submission, have been bound to deal with the applicant's administrator because the scope of the administrator's authority would not have extended to either of those matters. That is, neither of them involved the bringing and defending of an action, suits or other legal proceedings in the name of the represented person.
31 As to paragraph 1 of the applicant's affidavit and the institution of a bankruptcy proceeding against him in June 2006, it is relevant to turn to the affidavit of Mr Devaney. He states that on 13 April 2006 as part of his duties he was allocated instructions to seek a sequestration order against the applicant. Prior to that involvement judgment had been handed down in the District Court on 29 November 2005 directing the applicant to pay the respondent $53 121.24 and $698.70 costs. A bankruptcy notice was issued by the official receiver on 31 January 2006 for the amount of $53 819.94. At the time Mr Devaney received these instructions he was not aware that the applicant had an administrator appointed.
32 His affidavit continues by stating that he arranged for the preparation and service of a creditor's petition in the Federal Magistrates Court and organised for the petition to be served personally on the applicant at his home address, which occurred on 11 May 2006. On 1 June 2006 the applicant filed a notice stating grounds of opposition to the petition and an affidavit in support of this together with a notice of appearance. It was not until 6 June 2006 in the Federal Magistrates Court, when the District Registrar advised the applicant that he could not represent himself as he was under an administration order, that Mr Devaney became aware of the appointment of an administrator. The matter was adjourned until 8 August 2006.
33 The following day Mr Devaney sent a letter to the applicant's administrator, Mr Haddad, advising him of what had had happened in the proceedings and requesting him to contact Mr Devaney.
34 On 8 August 2006 Mr Devaney again appeared on behalf of the Deputy Commissioner in the Federal Magistrates Court before the District Registrar. The applicant attended with his administrator. Mr Devaney advised the District Registrar that the tax had been cleared by the issuing of a credit assessment and he sought on behalf of the Deputy Commissioner to have the petition dismissed, with the Deputy Commissioner's disbursements paid by the applicant. The applicant objected to such payment. It was later decided that the Deputy Commissioner would not pursue the issue of costs and a letter was written on 10 August 2006 advising the Court of this. Accordingly, on 29 August 2006 the Federal Magistrates Court ordered that the matter be dismissed with no order as to costs.
35 It is apparent from these circumstances that as soon as Mr Devaney became aware of the appointment of the administrator he placed him with full knowledge of what had occurred on 6 June 2006 and the administrator thereafter attended on 8 August 2006. From the evidence it cannot be inferred that the respondent was aware 'at all times' that the applicant had an administrator appointed and chose to exclude the administrator from the proceeding. The inference which the applicant seeks to draw is not open on the evidence relating to any of the four matters on which he relies.
Advice from respondent
36 The applicant also asserts in his submission that the respondent's office through M/s Patricia Redknap advised him that as the notice of assessment had been issued in his name he needed to lodge any appeal with the Federal Court under his name and that there was no need for his administrator to be involved. In his affidavit the applicant states:
'5. On 8th March, 2007 I spoke to Ms Patricia Redknap (Tax Office, Brisbane), and I asked her whether the application to the Federal Court in appealing the 'decision' should be made by me or my Administrator. Ms Redknap stated that as the 'notice' was in my name that I needed to make the application to the Federal Court and not my Administrator. It was on this advice that I lodged my application to the Federal Court.'
37 This requires reference to the affidavit of M/s Redknap. She states she was the officer responsible for considering and deciding the objections lodged by the applicant's tax agent, Mr Veder, dated 2 November 2006 against the amended assessments dated 8 April 1999 for the years ended 30 June 1993, 1994 and 1996. She states that she decided to disallow the objections and a formal notice disallowing the objections was sent to Mr Veder on 8 January 2007.
38 M/s Redknap accepts that a few weeks later the applicant telephoned her. To the best of her recollection the conversation took place in January 2007. She states that as it was just a general query, she did not make a written record of the conversation but has a good recollection of it. She states:
'6. Mr Abuothman complained about the objection decision and asked me what he could do about it. I advised him he had provided no evidence to support his claims and it was decided to disallow his objection. I told him that he had a right of appeal that was set out in the attachments to the objection decision that had been sent to him. We spoke in general terms and mainly about appealing to the Administrative Appeals Tribunal.
7. I was aware from my earlier reading of the decision in his previous appeal to the AAT that he had an Administrator but this had slipped my mind at the time of our conversation. At no time in my telephone discussion with Mr Abuothman did we discuss what the Administrator's role would be in an appeal. I am quite certain that Mr Abuothman did not ask me nor did we ever discuss whether any application to the Federal Court needed to be made by the Administrator.'
39 There is a conflict in the evidence of the applicant and M/s Redknap. They have different recollections of the conversation. I am inclined to find that the effect of the evidence of both witnesses is that M/s Redknap advised the applicant that, as the notice was in his name, he needed to make the application himself to the Federal Court. However, that was stated without any reference to the position of an administrator.
40 In any event, whatever the advice given by M/s Redknap it cannot preclude any effect which the statute law might have in relation to the validity of his application. I therefore return to those issues.
Effect of McVey's case
41 The applicant accepts that the decision in the McVey [2005] VSCA 233 case may support the respondent's submissions on the apparent validity of the present application. However, he contends that the validity of the application would not have been an issue had it not been for the misleading advice of the officer Ms Redknap, as set out in the applicant's affidavit filed on 15 May 2007. The applicant seeks an exercise of the discretion of the Court to grant leave for the fresh application to be lodged in view of that misleading advice. Further the applicant asserts the Court should have regard to the likelihood of him succeeding before this Court. Above all, he seeks that the issues be judged on their merits.
Validity of application
42 I consider the applicant is correct in accepting that the decision of the Victorian Court of Appeal in McVey [2005] VSCA 233 may support the respondent's submissions on the validity of the application. It is clear that it and the other authorities referred to in it do provide that support. Not only should this Court follow the reasoning in McVey [2005] VSCA 233 but there is no apparent legal reason for not doing so. In particular I agree that any differences in the wording of the legislation under consideration here and that considered in McVey [2005] VSCA 233 does not provide a foundation for making the reasoning in McVey [2005] VSCA 233 inapplicable here. The consequence is that the application was invalid.
43 The plea of the applicant for his application to be considered on its merits is understandable. However, given the invalidity of the application there is no discretion which arises in the Court to grant him leave to file a fresh application. It is not open to the Court to take the steps which the supplementary submissions of the applicant seek.
EXTENSION OF TIME
44 This issue arises in relation to the second application. The objection decisions which the applicant seeks to appeal were made on 8 January 2007 and served on the applicant's tax agent by post sent on that day. Consequently, the second application filed on 5 April 2007 was lodged outside the prescribed period of 60 days.
45 Section 14ZZN of the Taxation Administration Act 1953 (Cth) (the TAA) is the substantive statutory provision which prescribes that an appeal to the Federal Court against an appealable objection decision must be lodged with the Court within 60 days after service of the notice of the decision.
46 Whether the Federal Court was empowered to extend the time limit prescribed by s 14ZZN of the TAA has been considered by the Federal Court in Bayeh v Deputy Commissioner of Taxation (1999) 100 FCR 138 and Kimberley-Clark Australia Pty Ltd v Commissioner of Taxation (1994) 28 ATR 47.
47 In both Bayeh 100 FCR 138 and Kimberley-Clark 28 ATR 47 the Court determined that there was no statutory provision giving it the jurisdiction to extend the time in s 14ZZN of the TAA to lodge and appeal. This was unlike the positions in s 14ZZC of the TAA which modified s 29 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act) in respect of making an application for review of an objection decision by the AAT Actbut expressly saved s 29(7) of that Act which gives the Tribunal power to extend time for the lodging of such an application.
48 No statutory provision that saves any former jurisdiction of the Court to grant an extension of time in making an application to appeal against an appealable objection decision was enacted by the TAA at the time that Pt IVC (which included s 14ZZN) was introduced to the TAA. Although the Court in Bayeh 100 FCR 138 and Kimberley-Clark 28 ATR 47 queried whether this was an oversight on the part of the legislature, no amendment to Pt IVC of the TAA has been made to address this issue. On the authority of Bayeh 100 FCR 138 and Kimberley-Clark 28 ATR 47 the second application was not lodged within the 60 day time limit prescribed by s 14ZZN of the TAA and is not, therefore, a valid application. The respondent submits that the second application should therefore be dismissed.
49 In my view these submissions on the law are correct.
conclusion
50 The effect of the above reasoning is that the applicant is not able to pursue an appeal against the objection decisions in question to the Federal Court under Pt IVC of the TAA. The applicant considers that that has the consequence that, 'contrary to justice' he is precluded from appealing his bankrupt status.
51 However, as s 29(7) of the AAT Act empowers the Tribunal to extend the time for the lodging of applications to the Tribunal for review of the objection decisions, it would appear the applicant may remain entitled to make an application to the Administrative Appeals Tribunal under s 29(7) to extend the time for the lodging of applications for review of the objection decisions in question.
52 For his own reasons, the applicant states he does not wish to make an application to the Administrative Appeals Tribunal. That must be for him to decide. The fact is that he could not properly conclude he has no remaining remedies.
53 For these reasons the first and second applications must each be dismissed.
I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholson.
Associate:
Dated: 5 July 2007
The Applicant represented himself
Counsel for the Respondent: T Burrows
Solicitor for the Respondent: Australian Government Solicitor
Date of Hearing: 12 June 2007
Date of Judgment: 5 July 2007
| 8,851 |
federal_court_of_australia:fca/single/2004/2004fca0496
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decision
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commonwealth
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2004-02-03 00:00:00
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S1101 of 2003 v Refugee Review Tribunal [2004] FCA 496
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2004/2004fca0496
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2024-09-13T22:45:59.517739+10:00
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FEDERAL COURT OF AUSTRALIA
S1101 of 2003 v Refugee Review Tribunal [2004] FCA 496
S1101 OF 2003 v REFUGEE REVIEW TRIBUNAL & ANOR
N 1098 OF 2003
EMMETT J
3 FEBRUARY 2004
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY N 1098 OF 2003
ON REMITTAL FROM THE HIGH COURT OF AUSTRALIA
BETWEEN: S1101 OF 2003
APPLICANT
AND: REFUGEE REVIEW TRIBUNAL
FIRST RESPONDENT
MINISTER FOR IMMIGRATION & MULTICULTURAL & INDIGENOUS AFFAIRS
SECOND RESPONDENT
JUDGE: EMMETT J
DATE OF ORDER: 3 FEBRUARY 2004
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. the application be dismissed;
2. the applicant pay the second respondent's costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY N 1098 OF 2003
ON REMITTAL FROM THE HIGH COURT OF AUSTRALIA
BETWEEN: S1101 OF 2003
APPLICANT
AND: REFUGEE REVIEW TRIBUNAL
FIRST RESPONDENT
MINISTER FOR IMMIGRATION & MULTICULTURAL & INDIGENOUS AFFAIRS
SECOND RESPONDENT
JUDGE: EMMETT J
DATE: 3 FEBRUARY 2004
PLACE: SYDNEY
REASONS FOR JUDGMENT
1 On 25 May 2000 the Refugee Review Tribunal ('the Tribunal') affirmed the decision of a delegate of the Minister for Immigration & Multicultural & Ethnic Affairs ('the Minister') to refuse to grant a protection visa under the Migration Act 1958 (Cth) to the applicant. Thereafter, the applicant became a party to proceeding S 89 of 1999 in the High Court. On 29 May 2003 a draft order nisi was filed on behalf of the applicant in the High Court pursuant to orders made by Gaudron J. The draft order nisi sought prerogative writ relief in respect of the Tribunal's decision on the ground that the Tribunal failed to accord the applicant procedural fairness. That proceeding was remitted to this Court pursuant to orders made by Gaudron J on 25 November 2002.
2 On 27 October 2003 I ordered the applicant to file and serve on or before 20 January 2004 a statement of contentions of relevant facts and law setting out particulars of the grounds relied upon and any affidavits which the applicant intended to rely on at the hearing. When the proceeding was commenced in the High Court, the applicant was represented by a solicitor, Adrian Joel & Co. On 3 November 2003 Adrian Joel & Co wrote to the applicant saying that unless the applicant contacted Adrian Joel & Co within 14 days of that letter, they would withdraw from representing the applicant.
3 It appears that there was no contact and, on 14 January 2004, the solicitor filed a notice of withdrawal. In the meantime, on 9 December 2003 the solicitor for the Minister had written to the applicant drawing attention to the intention of the solicitor to withdraw and to the orders that I made on 27 October 2003. The letter said that, in the event that the applicant did not comply with the orders that I made, the Minister would seek to have the application dismissed with costs pursuant to O 10 r 7(1)(a) of the Federal Court Rules. The letter was addressed to the last known addresses of the applicant.
4 The Minister's solicitor subsequently received a letter of 20 January 2004 from the applicant saying that, because of Christmas and New Year holidays, it was too hard to find another solicitor. The applicant therefore requested an extension of time.
5 The matter was called on for hearing today and there was no appearance for the applicant. The Minister's solicitor therefore asked that the matter be dismissed pursuant to O 10 r 7. In the absence of any submissions on behalf of the applicant as to why any extension should be granted, I do not consider that it is appropriate to grant one. Accordingly, I propose to accede to the Minister's request and to order that the application be dismissed with costs.
I certify that the preceding five (5) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.
Associate:
Dated: 27 April 2004
Counsel for the Applicant: The applicant did not appear
Solicitor for the Respondent: Australian Government Solicitor
Date of Hearing: 3 February 2004
Date of Judgment: 3 February 2004
| 1,088 |
federal_court_of_australia:fca/single/2006/2006fca0594
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2006-03-15 00:00:00
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SZGGS v Minister for Immigration & Multicultural & Indigenous Affairs [2006] FCA 594
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2006/2006fca0594
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2024-09-13T22:46:00.861827+10:00
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FEDERAL COURT OF AUSTRALIA
SZGGS v Minister for Immigration & Multicultural & Indigenous Affairs
[2006] FCA 594
SZGGS v MINISTER FOR IMMIGRATION & MULTICULTURAL & INDIGENOUS AFFAIRS
NSD 2462 OF 2005
RARES J
15 MARCH 2006
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD 2462 OF 2005
BETWEEN: SZGGS
APPLICANT
AND: MINISTER FOR IMMIGRATION & MULTICULTURAL & INDIGENOUS AFFAIRS
RESPONDENT
JUDGE: RARES J
DATE OF ORDER: 15 MARCH 2006
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
The orders made on 1 March 2006 be set aside.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD 2462 OF 2005
BETWEEN: SZGGS
APPLICANT
AND: MINISTER FOR IMMIGRATION & MULTICULTURAL & INDIGENOUS AFFAIRS
RESPONDENT
JUDGE: RARES J
DATE: 15 MARCH 2006
PLACE: SYDNEY
REASONS FOR JUDGMENT
(REVISED FROM THE TRANCRIPT)
1 In Taylor v Taylor (1979) 143 CLR 1 at 8 Gibbs J said that:
'A court, whether superior or inferior, has inherent power to set aside an order made against a person who did not have a reasonable opportunity to appear and present his case.'
2 A like view was expressed by Mason J at 143 CLR at 16. He said:
'A jurisdiction to set aside its orders is inherent in every court unless displaced by statute. In my opinion, the jurisdiction extends not only to the setting aside of judgments which have been obtained without service or notice to a party (Craig v Kanssen [1943] KB 256 at 262-263) but to the setting aside of a default or ex parte judgment obtained when the absence of the party is due to no fault on his part.'
3 The other members of the court expressed a similar view. The question for my decision is whether I am satisfied that the explanation by the applicant for his non appearance on 1 March 2006 is such as comes within that rule.
4 The applicant has given evidence that he did not receive the letter from the court dated 23 February 2006 appointing 1 March 2006 as the date for the hearing of his application for leave to appeal. He made the telling point when re-examining himself that there was no reason, given his long, litigious history and his appearance on occasions when he has been involved in court proceedings, that he would on this occasion fail to attend had he known that the hearing was going to take place. He did give evidence that there was a problem with his post office box, that it appeared to be broken, and that from time to time documents went missing.
5 Although I have some hesitation about the matter, particularly given the knowledge that the post office box, to all appearances, appears unsatisfactory, I am satisfied that the applicant, through no fault of his own, did not have notice of the hearing on 1 March, and therefore I have jurisdiction and power to set aside my earlier orders. I think that is the appropriate course that I should adopt, having regard to the High Court's decision in Taylor v Taylor (1979) 143 CLR 1 is that the making of such an order flows ex debito justitae.
I certify that the preceding five (5) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.
Associate:
Dated: 22 May 2006
Applicant: In person
Solicitor for the Respondent: Australian Government Solicitor
Date of Hearing: 15 March 2006
Date of Judgment: 15 March 2006
| 906 |
federal_court_of_australia:fca/single/2004/2004fca0628
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text/html
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2004-04-30 00:00:00
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NBAQ v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCA 628
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2004/2004fca0628
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2024-09-13T22:46:00.936731+10:00
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FEDERAL COURT OF AUSTRALIA
NBAQ v Minister for Immigration & Multicultural & Indigenous Affairs
[2004] FCA 628
MIGRATION β no issue of principle
NBAQ v MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
NSD 112 OF 2004
CONTI J
30 APRIL 2004
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD 112 OF 2004
BETWEEN: NBAQ
APPLICANT
AND: MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
RESPONDENT
JUDGE: CONTI J
DATE OF ORDER: 30 APRIL 2004
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The application be dismissed.
2. The applicant pay the respondent's costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD 112 OF 2004
BETWEEN: NBAQ
APPLICANT
AND: MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
RESPONDENT
JUDGE: CONTI J
DATE: 30 APRIL 2004
PLACE: SYDNEY
REASONS FOR JUDGMENT
1 This is an application under s 39B of the Judiciary Act 1903 (Cth) for review of a decision of the Refugee Review Tribunal ('RRT') made on 17 December 2003 and handed down on 14 January 2004, in which the RRT affirmed the decision of a delegate of the respondent Minister to refuse to grant a protection visa under the Migration Act 1958 (Cth) ('the Act'). Both the delegate and the RRT were not satisfied the applicant met the criteria set out in s 36(2) of the Act.
2 The applicant arrived in Australia from China on 9 February 2003 and applied for the visa on 7 March 2003. The basis of this claim was that he feared persecution in China because he was a Falun Gong practitioner. The delegate, not satisfied the applicant was a person to whom Australia has protection obligations under the Refugees Convention, refused the visa on 19 March 2003. The applicant applied to the RRT for review of this decision on 22 April 2003.
3 On 29 October 2003, the RRT wrote to the applicant and advised him that it had considered the material before it in relation to his application but was unable to make a decision in his favour on that information alone. Accordingly, the applicant was invited to attend a hearing at the RRT 'to give oral evidence and present arguments in support of [his] claim'. The date and time of the hearing was given, and a brochure was enclosed explaining what would happen on the day of the hearing. Reference was also made to the RRT's website.
4 On 14 November 2003, a migration agent informed the RRT that the applicant did not wish to attend the hearing, and further that consent was thereby given to the RRT to determine the review, without the applicant taking any step in response to the RRT's hearing invitation. This was seemingly done on the instructions of the applicant whose signature appeared on that response to the RRT. No formal hearing of the applicant's application, for review was thus convened, and the RRT determined the matter on the documentation already placed before it.
5 The RRT found the applicant had not provided sufficient information to enable it to be satisfied as to the central factual matters raised by the applicant in support of the application, and that as a result, it was unable to reach the necessary state of satisfaction as to the applicant's asserted need for protection. In drawing such a conclusion, the RRT referred to the unsatisfactory nature of the written claims provided by or on behalf of the applicant, involving thereby a lack of detail and numerous inconsistencies that could not be clarified on the paperwork alone. As was candidly stated by the Tribunal Member in his reasons for decision:
'In the absence of an opportunity to question the applicant about his Falun Gong beliefs and practices, it is difficult to reach the necessary state of satisfaction that he was, in fact a Falun Gong practitioner prior to his departure from China. If he had attended a hearing I would have asked the applicant questions in order to ascertain whether he is, in fact, a genuine believer in Falun Gong. Moreover, while he claims to currently practice Falun Gong in Australia, he has provided no details of where or how often he practices.'
6 The RRT also referred to independent country information to the effect that those practitioners of Falun Gong who were perceived by the authorities to be 'core leaders' or 'diehard' members, who refuse to recant their beliefs, and who continue to publicly protest or practice in defiance of the law, were at risk of persecution. However, on the information available, the RRT was:
'unable to be satisfied that he [the applicant] falls within any of these categories, or that he otherwise has a well founded fear of persecution in the PRC [People's Republic of China] for reason of his belief in or practice of Falun Gong.'
7 As for the applicant's current beliefs and his claim he did not want to return to China and hide his beliefs and practice in private, the RRT was not satisfied that the applicant's commitment:
'β¦to Falun Gong is now such that there is a real chance that he would cease to co-operate with the authorities and comply with the law, if he returned to the PRC, and that he would now practise Falun in a manner which would bring himself to the attention of the authorities. The applicant has provided insufficient information upon which I can be satisfied that his attitude to Falun Gong has changed in this fundamental way since he has been in Australia.'
8 The grounds of appeal from the decision of the RRT, as set out in the applicant's amended application, disclose no viable basis in law for setting aside the decision of the RRT. They claim in very broad terms an error in law / jurisdictional error on the part of the RRT for denying the applicant a hearing, because 'he was under the impression that he would be detained by the Department of Immigration and deported to his home country (where he would be persecuted by the government) after the hearing if the Tribunal member made a unfavourable decision immediately after the hearing'. Further, it is claimed, the RRT 'failed to conduct a real, rather than purported exercise of its jurisdiction to determine whether the applicant was a Falun Gong practitioner as he claimed', and further that the 'RRT's decision was reached in the absence of probative material and/or logical grounds and was thereby not rationally formed'.
9 Such grounds do not reveal any errors or other basis for setting aside the RRT's decision. The grounds were said by the applicant to have been prepared by a migration agent Ms Lucy Wang of Suite 507, Level 5, 431-439 Sussex Street, Sydney.
10 The reasons of the RRT do not disclose any reviewable error involved in the refusal of a protection visa in favour of the applicant. Clearly it may be readily inferred, the RRT considered the evidence placed before it to be inadequate for review of the delegate's decision. The applicant chose not to provide any further information or documentation to the RRT or to accept the invitation to attend the RRT hearing. No error, jurisdictional or otherwise, is revealed by the terms of and reasons for the decision of the RRT.
11 The application should be dismissed with costs.
I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti.
Associate:
Dated: 18 May 2004
The Applicant appeared in person
Counsel for the Respondent: M Wigney
Solicitor for the Respondent: Clayton Utz
Date of Hearing: 30 April 2004
Date of Judgment: 30 April 2004
| 1,755 |
federal_court_of_australia:fca/full/2012/2012fcafc0131
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decision
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commonwealth
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text/html
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2012-09-12 00:00:00
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Minister for Immigration and Citizenship v SZQOY [2012] FCAFC 131
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/full/2012/2012fcafc0131
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2024-09-13T22:46:01.981202+10:00
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FEDERAL COURT OF AUSTRALIA
Minister for Immigration and Citizenship v SZQOY [2012] FCAFC 131
Citation: Minister for Immigration and Citizenship v SZQOY [2012] FCAFC 131
Appeal from: SZQOY v Minister for Immigration & Anor [2012] FMCA 289
Parties: MINISTER FOR IMMIGRATION AND CITIZENSHIP v SZQOY and REFUGEE REVIEW TRIBUNAL
File number: NSD 655 of 2012
Judges: BUCHANAN, LOGAN AND BARKER JJ
Date of judgment: 12 September 2012
Catchwords: MIGRATION β whether the tribunal was functus officio at the time it received further documents from a party β time at which a decision is finally made β whether internal transmission of a decision to a registry represents a final decision.
Held: decision final only when manifested externally β decision-maker not before then precluded from revisiting the decision at his or her option.
Legislation: Income Tax Assessment Act 1936 (Cth)
Migration Act 1958 (Cth) ss 410, 411, 414, 415, 420A, 421, 422, 422A, 430, 430A, 457, 458, 430A, 430D, 457, 458, 460, 472, 478
Migration Legislation Amendment Act (No 1) 2008 (Cth)
Cases cited: Batagol v Federal Commissioner of Taxation (1963) 109 CLR 243
Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409
Minister for Immigration and Citizenship v SZIAI (2009) 83 ALJR 1123
Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597
Pongrass Group Operations Pty Ltd v Minister for Planning (2007) 156 LGERA 250
Semunigus v The Minister for Immigration & Multicultural Affairs [1999] FCA 422
Semunigus v Minister for Immigration and Multicultural Affairs [2000] FCA 240; (2000) 96 FCR 533
Shell Company of Australia Ltd v Federal Commissioner of Taxation [1931] AC 275
Singh v Minister for Immigration and Multicultural Affairs (2001) 109 FCR 18
Date of hearing: 16 August 2012
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 58
Counsel for the Appellant: Mr S Lloyd SC
Solicitor for the Appellant: DLA Piper Australia
Counsel for the First Respondent: Mr M J Darke with Ms N Zerial
Solicitor for the First Respondent: Dobbie and Devine Immigration Lawyers Pty Ltd
Counsel for the Second Respondent: The second respondent submitted save as to costs.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 655 of 2012
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN: MINISTER FOR IMMIGRATION AND CITIZENSHIP
Appellant
AND: SZQOY
First Respondent
REFUGEE REVIEW TRIBUNAL
Second Respondent
JUDGES: BUCHANAN, LOGAN AND BARKER JJ
DATE OF ORDER: 12 SEPTEMBER 2012
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The appeal is dismissed with costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 655 of 2012
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN: MINISTER FOR IMMIGRATION AND CITIZENSHIP
Appellant
AND: SZQOY
First Respondent
REFUGEE REVIEW TRIBUNAL
Second Respondent
JUDGES: BUCHANAN, LOGAN AND BARKER JJ
DATE: 12 SEPTEMBER 2012
PLACE: SYDNEY
REASONS FOR JUDGMENT
BUCHANAN J:
1 The central issue in this appeal is whether the Refugee Review Tribunal ("the RRT"), constituted under the Migration Act 1958 (Cth) ("the Act"), became functus officio when a member of the RRT electronically transmitted to the Registry of the RRT a written decision, with a view to the decision being notified to the first respondent and to the Secretary of the Department of Immigration and Citizenship.
2 The first respondent to this appeal (to whom I shall refer hereafter as the respondent) is a citizen of Nepal who arrived in Australia on 12 September 2008 as the dependent spouse of an overseas Nepali student. She remained in Australia after her husband returned to Nepal in January 2011. On 17 January 2011 she lodged an application for a protection visa. The grounds for that application do not require discussion on this appeal.
3 On 10 March 2011 a delegate of the appellant refused the application for a protection visa. The respondent then applied to the RRT for review of that decision. The RRT affirmed the decision of the delegate. However, it was what occurred shortly before the RRT made that decision available to the respondent which raises the matters to be examined on the appeal. Those matters are referred to hereunder.
4 After receiving the decision of the RRT, the respondent applied to the Federal Magistrates Court of Australia ("FMCA") to set aside the decision of the RRT on the grounds that the RRT had committed jurisdictional error. A number of grounds were relied upon. Those grounds do not require consideration on the appeal. The grounds relied upon by the respondent were rejected by the FMCA (SZQOY v Minister for Immigration & Anor [2012] FMCA 289).
5 However, at the hearing before the FMCA the Minister properly raised for consideration by the FMCA the question whether the RRT had arguably committed a jurisdictional error of a different kind. The Minister, although raising the issue for consideration, argued that no jurisdictional error had been committed. The FMCA found that the RRT had made a jurisdictional error. It is that issue which requires consideration on the appeal. The issue turns upon some procedural steps taken within the administrative environs of the RRT on the day that its decision was published. I shall refer to those issues in more detail shortly. First, the history of the RRT proceedings should be identified.
6 The respondent's application to the RRT was received by the RRT on 7 April 2011. On 10 May 2011 the respondent was, by letter, invited to attend a hearing before the RRT on 15 June 2011. On 9 June 2011 the RRT was advised by Mr D Bitel, a partner in Parish Patience Immigration Lawyers, that his firm had received instructions to act for the respondent.
7 A hearing took place on 15 June 2011. The respondent was represented at the hearing by Mr Bitel. A note made in the file of the RRT, which was in evidence before the FMCA, recorded that the hearing before the RRT had been completed on 15 June 2011. It also recorded that Mr Bitel was to provide further submissions by 29 June 2011. On 28 June 2011 Mr Bitel sent long and detailed written submissions extending over more than 43 pages to the RRT. The letter containing the submissions concluded: "We request the opportunity to make further submissions as appropriate at or after the forthcoming interview." This statement was obviously a mistake, or the result of carelessness. There was no further interview or hearing scheduled.
8 According to another file note, on 27 July 2011, almost one month after the written submissions were made on behalf of the respondent, an officer of the RRT rang Mr Bitel's office and spoke to his secretary. The file note entry read:
At the Member's request I called the rep. He was not available so I left a message with his secretary stating that in Mr Bitel's submission dated 28 June 2011 he requested "the opportunity to make further submissions as appropriate at or after the forth coming interview". I said the Member asked me to call him and inform him that the Member did not say he would hold a second hearing and he has decided not to do so. I said that the Member will consider any submissions the [sic] Mr Bitel wishes to submit up until he makes a decision. She asked when the member will make a decision and I said I did not have a confirmed date but it could be at any time. The secretary said so there will not be a second hearing and Mr Bitel should make submissions asap. I said yes, if he wishes to do so.
9 That file note bore a time of 9.18 am. Seven minutes later, at 9.25 am, the same officer made a further file note in the following terms:
Further to the previous casenote, I left my name and number for Mr Bitel in the event that he had any further questions. His secretary said she would pass the message on.
10 At 4.57 pm on 27 July 2011 Mr Bitel sent the RRT by facsimile a short letter enclosing two documents, each dated before 15 June 2011. The first was, in form, a short statement by a Nepali gynaecologist dated 11 February 2007, more than four years earlier. The second was a letter from the respondent's aunt, written in support of her application for a protection visa, which on its face verified certain claims the respondent had made. Mr Bitel's letter did not say to what use the documents should be put, why they had not been provided at the hearing on 15 June 2011 or with the written submissions dated 28 June 2011, or why there had been a delay in providing them to the RRT. Mr Bitel's letter concluded:
Should you have any questions, please advise.
We await the Tribunal's further advice.
11 The evidence before the FMCA included an internal memorandum within the RRT to the effect that the member of the RRT saw the additional material with Mr Bitel's letter of 27 July 2011 but "decided there is no jurisdictional error in this matter and the case cannot be reopened".
12 Subsequently Ms Marina Osmo, Registry Manager for the New South Wales Registry of the RRT, wrote to Mr Bitel on 28 July 2011 in the following terms:
The Tribunal received your submission dated 27 July 2011 by fax on 27 July 2011 at 4:57 p.m.
The submission was forwarded to the Presiding Member and your request was carefully considered. However, the Presiding Member has decided not to reopen this case.
The Tribunal made its decision in this case on 27 July 2011 at 2:34 p.m. Once the Tribunal has made a decision under the Migration Act 1958, it becomes functus officio and has no power to take any further action on the review.
The Tribunal is not in a position to assist you any further on this issue.
13 The remaining evidence before the FMCA concerned the internal administrative arrangements within the RRT leading to publication of decisions of members of the RRT. Ms Osmo's affidavit contained the following statements:
3. The Tribunal maintains an online case management system called CaseMate. CaseMate is used to record the main steps in progressing an application from lodgement to finalisation. It is also a repository for case related correspondence including the Tribunal decision. As a Registry Manager I am familiar with CaseMate.
β¦
7. In CaseMate, there are various Work Steps, which are carried out at different stages of the review process. In the 'Decision' Work Step, once a Member has drafted a decision, it is 'checked in' to CaseMate. The Member will then click on a 'send to next Work Step' option. That will move the case from the 'Decision' Work Step to the 'Finalisation' Work Step, which is the step that alerts the relevant Registry officer to notify the decision to the applicant.
14 Ms Osmo referred to material which recorded the following "Work Steps":
15 Despite the fact that the electronic record of the RRT recorded that the review being conducted of the respondent's application was finalised at 6.42 pm on 27 July 2011, the submission made to the FMCA (and to this Court on appeal) was that the review was in fact finalised at 2.34 pm on 27 July 2011 when the member of the RRT sent his decision through the RRT electronic system to the next Work Step. The next Work Step was "Case Finalisation".
16 It is convenient to state at this stage that, in my view, the records of the RRT itself give no evidentiary support to the proposition that the review of the respondent's application was complete before 6.42 pm (or at worst 6.39 pm) on 27 July 2011. That is so whatever view is taken of the legal principles yet to be discussed.
17 In its decision the FMCA held (relevantly to the present point) as follows:
43. β¦ In this case there was no direct evidence to the effect that the presiding member could have recalled his decision at any point prior to its despatch but I infer that he could have. Nothing in Ms Osmo's affidavit suggests that the presiding member could not have spoken to the Tribunal's registry and countermanded the electronic instruction to send out the decision. In this regard it is significant that the decision was sent under cover of a letter signed by the same Tribunal officer who electronically recorded the finalisation of the file at 18.39 on 27 July 2011, shortly after the fax sending the letter and the decision had been despatched. That is to say, the despatch of the decision was not the product of an automated and irreversible process but was effected through the actions of a Tribunal officer.
44. Because this final step was not taken until after the applicant's solicitors had sent their further submissions, the Tribunal was not functus officio at the time those submissions were received. Consequently, the presiding member erred when he concluded that the matter was concluded at the time he saw the additional submission.
18 In my view, this conclusion was correct and the appeal should be dismissed.
19 The RRT is established under s 457 of the Act. It consists of a Principal Member and other members (s 458). The core function of the RRT is to review decisions which are made reviewable by it under s 411 (s 414). The RRT, upon such a review, may exercise all the powers and discretions conferred by the Act on the person who made the decision under review (s 415(1)). The RRT may affirm such a decision, vary it, set it aside and substitute a new decision, or remit the matter for reconsideration (s 415(2)). For the purpose of any particular review the RRT is constituted by a single member (s 421), although the Principal Member has powers and discretions to reconstitute the RRT in appropriate circumstances (ss 422 and 422A).
20 The Principal Member is the executive officer of the RRT and is responsible for the overall operation and administration of the RRT (s 460). The Principal Member may give directions as to the operations of the RRT, including directions about the application of efficient processing practices (s 420A). Under s 472 a Registrar of the RRT is to be appointed, together with "such other officers" as are required. Officers of the RRT have such duties, powers and functions as are conferred by the Act and the regulations thereunder, and also "such other duties and functions as the Principal Member directs". There is no reason to suppose, in the present case, that the administrative arrangements to which Ms Osmo deposed before the FMCA, were not administrative arrangements properly authorised by the Principal Member, to which officers of the RRT gave effect.
21 So far as is relevant to the present case, when the RRT makes its decision on a review it must prepare a written statement which sets out the decision, the reasons for the decision, its findings on any material questions of fact, and references to the evidence or other material on which the findings of fact were based (s 430). The RRT must notify the applicant for review of its decision by giving the applicant a copy of the written statement (s 430A). That may be done in various ways within 14 days of the date that the written statement setting out the decision bears. A copy of the written statement must also be given to the Secretary of the Department of Immigration and Citizenship. If an oral decision is given, the RRT must give the applicant and the Secretary a copy of the statement prepared under s 430 also within 14 days.
22 At the heart of the Minister's argument on the present appeal was the proposition that the RRT has completed its review in any case when the member who constitutes the RRT for the purpose of that review has prepared a written statement under s 430 and has transmitted that written statement to the Registry of the RRT. This argument attributes, to one aspect of the internal processes to which Ms Osmo deposed, a finality and legal significance which, in my view, is unjustified by reference to the provisions of the Act, or any relevant legal principle.
23 Although the RRT is constituted by one of its members for the purpose of any particular review (subject to any directions from the Principal Member that it be reconstituted for that purpose) any decision which is "made", is made by the RRT as a body established by statute. That is so even though an individual member decides what the outcome of a particular review will be and prepares the statement required by s 430 setting out the decision, reasons, material facts and evidence relied on. I do not accept that a decision is "made" by the RRT in the requisite sense at the time of an internal communication by a member of the RRT to the Registry of the RRT which is expected to lead (sometime in the next 14 days) to notification of the decision to the effective parties to the review β i.e. the applicant and the Secretary of the relevant government department from whence came the decision under review. A conclusion to that effect would entail, and depend upon, the accompanying conclusion that within the intervening period the statement of reasons and, if necessary, the decision on the outcome, was incapable of recall, revision, amendment or, if appropriate, reversal.
24 It is not necessary to speculate on all the circumstances where that might be appropriate. They could certainly include an important development in the law, or the emergence of some critical fact. I am not saying that the RRT is bound to receive new material up to the date of a decision, or that it should reasonably have done so in this case. However, I reject the idea (necessarily embedded in the appellant's argument) that the RRT has no legal authority to do so in an appropriate case. The period in which the RRT retained its legal authority to do so in the present case did not end upon the occasion, or at the time, of an internal communication to its own Registry.
25 The present case is not the first time that an issue of this kind has arisen for consideration, although there have been some alterations to the statutory framework in the intervening period. In Semunigus v The Minister for Immigration & Multicultural Affairs [1999] FCA 422 Finn J considered the date upon which the RRT was functus officio, having regard to the statutory arrangements then in place. His Honour said (at [19]):
19 For present purposes I am prepared to hold that the making of a decision involves both reaching a conclusion on a matter as a result of a mental process having been engaged in and translating that conclusion into a decision by an overt act of such character as, in the circumstances, gives finality to the conclusion - as precludes the conclusion being revisited by the decision-maker at his or her option before the decision is to be regarded as final.
26 On appeal (Semunigus v Minister for Immigration and Multicultural Affairs [2000] FCA 240; (2000) 96 FCR 533) Madgwick J said, in a passage with which I agree, (at [102]-[103]):
102 As a matter of undoubted fact, the conclusion to which the RRT member had arrived in his own mind had not been communicated to anyone outside the RRT's own staff. The taking of administrative steps, as part of an orderly general system of case management, to have support staff communicate the decision (and the reasons for it) to the parties could therefore plainly have been halted or countermanded by the RRT member. That must be the case, as a matter of administrative necessity: a RRT member might have had second thoughts about the proper factual conclusions in a case; or a new judicial decision might change the member's understanding of the relevant law. Mere case management practices, even if publicly decreed, cannot stand in the way of justice being done: Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146.
103 In a case of the kinds dealt with by the RRT, a decision is no decision, in my opinion, until either it has been communicated to the applicant or irrevocable steps have been taken to have that done. I speak of communication to the applicant because, before the RRT, the applicant is the only party. There is no need to regard a decision as irrevocable before it must be considered to have passed into the public domain.
27 Spender J was less definite, saying (at [12]):
12 There is little evidence touching the question whether the decision by the Member of the RRT, in this particular case, was "beyond recall". I think it likely that, had the Member wanted to recall his signed decision, because, for example, he had changed his mind or had realised that he had made a mistake, he would have been able to retrieve the decision at any time prior to a copy of it having been sent to either the Minister or the applicant as then required by s 430(2) of the Migration Act 1958 (Cth) ("the Act").
28 Higgins J took a different view. His Honour said (at [78]):
78 β¦ Given the procedures adopted by the RRT, it seems to me that once the reasons for decision were delivered to and recorded in the Registry of the RRT, the decision was made.
29 In my view, the observations of Higgins J have no application to the facts of the present case and, with respect, I am unable to agree with them as a matter of principle. In my respectful opinion the principles stated by Madgwick J and echoed by Spender J are a correct statement of the legal position. All three judges endorsed the statement of principle made by Finn J. That statement of principle incorporates a critical consideration. A decision maker must be precluded from revisiting the decision at his or her option before it is to be regarded as final in the relevant sense. In the present case there was, in my view, no support in the evidence or in any of the statutory provisions relied upon by the appellant to suggest that it was beyond the power of the member of the RRT to recall the decision which had been sent to the Registry through the RRT's electronic case management system. In so far as the member of the RRT concluded that it was beyond his power to do so he made a jurisdictional error.
30 In my view the judgment of the FMCA was correct and should not be disturbed. The appeal should be dismissed and the respondent should have her costs.
31 Counsel for the Minister asked, in the event that the appeal was dismissed, for costs of a notice of contention upon which we refused leave to rely at the appeal. There is no reason to think that costs were materially increased by reason of the notice of contention. I would not make a separate costs order in this case in that respect.
32 In my view, the appropriate order is "the appeal is dismissed with costs".
I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Buchanan.
Associate:
Dated: 12 September 2012
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 655 of 2012
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN: MINISTER FOR IMMIGRATION AND CITIZENSHIP
Appellant
AND: SZQOY
First Respondent
REFUGEE REVIEW TRIBUNAL
Second Respondent
JUDGES: BUCHANAN, LOGAN AND BARKER JJ
DATE: 12 SEPTEMBER 2012
PLACE: SYDNEY
REASONS FOR JUDGMENT
logan j:
33 I have had the advantage of reading in draft the reasons for judgment prepared by Buchanan J. I agree with the order which his Honour proposes. I am also in general agreement with his Honour's reasons. As Buchanan J highlights, differing views were expressed in Semunigus v Minister for Immigration and Multicultural Affairs [1999] FCA 422 (Finn J) (Semunigus) and, on appeal, in Semunigus v Minister for Immigration and Multicultural Affairs (2000) 96 FCR 533 as to when the Refugee Review Tribunal (RRT) became functus officio.
34 Like Buchanan J, I consider that the RRT's decision was not beyond recall by the member constituting the RRT for the purposes of the review until it was manifested to the applicant for review (the first respondent) and to the Secretary to the appellant Minister's department by some overt act. That was the view expressed in Semunigus by Finn J at first instance (at [19]) and, on appeal, certainly by Madgwick J (at [102] - [103]) and also, I consider, by Spender J (at [12]), in contrast to that of Higgins J (at [78]) who considered that communication of the member's decision on the review to the registry put it beyond that member's recall. Because we are differing from Higgins J on a point not just of considerable practical importance in relation to the administration of the RRT but also one of principle, which may be of more general relevance to administrative decision making, I wish to amplify why I am in general agreement with Buchanan J.
35 The RRT owes its existence to and exercises no greater jurisdiction than that conferred by the Migration Act 1958 (Cth) (the Act). It is therefore the text of the provisions of the Act concerning these matters, the context in which they appear and the subject, scope and purpose of those provisions which one must examine in order to determine when after an application for review has been lodged with it the RRT becomes functus officio.
36 Materially, the following emerges from such an examination.
37 Most importantly, and as French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ observed in their joint judgment in Minister for Immigration and Citizenship v SZIAI (2009) 83 ALJR 1123 at [18]:
The core function, in the words of s 414 of the Act, is to 'review the decision' which is the subject of a valid application made to the Tribunal under s 412 of the Act.
The type of review function consigned to the RRT has a lengthy provenance in Australian law, which may be traced back via, notably, Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409 (Drake) to Shell Company of Australia Ltd v Federal Commissioner of Taxation [1931] AC 275 at 296-298. On such a review, the question is what is the correct or preferable decision on the material before the administrative tribunal: Drake at 419 per Bowen CJ and Deane J.
38 Though the RRT is a body established under the Act (s 457), it is not constituted as a body corporate. The Act sometimes uses the terms "Refugee Review Tribunal" or "Tribunal" (defined by s 410 to mean the Refugee Review Tribunal) in a collective sense, as for example in s 458 to refer to the Principal Member, Deputy Principal Member (if appointed), Senior Member and the other members of which it consists and, on other occasions, to refer to the RRT as constituted by the particular member who conducts the review of a particular decision (s 421).
39 That it is a single member of the RRT who, by virtue of s 421, undertakes the "core function" of review in a particular case is instructive. It highlights that the focus must be on when that particular member becomes functus officio. It is on the RRT as constituted by that particular member on whom falls the responsibility not only of conducting the review but also of recording the decision and reasons as required by s 430 of the Act and either notifying the applicant for review and the Secretary to the Department of Immigration and Citizenship (Secretary) as required by s 430A of the Act or, if that member delivers the Tribunal's decision orally, notifying the Secretary as required by s 430D of the Act.
40 The intellectual process in undertaking the core function of review is not an end in itself. The decision and reasons which are the result of that intellectual process must be made known to the persons interested. Those persons are the applicant for the review and the Secretary. It is only when the decision of the RRT as constituted by the particular member has either been pronounced orally or, if given in writing, sent to the applicant and to the Secretary in accordance with the notification obligation that the core function of review is complete. Before then, the member is entitled to have second (or more) thoughts perhaps on the basis of further reflection on all of the material hitherto to hand, perhaps stimulated by further material. At that stage, the matter is entirely intramural. Depending on the nature and source of that further material there may be procedural fairness obligations which fall upon the member before a final decision is made. That member is entitled to entrust to a registry officer the tasks of recording the decision and of notifying the applicant and the Secretary of that decision but the responsibility for so doing remains that of the member who has conducted the review. Until the decision has been sent out, that member is also entitled to countermand a direction to the registry to record and send out what has proved, upon the member's reflection, to be an earlier version of that member's decision.
41 A distinction between the intellectual process of administrative decision-making and its culmination by manifestation to the interested party is also evident in the analysis made by Kitto J (Menzies J agreeing) in Batagol v Federal Commissioner of Taxation (1963) 109 CLR 243 (Batagol) of the process of assessment laid down in the Income Tax Assessment Act 1936 (Cth). His Honour's conclusion was that assessment in the sense of a mere calculation produced no legal effect, the process of assessment not being complete until notice of the assessment had been given to the taxpayer, "[N]othing done in the Commissioner's office can amount to more than steps which will form part of an assessment if, but only if, they lead to and are followed by the service of a notice of assessment". In this case, an analysis of the provisions of the Act relating to the RRT's core function of review yields a similar type of conclusion. Nothing done within the RRT's office can amount to more than steps which will form part of the review of the decision if, but only if, they lead to and are followed by the oral pronouncing or other notification of the decision of the particular member constituting the RRT for the purpose of that review.
42 The decision which has to be made and recorded under s 430 of the Act is the decision which that particular member has either pronounced orally or finally intends to be notified under s 430A. To construe, as was promoted by the Minister in submissions, s 430(2) of the Act as having the effect that some initial decision which may be reached by the particular member but never communicated other than to RRT registry staff became that member's decision on the review to the exclusion of that member's being able to have second thoughts is to read that provision out of context. In context, what must be recorded under s 430 is the final decision to which that particular member has come before the matter is beyond recall.
43 Were there a direction given by the Principal Member under s 420A of the Act which purported to preclude the ability of the particular member conducting a review to recall a decision communicated to registry staff but not notified that direction would be inconsistent with when the RRT's "core function" is concluded and, to that extent be invalid. Though the Act has been much amended since 2001, the observation to this effect made by Merkel J in Singh v Minister for Immigration and Multicultural Affairs (2001) 109 FCR 18 at [53] remains true of the Act as it stood at the time when the RRT conducted the review under present consideration.
44 The current procedure for the notifying the decision to the applicant and to the Secretary of the decisions of the RRT is the result of amendments made to the Act by the Migration Legislation Amendment Act (No 1) 2008 (Cth) (the 2008 Amendment Act). Prior to the 2008 Amendment Act, the Act required that the RRT's decision be "handed down". That entailed a requirement that the applicant and the Secretary be invited to be present at a time when the member constituting the RRT would then announce the decision orally. An announcement of the decision orally is still possible under the current procedure but the alternative of notification by other means is now offered. As part of that current procedure, s 430(2) seems to have no higher purpose than giving precision to what is to be the date of the decision when the RRT avails itself of that alternative. It is no part of the sub-section's role to preclude the member constituting the RRT for the purpose of a particular review from changing his or her mind before notification by that alternative occurs.
45 Entitlement to look at material sent by an applicant after a hearing is one thing; whether there is any obligation so to do either in the circumstances of the particular case or otherwise is another. The error in this case was in the RRT's concluding that there was no entitlement to consider the further material. It is not necessary to consider whether the RRT had any obligation so to do.
46 Though the question is always one of construction of the governing legislation, the conclusion that the Act does not preclude revision by an administrative decision-maker until the decision has been externally notified accords with the way in which a like question was answered by Jagot J, when a judge of the New South Wales Land and Environment Court in Pongrass Group Operations Pty Ltd v Minister for Planning (2007) 156 LGERA 250 (Pongrass) at [26] and at [33] in respect of another statutory decision-making task.
47 In Pongrass, the role of decision-maker was consigned by statute to a Minister. The statute concerned was regarded by Jagot J as operating against the background of an assumption by Parliament, grounded in principles of good public administration, that there would be a "dialogue" between the Minister and the permanent head and other officers of the department with respect to a decision. It was held that if, in the course of that dialogue and as in that case, the Minister's proposed decision had become known within the department, that would not, before its external notification, preclude the Minister from coming to a different decision.
48 Here, in providing in Div 10 of Pt 7 of the Act for the RRT to have a registry, a registrar and other officers, Parliament provided for administrative assistance for the members who would constitute the RRT. That, in the course of rendering that assistance, a registry officer might come to know of a member's decision may be taken to have been assumed if not expected by Parliament. That knowledge is not to be equated with the conclusion of the review process. Neither expressly nor by implication does the Act dictate that.
49 The position in the present case is to be contrasted with that in Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597 (Bhardwaj). In that case, what purported to be the decision of the tribunal was communicated but it was later appreciated that the making of that decision had been attended by a jurisdictional error (denial of procedural fairness). That error meant that in law there had never been a valid decision on the review by the tribunal and hence nothing which rendered the tribunal functus officio. Here, the RRT was not, when the further material was received from the migration agent, functus officio because no decision had yet been pronounced or notified. In deciding that it was not possible to "re-open" the review, the RRT made a jurisdictional error.
I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan.
Associate:
Dated: 12 September 2012
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 655 of 2012
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN: MINISTER FOR CITIZENSHIP AND IMMIGRATION
Appellant
AND: SZQOY
First Respondent
REFUGEE REVIEW TRIBUNAL
Second Respondent
JUDGES: BUCHANAN, LOGAN AND BARKER JJ
DATE: 12 SEPTEMBER 2012
PLACE: SYDNEY
REASONS FOR JUDGMENT
BARKER J:
50 I have had the advantage of reading in draft the reasons for judgment prepared by both Buchanan J and Logan J. I agree with the order which Buchanan J proposes. I am also in general agreement with his Honour's reasons. I agree also with the reasons of Logan J.
51 As Logan J points out, in deciding the question whether the member of the Refugee Review Tribunal (RRT) was precluded as a matter of law from deciding to consider the materials lodged late by the representative of the appellant before the RRT, given the statutory nature of the RRT and the functions that it performs, it is necessary to regard the terms of the statute that governs the review functions that it performs.
52 When this examination is conducted there is no particular reason to think that the Parliament anticipated that the review function of the RRT would come to a halt because the RRT, by its human member or members, came to a point in their mental or intellectual consideration of the issue or issues under review that the review should be determined in a particular way. To come to such a conclusion would not only be artificial but could hardly be said to serve any public policy reason for the establishment of the RRT and the review function that it performs.
53 To read the relevant provisions of the Migration Act 1958 (Cth) in this way, as the Minister proposes, by drawing some strict division between the making of a decision on review and the subsequent provision of reasons for that decision, is highly artificial. Apart from anything else, it may not necessarily be the case that any decision-maker, including in the RRT, finally decides what the resolution of an issue or issues should be until concluding the required written reasons for that decision. The decision and the reasons to be expressed for the decision may in any given case be arrived at simultaneously.
54 The position taken by the member of the RRT was, in effect, that short of a Bhardwaj issue (see Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597) arising (as discussed in the reasons of Logan J), having signed his decision and, in effect, instructed that it be released to the affected party and thereafter to the Secretary to the appellant Minister's department, in accordance with the requirements of the Act, he was statutorily prevented from reconsidering what he had decided and signed off on.
55 In my view, as tempting as that course may be on many occasions, and as appropriate as it may be on some occasions not to reopen a matter, it is not, as a matter of proper construction of the Act, the position under the Act. As Buchanan J has pointed out, and as the majority in Semunigus v Minister for Immigration and Multicultural Affairs [2000] FCA 240; (2000) 96 FCR 533 emphasised, there may be a number of reasons that, in practice, might arise following the formal signing of a decision and instruction that it be sent out in accordance with the Act, that might lead the decision-maker to realise that some aspect, if not the whole of, the decision recorded should be changed and corrected and to that end the materials that have been ordered to be sent out recalled for those purposes.
56 In the present circumstances, for example, it may have been appropriate for the decision-maker to have considered the materials submitted extremely late in the piece on behalf of the appellant. That, however, is not the issue in this proceeding. The issue is whether the member was right to conclude he could not take such a step.
57 The Act, as Logan J, with respect, demonstrates in some detail, indicates communication to a party β and probably to the Secretary too β as a critical point in the process by which the decision arising from the review process is "beyond recall". I would also emphasise, however, that it is only following receipt of the reasons given for a decision that parties such as an appellant and the Minister or where appropriate the Secretary will be in a practical position to take advantage of their rights to make an application in respect of the decision as provided for by s 478 of the Act.
58 As I observed above, there is no compelling reason in public policy why the RRT should not be able to recall the reasons recording a decision arising from the review process under the Act before it has been communicated to a party. While finality is important in any decision-making process, there is a much greater public policy to be served if, despite having written up the reasons for a decision and instructed they be despatched to the affected party and the Secretary, the RRT has the flexibility to correct any error made so as to avoid legal error or to take steps to avoid any possible injustice. After all, the whole point of the review process is to ensure that good and fair decisions are made in the course of the public administration of the Act in this difficult area of decision-making.
I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker.
Associate:
Dated: 12 September 2012
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Halsted (Bankrupt) v The Official Trustee in Bankruptcy, in the matter of Halsted (Bankrupt) (No 2) [2012] FCA 66
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FEDERAL COURT OF AUSTRALIA
Halsted (Bankrupt) v The Official Trustee in Bankruptcy, in the matter of Halsted (Bankrupt) (No 2) [2012] FCA 66
Citation: Halsted (Bankrupt) v The Official Trustee in Bankruptcy, in the matter of Halsted (Bankrupt) (No 2) [2012] FCA 66
Parties: WILLIAM ANTHONY HALSTED (A BANKRUPT) v THE OFFICIAL TRUSTEE IN BANKRUPTCY, SLATER & GORDON LAWYERS (A FIRM) and ASK FUNDING LIMITED (ACN 094 503 385)
File number: QUD 221 of 2011
Judge: LOGAN J
Date of judgment: 9 February 2012
Catchwords: COSTS β loan contract β valid equitable charge in favour of respondent β application of contra proferentum rule β order for costs β whether applicant should be ordered to pay costs on a party and party basis or indemnity basis β construction of contractual arrangement β clause insufficiently explicit to require costs be paid on indemnity basis
COSTS β imprudent or unreasonable refusal of an offer of compromise by applicant β whether indemnity costs to be ordered β indemnity costs ordered to be paid from date of expiry of reasonable offer of compromise
Legislation: Bankruptcy Act 1966 (Cth) s 116
Federal Court of Australia Act 1976 (Cth) s 43
National Consumer Credit Protection Act 2009 (Cth) Sch 1
Federal Court Rules 2011 (Cth) r 40.01
Credit (Commonwealth Powers) Act 2010 (Qld) s 11
Consumer Credit Act 1994 (Qld)
Cases cited: Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 applied
Elders Trustee & Executor Company Limited v E G Reeves Pty Ltd (1988) 20 FCR 164 considered
Gomba Holdings (UK) Ltd v Minories Finance Ltd (No 2) [1993] Ch 171 considered
Halsted (Bankrupt) v The Official Trustee in Bankruptcy, in the matter of Halsted (Bankrupt) [2011] FCA 1242 cited
In re Adelphi Hotel (Brighton) Ld; District Bank Ld v Adelphi Hotel (Brighton) Ld [1953] 1 WLR 955 applied
Jackson v Richards [2005] NSWSC 630 considered
MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (no 2) (1996) 70 FCR 236 followed
Perpetual Trustees Australia Ltd v Barker (2004) 1 BFRA 130; 2004 SASC 58 considered
Re Solicitor's Bill of Costs; Re Shanahan (1941) 58 WN (NSW) 132 considered
Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 cited
Date of hearing: 17 October 2011
Date of last submissions filed by the Third Respondent: 21 October 2011
Date of last submissions filed by the Applicant: 25 October 2011
Place: Brisbane
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 51
Counsel for the Applicant: Mr D Kissane
Solicitor for the Applicant: Taylor David Lawyers
Counsel for the First Respondent: The First Respondent did not appear
Counsel for the Third Respondent: Ms JK Chapple
Solicitor for the Third Respondent: Boyd Legal
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION QUD 221 of 2011
IN THE MATTER OF WILLIAM ANTHONY HALSTED (A BANKRUPT)
BETWEEN: WILLIAM ANTHONY HALSTED (A BANKRUPT)
Applicant
AND: THE OFFICIAL TRUSTEE IN BANKRUPTCY
First Respondent
SLATER & GORDON LAWYERS (A FIRM)
Second Respondent
ASK FUNDING LIMITED (ACN 094 503 385)
Third Respondent
JUDGE: LOGAN J
DATE OF ORDER: 9 FEBRUARY 2012
WHERE MADE: BRISBANE
THE COURT ORDERS THAT:
1. Subject to this order, the Applicant pay the Third Respondent's costs of and incidental to this proceeding to be taxed as follows:
(a) prior to 26 August 2011, on a party and party basis; and
(b) on and from 26 August 2011, on an indemnity basis.
2. In respect of the written submissions in respect of costs made after 17 October 2011, any affidavit filed in support of any such submission and the attendance at judgment today, there be no order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION QUD 221 of 2011
IN THE MATTER OF WILLIAM ANTHONY HALSTED (A BANKRUPT)
BETWEEN: WILLIAM ANTHONY HALSTED (A BANKRUPT)
Applicant
AND: THE OFFICIAL TRUSTEE IN BANKRUPTCY
First Respondent
SLATER & GORDON LAWYERS (A FIRM)
Second Respondent
ASK FUNDING LIMITED (ACN 094 503 385)
Third Respondent
JUDGE: LOGAN J
DATE: 9 FEBRUARY 2012
PLACE: BRISBANE
REASONS FOR JUDGMENT
1 On 17 October 2011 I heard and, save in respect of costs, determined an application concerning whether the third respondent, Ask Funding Ltd (Ask Funding), was entitled to be paid the sum of $77,259.62 out of settlement proceeds held in the account of a solicitor's firm on behalf of the applicant: Halsted (Bankrupt) v The Official Trustee in Bankruptcy, in the matter of Halsted (Bankrupt) [2011] FCA 1242 (the principal judgment). These reasons for judgment should be read in conjunction with the principal judgment. I determined that those proceeds were subject to a valid equitable charge in favour of Ask Funding which operated as an equitable assignment to the extent of $77,259.62. That determination resolved the last of what had originally been a number of controversies in the matter. That last controversy might accurately be described as a short cause, which, though not without difficulty, nonetheless involved how particular principles of equity applied in the circumstances of this case. The only active protagonists in respect of that last controversy were Mr Halsted and Ask Funding.
2 I delivered the principal judgment ex tempore. That I was able so to do was, in no small measure, due to the helpful submissions which were made that day on behalf of each of the active parties.
3 Upon my delivering judgment I invited submissions as to costs from the parties. It transpired that a special order as to costs was to be sought, ie something other than an outcome which is that costs follow the event and that they would be taxed on a party and party basis. It transpired that neither party was then in a position to make submissions in respect of such an application, apparently because it was assumed that judgment would not be delivered ex tempore.
4 To make such an assumption in respect of a short cause is unwarranted. Where a party to such a cause considers that, if successful, a special order as to costs is warranted a necessary part of that party's preparation for the hearing of that cause must be preparing to meet the contingency that judgment will be delivered forthwith. That means having immediately available the evidence upon which that party proposes to rely in relation to costs as well as any pertinent authority. In many, if not most, cases it ought also to be apparent to a respondent to such an application, having regard to the receipt of prior "without prejudice" correspondence or a formal offer to settle, that there is a contingency that, if the application is successful, a special order as to costs might be sought against that respondent. Once again, in such circumstances a necessary part of the respondent's preparation must be being in a position to resist any such costs application, if there is any reasonable prospect of its resistance, immediately upon judgment in respect of the substantive issue being delivered (and the converse contingency of success by a respondent may give rise to like considerations).
5 In the result, it proved necessary to give directions for the later filing and service of evidence and related submissions in respect of costs. That it was not possible immediately upon delivery of the principal judgment to resolve the question of costs is regrettable. It has not been possible to determine that costs question before now.
6 Unsurprisingly, Ask Funding submits that costs should follow the event. The special order as to costs it seeks, which is resisted, is that it be ordered that Mr Halsted pay its costs taxed on an indemnity, rather than a party and party, basis. It advances two reasons why costs should be ordered on an indemnity basis:
(a) contractual provision; and
(b) imprudent or unreasonable rejection by Mr Halsted of one or more prior offers of compromise made by it.
Contractual provision?
7 Subject to qualifications which are not presently material, s 43 of the Federal Court of Australia Act 1976 (Cth) confers upon the Court a broad discretionary power with respect to the ordering of costs. Though that section has nothing at all to say about any contractual provision in respect of litigation costs, neither, materially, does it state that it is irrelevant to take into account any such provision. Indeed, it is customary to take any such provision into account in the exercise of the costs discretion and ordinarily to exercise that discretion in accordance with any such provision: Gomba Holdings (UK) Ltd v Minories Finance Ltd (No 2) [1993] Ch 171 at 194 (Gomba). However, costs will only be awarded on other than a party and party basis if, upon the proper construction of the contractual provision, it has been agreed that litigation costs be awarded on some other basis: Perpetual Trustees Australia Ltd v Barker (2004) 1 BFRA 130; [2004] SASC 58 at [21] per Duggan J (Perpetual Trustees Australia Ltd v Barker), with whom on this point Doyle CJ and Anderson J each agreed. That position, in turn, is subject to any statutory provision which modifies what would otherwise flow from taking the contractual position into account.
8 Ask Funding made two loans to Mr Halsted but the agreements are in a standard form; hence the use hereafter of the singular. Under the loan agreement (clause 1.1), the "Loan" is defined to mean "the unpaid amount of the Loan Account owing from time to time plus any other monies owing under this Credit contract including β¦ enforcement expenses" (emphasis added). By clause 10.6 of the loan agreement Mr Halsted agreed to pay to Ask Funding "all enforcement expenses in the event of a breach of the Credit Contract being the reasonable amount reasonably incurred or expended by [Ask Funding] in the exercise of any right consequent upon any default β¦"(emphasis added). A failure to repay "the Loan" when it is due is an event of default under the loan agreement.
9 At the time when the loan agreement was entered into in 2007, the Consumer Credit Code (the Queensland Code) being the Appendix to the Consumer Credit Act 1994 (Qld) (since repealed) was in force. That Act was repealed by the Credit (Commonwealth Powers) Act 2010 (Qld) (s 11) as part of a national scheme which resulted in the adoption of the National Credit Code found in Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth), as amended. It is the Queensland Code which is applicable to this loan agreement, given the date when the agreement was made. Materially, s 45 of the Queensland Code rendered void any mortgage "to the extent that it secures an amount, in relation to any credit contract which it secures, that exceeds the sum of the amount of the liabilities of the debtor under the credit contract and the reasonable enforcement expenses of enforcing the mortgage" (emphasis added). The term "enforcement expenses" was defined in an inclusive way by the Queensland Code (Schedule 1).
10 The provisions, set out above, in the loan agreement in respect of enforcement expenses are not inconsistent with what may constitute "enforcement expenses" for the purposes of the Queensland Code. That being so, there is no basis holding that the provision in respect of those expenses is to any extent rendered void by reason of the application and operation of s 45 of the Queensland Code. No submission to the contrary was made on behalf of Mr Halsted.
11 In Perpetual Trustees Australia Ltd v Barker the mortgage security agreement in respect of the loan contract materially provided (clause 7.2):
7.2 You must pay the Mortgagee all reasonable enforcement expenses the Mortgagee reasonably incurs or expends in exercising its rights under the Mortgage. In the case of legal fees and disbursements, these are payable on the higher of a full indemnity basis or a solicitor and own client basis. [Emphasis added]
On the basis of this explicit provision and in accordance with the usual position where there is contractual provision in respect of costs, Duggan J (at [42]), with whom on this point also Doyle CJ and Anderson J agreed, held that the successful party in that case was entitled to its costs on an indemnity or solicitor and own client basis.
12 Ask Funding submitted that the provision in the loan agreement is not materially distinguishable from clause 7.2 of the mortgage security agreement considered in Perpetual Trustees Australia Ltd v Barker. In so doing, Ask Funding set out only the first and not the second sentence of clause 7.2 in its submission. This is apt to mislead. As will be apparent from the terms of the second sentence of that clause, it is in that sentence that the explicit provision in respect of other than party and party costs is to be found.
13 It does not necessarily follow from this absence of express reference to litigation costs on other than a party and party scale that this basis of Ask Funding's claim for a special costs order fails. The question which remains is what is the meaning of the provisions in this loan agreement? As to this, the position is as stated by Duggan J in Perpetual Trustees Australia Ltd v Barker at [22]:
The effect of clauses bestowing such rights on mortgagees will depend upon their interpretation in each case and they will not be given effect so as to place mortgagors in a less favourable position than would otherwise be the case unless they are unambiguously expressed.
14 The ordinary way in which the costs discretion would be exercised is that costs would follow the event and, per force of r 40.01 of the Federal Court Rules 2011 (Cth), that such costs would fall to be taxed on a party and party basis. Thus, absent express contractual provision to the contrary or some other consideration intruding, Mr Halsted was entitled to expect that, if the application were decided adversely to him, costs would follow the event but would be limited to such of Ask Funding's litigation costs as were allowable on a party and party taxation. Should he be placed in a less favourable position than this?
15 As has already been demonstrated in relation to clause 7.2 of the agreement considered in Perpetual Trustees Australia Ltd v Barker, the utility, other than in respect of matters of general principle, of other authorities is necessarily dependent upon the language of the contractual term under consideration in those authorities.
16 The clause which fell for consideration in Re Solicitor's Bill of Costs; Re Shanahan (1941) 58 WN (NSW) 132 at 135 (Shanahan) was in these terms:
Sixthly, that in addition to all costs and expenses which the mortgagor may be liable at law or in equity to pay in respect of this security or otherwise in relation thereto, the mortgagor will upon demand pay all costs and expenses incurred by the mortgagee in consequence or on account of any default on the part of the mortgagor hereunder or incurred by the mortgagee for the preservation of or in any manner in reference to this security, all of which costs and expenses shall, from the time of payment or expenditure thereof respectively until repaid to the mortgagee by the mortgagor be deemed principal moneys covered by this security, and shall carry interest accordingly.
The absence of any explicit reference in the clause to solicitor and own client or indemnity costs will be noted. The following observation was made by Street J of that clause in Shanahan (at 136):
The terms of that clause are of the widest possible nature. It imposes upon the mortgagors an obligation to pay something in addition to those costs and expenses which they would be liable at law or in equity to pay, and would appear to be designed to impose upon the mortgagors a higher obligation than would be imposed upon them by the rule as stated in the cases to which I have referred. They are bound to pay on demand all costs and expenses which the mortgagees might not ordinarily be entitled to recover from the mortgagors at law or in equity, if those costs and expenses were incurred on account of any default on the part of the mortgagor, or for the preservation of the security, or if they were incurred in any manner in reference to the security. It is difficult to think of words of a more general application in themselves, and the intention of the parties to extend the rights of the mortgagees in respect of their costs is clear beyond doubt when it is seen that those words refer specifically to costs additional to the costs ordinarily payable at law. In effect, the mortgagors appear to have undertaken to indemnify the mortgagees in respect of any expenditure they may incur in their capacity as mortgagees and in relation to the secured debt.
These observations were quoted with approval by Sheppard and Foster JJ in Elders Trustee & Executor Company Limited v E G Reeves Pty Ltd (1988) 20 FCR 164 at 172 (Elders Trustee). Immediately after this and in a passage not set out in Elders Trustee, Street J had further observed in Shanahan (at 136):
In my view, this agreement imposes upon the mortgagors an obligation to pay all costs which would be payable by the mortgagees to their own solicitor, and such costs, if properly payable on a "solicitor and his own client" taxation, must be paid by the mortgagor.
I do not think that costs which had been unjustifiably or vexatiously incurred by the mortgagees so as to impose an unwarrantable burden on the mortgagors would fall under this clause, and the taxing officer might in some cases be justified in disallowing such costs, even though they might be payable by the mortgagees to their solicitors but speaking in broad terms I think the mortgagees are entitled to be paid all those costs which they are bound to pay to their solicitor, and that the effect of this clause is to require the taxation to be held on that footing.
His Honour gave directions to the court's taxing officer accordingly.
17 The clause under consideration in Elders Trustee was described by Sheppard and Foster JJ (at 172) as "closely similar" to that considered by Street J in Shanahan. However, with respect, that clause (see Elders Trustee at 166) provided, after "all costs and expenses", "including costs as between solicitor and client incurred by the mortgagee β¦" (emphasis added). The clause in Elders Trustee made explicit what Street J is to be taken as having regarded as implicit in the clause considered in Shanahan by virtue of its breadth of language. Because of the explicit contractual provision which existed in the clause under consideration in Elders Trustee, it was not necessary in Elders Trustee for the Full Court to consider what might have been the effect of that clause absent such provision. That Sheppard and Foster JJ did not consider it necessary to add to the passage from Shanahan the further passage which I have quoted underscores this. I do not therefore consider that Elders Trustee binds me to hold that a generally worded clause but one which makes no explicit reference to a liability to pay enforcement litigation costs assessed on other than a party and party basis nonetheless entitles a person in the position of Ask Funding to an order that court costs be taxed on some other, more generous basis.
18 The authorities are not uniform as to whether breadth of language alone is sufficient to entitle a mortgagee to other than party and party costs. A clause materially in these terms fell for consideration by Vaisey J in In re Adelphi Hotel (Brighton) Ld; District Bank Ld v Adelphi Hotel (Brighton) Ld [1953] 1 WLR 955 (Adelphi):
β¦ all costs charges and expense incurred or paid by the bank in relation to the negotiation for and preparation completion realisation and enforcement of this security.
19 On the basis of that clause, the bank in that case claimed that it was entitled to its costs not on a party and party basis but rather on an indemnity basis or a solicitor and own client basis (which Vaisey J, at 957, stated "comes to much the same thing") or at any rate as between solicitor and client. That claim was rejected. As to the claim and with respect to the clause, His Lordship stated (at 960):
These are certainly wide and comprehensive words, and it is argued with some force that they cover more than the "full costs" (the meaning of which I have already explained) and amount either to a complete unlimited and unqualified indemnity, or at any rate to such a measure of indemnity as would be ascertained on a taxation as between solicitor and client. I cannot so construe the words.
As to "full costs", His Lordship had earlier stated (at 958):
It must always be remembered that when costs are referred to they are understood to be party and party costs, and not solicitor and client costs, and it is difficult to see in principle why a mortgagor should be called on to reimburse a mortgagee for anything beyond his necessary expenditure. I think that a mortgagee is entitled, as against a mortgagor and against the mortgaged property, to his "full costs", but that expression means ordinary party and party costs, and not costs as between solicitor and client: see Avery v Wood, following Irwine v Reddish, apart, of course, from some special bargain.
His Lordship concluded that the bank's costs ought to be taxed on a party and party basis which, as with this Court: Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at 234, is the default position. The reason why in Adelphi Vaisey J did not construe the clause as one entitling the bank to solicitor and client costs was the rule of construction, applicable in the circumstances, which told against construing general words in a contract in favour of a lender or mortgagee so as to subject a borrower or mortgagor to a special or unusual liability, ie an example of the contra proferentum rule. His Lordship put the matter this way (at 960):
I thought at one time that Malvern Urban District Council v Malvern Link Gas Co gave support to the claim of the bank, and certainly the words which were under consideration in that case are very similar indeed to those which I am considering in the present case, but the document in which they appear is of a very different character, viz, a contract of sale and purchase, and not one, like the present, to which a well-established rule normally applies, and it seems to me that, if parties desire to depart from such a rule, they must express themselves in plain and unequivocal language. I read the words as indicative of nothing more than an assertion or reminder of the bank's ordinary right, on realising or enforcing its security, to recover its costs, charges and expenses as well as the principal money and interest. Of course the words do confer additional rights in regard to the costs of negotiating, preparing and completing the security, which are matters occurring before the relationship of mortgagor and mortgagee arose. I need not express any definite view as to how the amount of those particular costs ought to have been ascertained. [Footnote reference omitted]
20 A submission grounded in the contra proferentum rule was neither put to Street J in Shanahan nor, which is not unrelated, did his Honour advert to that rule when construing the agreement. I prefer the reasoning of Vaisey J in Adelphi. Adelphi and, for that matter, Shanahan were each referred to by the Court of Appeal in Gomba but the reference to Shanahan was in the different context of an issue as to the interaction between a contractual right to the costs of litigation and the court's general discretion with respect to costs whereas, of the several references made to Adelphi, in that (at 185-186) concerning the construction of these types of clause, the Court of Appeal made no criticism of the approach adopted by Vaisey J. The order made in Gomba directed taxation on an indemnity basis but the language of the clauses under consideration was much more explicit than the provisions of the loan agreement in this case, materially, "on a full indemnity basis" and "whether or not such costs charges and expenses and moneys or part thereof would be allowable on a party and party or solicitor and own client taxation by this court".
21 Generality of language which admits as a matter of construction of doing nothing more than describing the usual or default position as to costs which would prevail in the event that a lender or mortgagee takes enforcement proceedings is not sufficient to subject a borrower or mortgagee to a special liability as to the costs of such proceedings. Explicit language, a "special bargain", is required. The language of cl 10.6 of the loan agreement, "being the reasonable amount reasonably incurred or expended by [Ask Funding] in the exercise of any right consequent upon any default β¦" is not materially distinguishable from that regarded by Vaisey J in Adelphi as "indicative of nothing more than an assertion or reminder of the bank's ordinary right, on realising or enforcing its security, to recover its costs, charges and expenses as well as the principal money and interest" and that ordinary right in respect of costs is to party and party costs, absent an exercise of the costs discretion in favour of taxation on a more generous scale.
22 The provisions of this loan agreement are not, in my view, by force of language alone, sufficient to entitle Ask Funding to a special order as to costs against Mr Halsted. It follows that I reject this basis upon which Ask Funding sought an order that its costs be taxed on an indemnity basis.
Imprudent or unreasonable refusal of an offer of compromise?
23 The circumstances of a particular case can warrant, in the exercise of the general discretion as to costs, a departure from the usual, party and party basis upon which costs are ordered to be taxed: Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 at 233 (Colgate-Palmolive). In Colgate-Palmolive, while highlighting that the circumstances in which a departure from the usual order as to costs are not closed, Sheppard J summarises (at 233) a number of circumstances in which the awarding of costs on an indemnity basis has occurred. One of these is an imprudent refusal of an offer of compromise.
24 Via correspondence between solicitors, Ask Funding made three offers to Mr Halsted, each without prejudice save as to costs (a type often termed, by reference to a case of that name in which their availability and utility is discussed, "Calderbank" letters). The first of these was made by letter between the respective solicitors dated 18 July 2011. It sought the payment of $45,000 by Mr Halsted within seven days in return for compromising all claims which Ask Funding may have against either Mr Halsted or his bankrupt estate. Another term of the offer was that each side would bear its own costs. The offer was open for acceptance until 5:00 pm on 25 July 2011. It was not accepted.
25 This offer was renewed on 11 August 2011 with the fresh acceptance time being specified as 5:00 pm on 25 August 2011. This offer, too, was not accepted. Proceedings were instituted in this Court on 19 August 2011. A final offer was made on 7 October 2011. Under the terms of this offer Mr Halsted was called upon to pay the sum of $50,000 in return for Ask Funding's abandoning any claim which it had on the remaining balance of funds held in his solicitor's trust account and in return for like compromising by Ask Funding of all claims which it have against either him of his bankrupt estate. Other terms of the offer were the discontinuance of the present proceeding with no order as to costs and otherwise each party bearing its own costs. This offer was open for acceptance until 5:00 pm on 12 October 2011. Once again, that offer was not accepted. The hearing of the application which determined the remaining controversy in the matter did not occur until 17 October 2011.
26 These offers must be viewed against the background of what had occurred in relation to Mr Halsted's personal injuries claim since he became bankrupt in September 2010. In or about April 2011 he settled his personal injuries claim. Pursuant to that settlement and on behalf of the defendant to his personal injuries proceeding, the sum of $333,098.80 was paid into the trust account of Slater & Gordon on 13 May 2011. Slater & Gordon had been acing for Mr Halsted in that personal injuries proceeding in succession to Quinn & Scattini upon acquiring the practice of the latter firm. From the sum paid into their trust account, Slater & Gordon deducted no less than $116,169.53, presumably in respect of professional costs and related outlays in relation to the personal injuries proceeding. High though that proportion of the settlement sum may be, it is unnecessary in this proceeding to resolve whether and to what extent those costs and outlays were reasonable.
27 On or about 23 June 2011 Slater & Gordon transferred the balance of the settlement monies, $216,929.27, into the trust account of Taylor David, Mr Halsted's present solicitors. In light of Mr Halsted's supervening bankruptcy, controversy attended what was the fate of that balance. Was it his or did it pass to his trustee in bankruptcy and, in any event, was it subject to an equitable charge in favour of Ask Funding?
28 The offer made on 18 July 2011 was accompanied by and intended to be read in conjunction with an open letter also sent that day by Ask Funding's solicitors to those acting on behalf of Mr Halsted. It made reference to the advances totalling $20,000 which Ask Funding had made to Halsted in 2007. It was stated that the then payout figure under those contracts was $57,122.31. It is evident that, after the receipt of the balance of the settlement monies by Taylor David, some earlier dealing between that firm and Boyd Legal, Ask Funding's solicitors, had preceded this letter for reference is made in it to a request having been made of Ask Funding for the release to Mr Halsted of the "undisputed portion" of those settlement monies. Mr Boyd's evidence was that this earlier request had been by way of a telephone call from Taylor David whereby the release of $60,000 to Mr Halsted was sought in respect of a "business opportunity".
29 Ask Funding's open letter put its entitlement to be paid the payout figure on the basis of a charge. It alleged that the charge was created by what was described as the "credit contracts" (what I have termed the loan agreements in the principal judgment) and irrevocable instructions given by Mr Halsted to Quinn & Scattini. In his submission in respect of costs, Mr Halsted contended that what Ask Funding came to put forward at trial as the foundation for its claim was different. It is true that the irrevocable instructions came not to be relied upon but Ask Funding's position remained that it was entitled to a charge in its favour. It was that position which was vindicated by litigation.
30 Also put in this open letter was a willingness on the part of Ask Funding to consider a release of part of the balance of the settlement monies to Mr Halsted. This was subject to the qualification that Ask Funding would "need to be satisfied that a sufficient component has been retained to cover the current debt and the interest and enforcement expenses which will fall due under the credit contracts during the enforcement process. What will amount to sufficient cover will depend upon the ambit of the dispute (including the possibility of appeal) and the time it is likely to take for the dispute to be resolved." Ask Funding sought from Mr Halsted particulars of his claim as to the balance of the settlement monies.
31 By his solicitor's response of 20 July 2011 Mr Halsted denied that Ask Funding had in law any charge over the net settlement monies. He proposed that $100,000 of the net settlement monies be held in an interest bearing deposit to abide the order of the court in the event of litigation with the remainder being released to him immediately. This proposal was open for acceptance until 2:00 pm on 22 July 2011. It was not, in terms, an offer of compromise, only a proposal as to the disposition of the net settlement monies pending the outcome of litigation. In any event, it was not taken up by Ask Funding.
32 Apart from the further offers which Ask Funding made, referred to already, there was further correspondence between the parties concerning whether some lesser amount might be released to Mr Halsted than that proposed in his solicitor's letter of 20 July 2011 so as to meet medical treatment expenses. Imprecision as to how the amount sought was derived proved to be the sticking point so far as Ask Funding was concerned. It was not unreasonable for Ask Funding to seek to obtain further precision from Mr Halsted as to the expenses he expected to encounter in order to measure this against a considered estimate as to the likely extent, given various litigation contingencies, of how much of the net settlement proceeds might be subject to its claimed charge. Mr Halsted's supervening bankruptcy gave a singular importance to Ask Funding to the charge claimed by it over the settlement monies.
33 In his submissions as to costs Mr Halsted contended that agreement to the release of a portion of the net settlement monies would have obviated the need for proceedings to be instituted. I disagree. It would doubtless have obviated the perceived need for this litigation to have been instituted when it was, but it would not have resolved the question as to whether Ask Funding had an equitable charge, only postponed the final resolution of that controversy. Only compromise or determination by final judgment would have resolved the controversy as between Mr Halsted and Ask Funding.
34 Yet further, any such compromise would have removed one impediment to the release of a portion of the net settlement proceeds but that release would still have required at least the assent of Mr Halsted's trustee in bankruptcy. In the proceedings which came to be issued, the trustee was also named as a party. I infer from this that, before 19 August 2011, a formal admission by the trustee that the net settlement fund did not form part of the "property of the bankrupt" for the purposes of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) had not been received by Mr Halsted from the trustee. Slater & Gordon was also named as a respondent in the proceeding even though it had deducted its costs and outlays from the settlement monies before forwarding the net amount to Taylor David. It may be that the joinder of this firm was out of an abundance of caution.
35 Whatever the reason for the joinder of Slater & Gordon, it was not until 9 September 2011 when the bankruptcy trustee informed the Court that he had no interest in the net settlement sum that this aspect of the matter was resolved. On that day, Greenwood J consequentially determined as a separate question that, by operation of s 116(2)(g) of the Bankruptcy Act, the net settlement sum did not form part of Mr Halsted's property divisible amongst his creditors. His Honour further ordered that Mr Halsted's solicitors be released to the extent of $75,000.00 from an undertaking by which they had undertaken not to pay out any part of the net settlement monies to Mr Halsted. His Honour then gave directions for the further conduct of the proceeding, which amounted by then to the resolution of a controversy as to whether Ask Funding had a charge over the net settlement monies to the extent of the amount of "the Loan" as defined (On 17 October 2011 Mr Halsted was given leave to discontinue the proceedings as against Slater & Gordon with no order as to costs). His Honour further ordered that the disposition of the balance of the net settlement monies was to abide the order of the Court.
36 The outcome of the litigation in respect of Mr Halsted's claim against Ask Funding was less favourable to him than any of the offers made to him by that company. At least so far as offers made by "Calderbank" correspondence are concerned, it does not follow that, just because, after judgment has been delivered, such an offer can be seen to have been more favourable to its recipient than the judgment, that some special order as to costs must be made. There is no presumption that the recipient of the more favourable offer must be visited with a special order as to costs: MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236 at 239. The making of such an order is always a matter for the exercise of a judicial discretion. In the exercise of that discretion, the unreasonableness or imprudence of rejecting such an offer by its recipient is to be judged by the circumstances prevailing as at the time when the offer was open for acceptance, not the wisdom of hindsight.
37 By the time when each of these offers was made, Mr Halsted had already seen a little more than a third of the gross settlement monies paid out to Slater & Gordon. That experience doubtless underscored why it was in his interest to maximise the sum he would ultimately receive from the net settlement monies but it ought also to have underscored the desirability, if at all reasonably possible, of not further diminishing his settlement monies by legal costs, be they his own or those he might be called upon to pay in the event of an adverse outcome in litigation.
38 It was always tolerably clear, given their character, that these settlement monies did not form part of his bankrupt estate. It is not the wisdom of hindsight to hold that the real question was always whether Ask Funding had an equitable charge over them or whether it was just one of his unsecured creditors. If the latter, then it had no claim on the net settlement monies, its right being to prove in his bankruptcy. That was the position not just in respect of the principal of the loans to Mr Halsted and interest thereon but also in respect of any enforcement expenses which by then formed part of "the Loan" as contractually defined.
39 In the principal judgment, at [16], I gave emphasis to an observation made by White J in Jackson v Richards [2005] NSWSC 630 at [20] as to the prospect of very slight differences of language in the instrument said to create a charge producing different legal outcomes. As is apparent from the principal judgment, the position in this case on the documents relied upon by Ask Funding was not straight forward. For all that, none of the offers successively made by Ask Funding in substance put to Mr Halsted that he should just concede the whole of what that company claimed was a secured debt which remained owing to it notwithstanding his bankruptcy. The discount in these offers from the amount claimed by Ask Funding was not derisory.
40 Also to be taken into account when considering the first offer was the possibility that, in the event of litigation and were Ask Funding to succeed in respect of its claim to a charge, its "enforcement expenses" in terms of the loan agreements, forming part of "the Loan" as defined, might be held not only to extend to its party and party costs of the litigation but might also be held to extend to its solicitor and client costs. As I have stated above, even absent an express contractual reference to such costs, there was a difference of authority as to whether the width and generality of language employed was sufficient in any event to ground an expectation that the costs discretion would be exercised in favour of awarding other than party and party costs. That was another factor to be taken into account by Mr Halsted in assessing the risks of litigation.
41 During the time when the second offer remained open for acceptance the possibility of litigation had, at Mr Halsted's initiative, become an actuality. Ever thereafter during the times when both the second and the third offers were open for acceptance, that litigation was on foot gave additional attraction to offers by Ask Funding to Mr Halsted because they were additionally on terms that each side bear its own costs in relation to this proceeding. The benefit potentially present was much greater by the time of the third and final offer in October 2011, having regard to the interlocutory steps taken by that stage. By the time this offer came to be made Mr Halsted and those advising him had the benefit of Mr Templeton's affidavit affirmed on 3 October 2011 and filed the following day, in which he attested that the total then owed under the two loans was $76,178.10 and to which he annexed detailed loan statements together with copies of each loan agreement and related documentation. Once again, the discount, even measured against the total attested loan liability, was far from derisory, to say nothing of the worth of the repetition of a no order as to costs outcome in respect of these proceedings.
42 Mr Halsted pointed in his submissions to examples of cases where even quite dramatic differences between a Calderbank offer and the outcome of litigation had not resulted in the making of a special order as to costs. Such results are however inherently a reflection of the circumstances of those cases rather than indicative of any principle of general application to costs applications other than those which I have already mentioned. For this reason it is unnecessary to refer to these cases.
43 Yet another contingency which loomed for Mr Halsted was that any success at first instance by him in relation to whether the documentation was sufficient to create an equitable charge might be met with an appeal by Ask Funding. That company's solicitors had already expressed the opinion that "enforcement expenses" extended to the costs of any appeal.
44 The interests of Mr Halsted and Ask Funding in relation to the question of whether an equitable charge had been created by the documents were not congruent. These were standard form documents. Ask Funding had a strategic interest in vindicating their efficacy; Mr Halsted did not. When weighing up these offers, the prospect that Ask Funding might appeal in the event it failed in the original jurisdiction was greater than the prospect that Mr Halsted might appeal if he was the party who failed.
45 While the subject is one on which reasonable minds might reasonably differ, I do not see that Mr Halsted was either imprudent or unreasonable to reject Ask Funding's initial offer. There was then no litigation on foot to add a court costs element to "enforcement expenses". At that early stage he was entitled to take the view that a better settlement might be able to be negotiated. In the result, those acting for him seem to have focussed attention on securing the release of a portion of the net settlement proceeds to him, admittedly important, rather than additionally putting to Ask Funding a settlement offer keener than that originally made by that company.
46 So far as the third offer by Ask Funding is concerned, I am firmly of the opinion that, even taking into account the fine questions which might attend whether there was an equitable charge created and the other contingencies I have mentioned, it was imprudent or unreasonable not to have accepted this offer. It was for Mr Halsted to take his own advice as to his prospects on the alleged charge and various costs contingencies. It was not incumbent upon Ask Funding yet further to detail its case. It had already by that stage given detail in pleadings and affidavits beyond that given in earlier correspondence. At the time when this third offer was open for acceptance, it was a very reasonable one, taking into account the risks of litigation and the certainty and finality of outcome a compromise would bring. Mr Halsted was perfectly entitled to have his day in court, but there comes a point when the exercise of that right in the face of a reasonable offer of compromise comes at the price of a special order as to costs in the event of lack of forensic success. The public interest in the resolution of disputes according to law by the exercise of judicial power is complemented by a related public interest in the encouragement of reasonable compromise and the prevention of unnecessary litigation.
47 At the very least and subject to particular provision I intend to make in respect of the costs application, Ask Funding should have its costs after the expiry of that offer, ie on and from 13 October 2011, on an indemnity basis. Should though that period be extended back to the period from the expiry of the second offer, ie on and from 26 August 2011?
48 When these proceedings having been commenced, the initial offer was repeated, it was a very considerable step for a bankrupt to risk denuding by more, perhaps much more, than $45,000, a capital sum that did not form part of his bankrupt estate. Especially that was so in circumstances where, in the time which had elapsed since the first offer had expired, opportunity had not been taken to make to Ask Funding on behalf of Mr Halsted an "all up" counter offer of some lesser capital sum. This was a wasted opportunity. The repetition of the original offer by Ask Funding was unsolicited. It was something of a last chance for Mr Halsted to avoid what could only be anticipated to be a dramatic increase in the "enforcement expense" component of what may prove to be an indebtedness secured by an equitable charge over his net settlement monies, to say nothing of avoiding the interest expense which would continue to accrue, were he unsuccessful in the litigation. The offer was, in my opinion, a very reasonable one. It was, even at the time, for a man in Mt Halsted's position, a reckless gamble not to have accepted it. To continue in the face of such an offer was not proportionate to the adverse risks entailed. Ask Funding's indemnity costs will therefore date from the expiry of this second offer.
Enforcement Expenses
49 Mr Halsted also put that the sum specified in the order made on 17 October 2011 already included "enforcement expenses" and that these included some at leadt of Ask Funding's costs of this litigation such that it ought not to be doubly compensated. He submitted that this was established by the oral evidence at trial of Ask Funding's Mr Templeton. It is true that Mr Templeton acknowledged in cross-examination that the loan balance included enforcement expenses. The loan statements record as much. However, the cross-examination did not descend to particularity in relation to whether enforcement expenses included costs referable to this proceeding. The further evidence filed in relation to the costs application makes it plain that they do not.
Costs of this application
50 As I have observed, the parties should have been prepared to deal with the question of whether a special order as to costs should be made at the time when judgment was delivered. It follows from this that there should be no order as to costs in respect of the separate, later submissions, any related affidavit and the attendance on the publication of these reasons for judgment.
51 There will be orders accordingly.
I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan.
Associate:
Dated: 8 February 2012
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FEDERAL COURT OF AUSTRALIA
PRACTICE & PROCEDURE β subpoenas and discovery β application to set aside subpoena addressed to a respondent β subpoena called upon during hearing of trial β appropriateness of issuing subpoenas so close to hearing date β appropriateness of calling subpoena during trial β usual processes available to parties are processes of discovery and inspection β availability of orders for particular discovery β usual processes not utilised by applicants β subpoena set aside as abuse of process.
Federal Court Rules, O 15 r 2, O 15 r 8, O 27 r 9
Trade Practices Commission v Arnotts Limited (1989) 88 ALR 90, cited
JOHN FLOWER DIDDAMS
& ORS v
COMMONWEALTH BANK OF AUSTRALIA
& ANOR
ng 3401 of 1996
BRANSON J
SYDNEY
12 MAY 1998
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY nG3401 of 1996
BETWEEN: JOHN FLOWER DIDDAMS
First Applicant
JANE LAVINA DIDDAMS
Second Applicant
WHITFIELD INVESTMENTS PTY LIMITED
(acn 002 653 796)
Third Applicant
BARROT PTY LIMITED
(ACN 003 562 445)
Fourth Applicant
AND: COMMONWEALTH BANK OF AUSTRALIA
First Respondent
(ACN 123 123 124)
PETER MURRAY WALKER
Second Respondent
JUDGE(S): BRANSON J
DATE: 12 MAY 1998
PLACE: SYDNEY
REASONS FOR DECISION
On 6 May 1998, during the course of the trial of this matter, I made an order setting aside a subpoena served on the first respondent by the applicants ("the subpoena"). I indicated at that time that I would issue written reasons for the making of that order. These are those reasons.
The subpoena was issued on 28 April 1998. It required the proper officer of the first respondent to attend at the Court on 6 May 1998 at 9.30 am to produce the following documents:
"1. The personnel file of each of the following employees of the Commonwealth Bank of Australia:
(a) Philip Rodney Catto
(b) Bradley John Fowler
(c) Vincent Mathew Kelly
2. The personnel files of John David Robertson, an employee of the Commonwealth Bank of Australia during the period 1964 to 1973."
Each of Messrs Catto, Fowler, Kelly and Robertson has sworn an affidavit filed by the respondents in these proceedings. Mr Robertson has sworn an affidavit annexing a valuation report given by him as an expert valuer. He was an employee of the first respondent between 1964 to 1973 but not thereafter. Each of Messrs Catto, Fowler and Kelly was an employee of the first respondent at the time of the events with which this proceeding is concerned and remains such an employee.
Mr Williams, counsel for the applicants, acknowledges that neither he nor his clients is or are aware of the contents of the files, the production of which are called for by the subpoena. The applicants wish to have the opportunity to inspect such files in order to ascertain if any of them does contain material adverse to the credit of any of Messrs Catto, Fowler, Kelly or Robertson, and, in the case of Messrs Catto, Fowler and Kelly, to ascertain whether their personnel files contain material which may reflect on their respective handling of matters relevant to this proceeding.
Michael Bryan Joshua Lee ("Mr Lee"), a solicitor acting on behalf of the first respondent, has sworn an affidavit by which he deposes as follows:
"6. The First Respondent has delivered to me all documents referred to in the Schedule to the Subpoena as remain extant.
7. I have perused the personnel files of Phillip Rodney Catto, Bradley John Fowler and Vincent Matthew Kelly ("the personnel files").
8. A perusal of the personnel files does not include any reference whatsoever to:
(a) the Applicants;
(b) any company associated with the Applicants;
(c) any company associated with Dr Fox; or
(d) any matters in issue in these proceedings.
9. The personnel files contain a number of references to personal and private matters which do not relate to the performance of the individuals that are subject of the personnel files.
10. The First Respondent regards the personnel files as highly confidential and objects to their production or inspection."
Mr Lee was not cross-examined on his affidavit.
This matter has had quite a long history in the Court. On 5 September 1996, by consent, the Court made a number of orders. One order was that the applicants file and serve a verified list of documents on or before 6 September 1996. Other orders included that the respondents file and serve verified lists of documents on or before 16 September 1996, and that the applicants and respondents attend to inspection of discovered documents on or before 30 September 1996.
The first respondent filed and served a verified list of documents on 17 September 1996. The solicitors for the applicants inspected the documents referred to in such list on 30 September 1996 and again on 26 March 1998.
The proceeding has remained under the management of the Court since 5 September 1996. Directions have from time to time been made for the purpose of ensuring an orderly preparation of the matter for hearing. At none of the directions hearings in this matter have the applicants sought an order from the Court that the first respondent give further or better discovery or that it, by an appropriate officer, file an affidavit stating whether any particular document or class of document is or has been in its possession, custody or power (O 15 r 8).
A number of subpoenas duces tecum has been issued in this proceeding. In accordance with the usual practice of the Court, in the interests of justice, including the efficient preparation of the matter for trial, such subpoenas required the production of documents ahead of the date of trial.
On 30 October 1997 the matter was listed for hearing commencing on 4 May 1998.
This hearing commenced on 4 May 1998 and is continuing.
The subpoena was called upon before a Registrar of the Court at 9.30 am on 6 May 1998. The first respondent indicated that it did not have any documents to produce at that time. No application to set aside the subpoena was made or foreshadowed. Late in the morning of 6 May 1998, Mr Fowler was called to give evidence on the hearing. After his formal evidence in chief, I called on Mr Williams to commence his cross-examination of Mr Fowler. Rather than commencing his cross-examination, Mr Williams called on the subpoena. Mr Forster SC, counsel for the respondent, responded by seeking leave to file in Court first, a notice of motion seeking an order setting aside the subpoena and secondly, an affidavit in support of the foreshadowed motion. He further sought leave to amend the notice of motion to add an alternative claim that the applicants be refused access to any documents produced in answer to the subpoena.
Placing to one side the question of the appropriateness, in the circumstances, of the issue and service of the subpoena, the calling of a subpoena during the course of a witness's evidence is, in my view, plainly inappropriate. It is disruptive of the orderly conduct of the hearing and, moreover, likely to cause inconvenience to the witness. In this case I was obliged to excuse Mr Fowler from the witness box for an uncertain period of time to allow argument on the notice of motion. Even had the first respondent not sought to set aside the subpoena, time would have been taken attending to the formalities associated with the calling of the subpoena and the making of orders concerning access to the documents produced in response to the subpoena. Further delay would then, presumably, have ensued to allow the applicants' legal advisers time to inspect the documents produced in answer to the subpoena. A witness whose oral evidence has commenced should not ordinarily be expected to wait whilst such matters are attended to.
It was also inappropriate, in my view, for the first respondent to delay filing and serving its notice of motion and supporting affidavit until such time as the subpoena was called. Having been served with a subpoena which it considered an abuse of process, the first respondent ought promptly to have filed the notice of motion. Had it done so, a time for argument on the notice of motion could have been fixed which would not have disrupted the orderly taking of evidence.
I turn to the question of whether the subpoena should be set aside.
Neither counsel was able to refer me to any authorities of this Court directly on the issue of whether a subpoena may be served on a party to proceedings from whom discovery has or may be obtained. A subpoena addressed to a party is not necessarily bad (Trade Practices Commission v Arnotts Limited (1989) 88 ALR 90). On occasion such subpoenas are issued and answered without objection.
However, the usual legal processes by which a party to a proceeding in the Court obtains access to the documents of opposing parties are the processes of discovery and inspection. Where the Court has by detailed directions set a timetable for the undertaking of the procedural steps necessary to bring a matter to readiness for trial, including a timetable for the discovery and inspection of documents, it is to be expected that the parties will seek such documents "relating to any matter in question between [them]" as they wish to have access to through the process of discovery and inspection (O 15 r 2(2)). If such documents are sought by subpoena or notice to produce issued close to trial, the Court's endeavours to manage the process of the preparation of the matter for trial, and to ensure that no interlocutory issues are outstanding at the hearing date, may be subverted.
Order 15 rule 8 of the Federal Court Rules provides a procedure whereby particular discovery may be sought where a party is dissatisfied with the extent of discovery made by an opposing party. The discretion given to the Court by O 15 r 8, and the requirement that, before any order may be made under that rule, it should appear to the Court "β¦from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that some document or class of document relating to any matter in question in the proceeding may be or may have been in the possession, custody or power of [the] party", ought not, in my view, to be able to be avoided by the simple device of serving a subpoena duces tecum upon an opposing party.
In this case the applicants do not know whether the documents sought by the subpoena relate in any way to the matters in dispute between them and the first respondent. They concede the confidential nature of such documents. In the hope that something useful to their case might be found in such documents, their proposal was that I should read the documents. At the request of the applicant's counsel, the Court was shown three envelopes said to contain all but one of the documents the production of which was sought by the subpoena. The document not contained in an envelope was, the Court was informed, approximately ten pages long. The size of the three envelopes shown to the Court suggests that the task of reading all of the documents in them would be a not inconsiderable one. The rules of court do not place on judges the responsibility of determining for the parties which of their respective documents are required to be discovered. Judges have not traditionally assumed such a role. I do not consider that by choosing to issue a subpoena, rather than to seek an order pursuant to O 15 r 8 of the Federal Court Rules, a party should be able to achieve the result of placing such a responsibility on a judge. Moreover, in this case it would have been inappropriate for the conduct of the trial to have been further disrupted by my being required to read documents produced in response to a subpoena called during the course of the taking of evidence.
The applicants did not in their submissions in opposition to the motion to set aside the subpoena advance any justification for their failure to pursue the options of seeking further and better discovery, or particular discovery pursuant to O 15 r 8, from the first respondent. Nor did they advance any justification for the issue and service of the subpoena on a date sufficiently close to the commencement of the hearing to make it impracticable for the subpoena to be called before the trial commenced.
Nothing before me suggests that the documents the production of which is sought by the subpoena, are likely to have any significance to the applicants' case. In the unlikely event that, on inspection by me, they might have been found to have some relevance to the proceeding, I am confident that such relevance would have been sufficiently peripheral to the real issues in the case to ensure that the setting aside of the subpoena will not result in their suffering significant prejudice.
For the above reasons I concluded that the subpoena should be set aside pursuant to O 27 r 9 of the Federal Court Rules on the basis that it was an abuse of the privilege of requiring documents to be produced to the Court. In my view, had the subpoena not been set aside, it would have undermined the effectiveness of the steps taken by the Court to ensure the orderly and timely preparation of this matter for trial, including the orderly and timely resolution of issues relating to discovery and inspection of documents.
For completeness I add that I would have taken the same view of a notice to produce requiring the production of the same documents.
I certify that this and the preceding seven (7) pages are a true copy of the Reasons for Decision herein of the Honourable Justice Branson.
Associate:
Dated:
Counsel for the Applicant: M L Williams
Solicitor for the Applicant: Esplins
Counsel for the Respondent: R G Forster SC
Solicitor for the Respondent: Corrs Chambers Westgarth
Date of Hearing: 6 May 1998
Date of Order: 6 May 1998
Date of Publication of Reasons: 12 May 1998
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FEO17 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2022] FCA 1415
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2024-09-13T22:46:05.190884+10:00
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Federal Court of Australia
FEO17 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2022] FCA 1415
Appeal from: FEO17 v Minister for Immigration [2020] FCCA 648
File number(s): NSD 303 of 2020
Judgment of: RARES J
Date of judgment: 11 November 2022
Catchwords: MIGRATION β Held: appeal dismissed
Legislation: Migration Act 1958 (Cth) s 36(2)(a), (aa)
Cases cited: Corporation of the City of Enfield v Development Assessment Commission (2000) 199 CLR 135
Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259
Division: General Division
Registry: New South Wales
National Practice Area: Administrative and Constitutional Law and Human Rights
Number of paragraphs: 33
Date of hearing: 11 November 2022
Counsel for the Appellant: Mr G Foster
Solicitor for the Appellant: Sentil Solicitor
Counsel for the First Respondent: Mr G Johnson
Solicitor for the First Respondent: Australian Government Solicitor
ORDERS
NSD 303 of 2020
BETWEEN: FEO17
Appellant
AND: MINISTER FOR IMMIGRATION, CITIZENSHIP, MIGRANT SERVICES AND MULTICULTURAL AFFAIRS
First Respondent
IMMIGRATION ASSESSMENT AUTHORITY
Second Respondent
order made by: RARES J
DATE OF ORDER: 11 NOVEMBER 2022
THE COURT ORDERS THAT:
1. The appeal be dismissed with costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(Revised from the transcript)
RARES J:
1 This is an appeal from the decision of the Federal Circuit Court of Australia refusing the appellant constitutional writ relief against the decision of the Immigration Assessment Authority made on 20 November 2017 that affirmed the decision of a delegate of the Minister made on 26 April 2017 to refuse the appellant's application for a safe haven enterprise visa: FEO17 v Minister of Immigration [2020] FCCA 648.
Background
2 The appellant is a citizen of Sri Lanka of Tamil ethnicity. He arrived at Christmas Island in 2013. At his interview by Departmental officers there, he told them that his passport, which he used for travel en route to Australia, had been acquired legally in Jaffna, Sri Lanka in 2008. He could no longer remember its number.
3 Subsequently, the Minister allowed the appellant to apply for the visa. In his application that the Minister's Department received on 30 December 2016, he answered question 50 by stating that he had left Sri Lanka legally on his passport issued on 24 April 2008 and gave its number. He said, in his statement accompanying the visa application, that he had decided to leave Sri Lanka in 2008 and obtained a passport with the assistance of an agent, whom, he claimed:
went into the passport office and managed to get a passport with my birth certificate. I am not sure the passport is genuine or not although my name, date of birth and photo in it and name of misspelled as [one of three versions of one of his names that was in the material before the delegate and the Authority].
4 The appellant attached a copy of his Sri Lankan birth certificate that had been issued on 11 November 2014, in which his name was spelled differently to that in the copy of the identification page in the passport that he supplied and which he appears to have used in completing the details of the visa application. He did not appear to have had that identification page available when he was interviewed at Christmas Island.
The Authority's Decision
5 There is no issue in this appeal as to the Authority's summary of the appellant's principal claims, relevantly, as follows:
between 2002 and 2005, the appellant provided limited support to the Liberation Tigers of Tamil Eelam (LTTE) and attended a number of LTTE memorial events;
between 2004 and 2008, the appellant worked in a machinist workshop in the Jaffna district. During his employment, he introduced three friends to the owner of the workshop who subsequently employed them;
during June 2008, he was twice questioned by the Sri Lankan Police Criminal Investigation Division (CID) about his knowledge of his three friends. The CID believed them to be members of the LTTE;
the appellant was unable to assist the CID with their inquiries. He was threatened by the CID that he would be killed unless he provided information about his three friends (now colleagues);
following these events, the appellant fled Sri Lanka to Malaysia as he was afraid for his life. He lived in Malaysia between 2008 and 2013;
in 2013, the appellant departed Malaysia and came to Australia via Indonesia; and
he feared that, if returned to Sri Lanka, he would be subjected to discrimination, torture and possibly death at the hands of Sri Lankan authorities because of his Tamil ethnicity, his previous connections to the LTTE, his illegal departure and his failed attempt to seek asylum in Australia.
6 The Authority found that:
the appellant had provided a consistent narrative of his claims and a number of identity documents to support them throughout the visa application process, but that there were several discrepancies in the documents as to the correct spelling of his name;
having considered those discrepancies, it was satisfied that his explanation for the inconsistencies was reasonable and that the discrepancies arose from transliteration errors and his fears that he would be denied refugee status in Australia and, earlier, in Malaysia were he to have contradicted any of the information contained in the documents; and
it accepted his claimed identity and that he had been born, lived and worked in the Jaffna district as he claimed.
7 The Authority set out the appellant's account of the matters giving rise to his claims that had occurred to him in Sri Lanka as follows:
the appellant claimed that he had played a minor role in LTTE remembrance ceremonies and memorial services in the Jaffna district between 2002 and 2005 because he felt coerced in the sense that refusal could be interpreted by the LTTE as a rejection of its goals and any person who did so might suffer consequences as a result;
he had not provided any support to the LTTE beyond minor administrative tasks and that when the LTTE attempted to recruit him, he declined to become a member and had no other links with it;
during that period, he became friendly with three other young men (ie: the three friends) whom he met attending LTTE memorial services;
during the same period, he had been subjected to minor instances of coercion from members of the Sri Lankan Army stationed in the area;
between 2004 and 2008, he worked as an apprentice at a machinist workshop and, from time to time, known members of the LTTE would arrive at his workshop to have some routine work done. Because he completed such tasks as part of his regular duties, such conduct could be interpreted by Sri Lankan authorities as evidence of his support for the LTTE, should he be returned to Sri Lanka;
in January 2008, his employer asked him if he knew of other persons who might wish to be apprentices at his workshop, and this was the occasion for him to bring his three friends there to introduce them to his employer, who accepted his recommendation that they be employed;
in early June 2008, the three friends stopped attending the workshop and the appellant was unclear as to how or why that had occurred;
initially, he had thought that the three friends may have been sent away on some task by his employer;
about three days after his three friends ceased to attend at work, CID officers approached him, when he was alone, and questioned him about his missing colleagues. He told the CID officers that he could not provide them with any information because he was unaware of the circumstances of the three friends or their whereabouts. The officers told him that the three friends had some link to the LTTE and that he should find out where they were currently located. On this occasion, he was not mistreated, but felt intimidated by the police interest in his three friends;
about one week later, the CID officers returned to the workshop and questioned him a second time about the three friends. When he informed them that he had not been able to find out any information that would be of assistance to the CID's inquiries, they became angry with him, held firearms to his head and threatened to kill him if he failed to supply them with information;
he became very scared as a result of that second interaction with the CID and reported the matter to his employer, whom he found unsympathetic and who made statements to the effect that the appellant was entirely responsible for the employment of the three friends who were now suspected to be LTTE supporters. His employer informed the CID of the appellant's relationship with the three friends;
after those events, he feared for his life and decided to flee Sri Lanka for his own safety. He quit his job and went into hiding in Colombo, believing that he would not be safe in the Jaffna district. He stayed in hiding for about a month, during which time he approached an agent to assist him in obtaining a passport and tourist visa for Malaysia and that, having secured those, he flew on a commercial flight to Malaysia in August 2008;
his Malaysian tourist visa expired three months after his arrival in Malaysia and that, having no legal reason to stay, in 2009, he registered with the Office of the United Nations High Commissioner for Refugees (UNHCR) and, in 2012, the Sri Lankan Tamil Refugees Organisation of Malaysia. Those organisations had supplied him with several identity documents, demonstrating that he had been resident in Malaysia for the period between 2008 and 2013, which the Authority accepted; and
during 2009, CID officers visited his mother's home on one occasion in order to question him and that this demonstrated that the Sri Lankan Police had never lost interest in him despite his departure for Malaysia the previous year. Were he to return, the Sri Lankan authorities would still maintain an interest in him despite the passage of time and he would be detained, likely to be tortured and possibly killed by the authorities because of his actual or imputed connection to the LTTE.
The Authority's Reasons
8 The Authority found some aspects of the appellant's claims to be problematic and his claims concerning his three friends unconvincing. It found that he had described them during his interview with the delegate in 2017 as being "very close friends", but to have been surprised when they all failed to attend work in early June 2008, had no knowledge of where they were or what they were doing, and only became aware of their links to the LTTE after the CID questioned him. The Authority concluded that the appellant knew more about the three friends than he was willing to tell the CID officers in 2008 or the Australian authorities since his arrival here. Nonetheless, it accepted that the Sri Lankan Police thought the three friends had links to the LTTE and that the appellant had been questioned on that basis.
9 The Authority found:
20. There are other difficulties with the applicant's narrative. He has claimed that he decided to depart Sri Lanka after the events of June 2008 and that only then did he attempt to obtain a passport and a visa. The applicant has not provided an original passport to Australian authorities, but he has provided a scanned copy of the front page from his passport which contains basic biographical details about the passport owner (the applicant), and administrative particulars about the document itself. This copy records that the applicant's passport was issued by Sri Lankan Government in April 2008, two months prior to the events of June 2008. At his 2017 protection visa interview, when challenged by the delegate about the discrepancy between the date he claimed he acquired his passport (post June 2008) and the date his passport was actually issued (April 2008), the applicant was unable to provide a reasonable explanation. He stated that he was unsure if his passport was genuine, and suggests the agent he used to obtain the passport may have given him a fake. In support of this assertion, he notes that his name is spelt incorrectly in the passport.
21. I am unconvinced by this explanation. I note that the applicant has provided a different reason for the mistaken spelling of his name in the documentation he has presented in support of his claims (transliteration error) which I find more credible. I have also taken into consideration that the applicant was able to use his passport to obtain a Malaysian tourist visa, and to depart Sri Lanka on a routine commercial flight in 2008. He also used the passport to legally enter Malaysia and later provided the passport to the UNHCR as evidence of his Sri Lankan citizenship in 2009. I am not satisfied by the applicant's claim that he thinks the passport is a fake, and I conclude that he has made this claim in order to explain the discrepancy between the date the passport was issued, and the narrative explanation he has provided for his departure from Sri Lanka. I infer from this information that the applicant had decided to obtain his passport, and had considered departing Sri Lanka prior to any interactions he may have had with the CID.
(emphasis added)
10 The Authority found that the Sri Lankan Army controlled the Jaffna district from 1995 and garrisoned units there. It accepted as credible the appellant's claims that he was coerced by members of the Sri Lankan Army. This was also consistent with country information, which suggested that there were still military units stationed throughout the former conflict areas in the northern province and a higher proportion were stationed around Jaffna. It found that the security situation in the north and east of Sri Lanka "has improved dramatically since the end of the conflict, with greater freedom of movement and a reduction in the military's involvement in civilian life".
11 It found that the Sri Lankan Police were then responsible for civil affairs across the country. It found, based on country information, that the Sri Lankan Police was a trained and an active police force, albeit that the majority of its members had been recruited and gained their experience during war time and that significant institutional changes were necessary to transform it to a civilian police force.
12 The Authority found that the appellant's claims of mistreatment in June 2008 while being questioned by CID officers were consistent with the country information and indicative of standard interrogation techniques used by Sri Lankan security agencies during the period of the conflict, in which the Sri Lankan Police played an active pro-government role, leaving members of the Tamil minority particularly vulnerable to the type of mistreatment that the appellant had suffered. The Authority said:
24. Information before me indicates that Sri Lankan authorities collect and maintain sophisticated intelligence on former LTTE members and supporters, including 'stop' and 'watch' electronic databases. 'Stop' lists include names of those individuals that have an extant court order, arrest warrant or order to impound their Sri Lankan passport. 'Watch' lists include names of those individuals that the Sri Lankan security services consider to be of interest, including due to separatist or criminal activities. While the Sri Lankan authorities maintain an interest in former real or imputed LTTE members and a large number were previously detained, only a small number continue to be held by the Government. Those persons who may remain of security interest to the Sri Lankan Government are persons who were high profile former LTTE members (i.e. leaders of the organisation or those suspected to have committed terrorist or serious criminal acts during the conflict or to have provided weapon), or low profile former members (i.e. former combatants, administrative staff or other persons who provided non-military support) who have not undergone rehabilitation.
25. DFAT's most recent assessment of the situation in Sri Lanka is that the monitoring and harassment of Tamils in day-to-day life has decreased significantly under the Sirisena Government. Members of the Tamil community have also described a positive shift in the nature of interactions with authorities; they feel able to question the motives of, or object to, monitoring or observation activities. Since 2015, genuine attempts have been made at reconciliation between the Sinhalese community and the Tamil minority. DFAT reports that Tamils have a substantial level of political influence and their inclusion in political dialogue has increased since 2015. The Sirisena Government has prioritised human rights and reconciliation and has made significant progress, including: replacing military governors in the Northern and Eastern Provinces with civilians; returning some of the land held by the military since the conflict-era back to its former owners; releasing some individuals detained under the Prevention of Terrorism Act (PTA) and committing to reform the PTA; and engaging constructively with the United Nations. The Government also established an Office of National Unity and Reconciliation (ONUR) to develop a national policy on reconciliation.
(emphasis added, footnotes omitted)
13 The Authority's reference (in par 25 quoted above) to the country report of the Department of Foreign Affairs and Trade (2017 DFAT report) referred to and summarised what DFAT had stated in that report at [3.32], namely:
The most recent UNHCR Eligibility Guidelines for Sri Lanka (December 2012) note that a person's real or perceived links with the LTTE may give rise to a need for international refugee protection. Although the nature of these links can vary, this may include:
β’ persons who held senior positions with considerable authority in the LTTE civilian administration, when the LTTE was in control of large parts of what are now the northern and eastern provinces of Sri Lanka;
β’ former LTTE combatants or 'cadres';
β’ former LTTE combatants or 'cadres' who, due to injury or other reason, were employed by the LTTE in functions within the administration, intelligence, 'computer branch' or media (newspaper and radio);
β’ former LTTE supporters who may never have undergone military training, but were involved in sheltering or transporting LTTE personnel, or the supply and transport of goods for the LTTE;
β’ LTTE fundraisers and propaganda activists and those with, or perceived as having had, links to the Sri Lankan diaspora that provided funding and other support to the LTTE;
β’ persons with family links or who are dependent on or otherwise closely related to persons with the above profiles.
(emphasis added)
14 The Authority found that, notwithstanding its concerns about the appellant's truthfulness concerning his knowledge of the three friends, it accepted that he had been questioned by officers of the CID twice during June 2008 about their whereabouts, their links to the LTTE and that, on the second occasion, the CID officers had threatened to kill him unless he cooperated with them and had pointed weapons at him in order to emphasise the seriousness of their threats. However, the Authority observed that the appellant had not claimed that the CID officers imputed him to be a member of the LTTE nor had they on either occasion detained, charged, arrested him or otherwise inferred him to be involved with the LTTE.
15 It found that, at his interview with the delegate, the appellant had said that there were no outstanding Sri Lankan arrest warrants against him. It found that, after the events concerning his three friends and his interrogations, the appellant had been able to depart Sri Lanka legally on a routine commercial flight from Colombo Airport and that he had not had any contact with the three friends since their disappearance in June 2008.
16 Given the passage of time, the Authority was unconvinced that the appellant's previous links with the three friends would raise his profile to a level that would be of interest to the Sri Lankan Police were he to return to Sri Lanka. It found that credible information before it indicated that Tamils living in Sri Lanka could experience some societal discrimination on the basis of ethnicity, but there were no laws that discriminated upon that basis and such discrimination did not result from government policy. It also found that treatment of Tamils by the Sri Lankan government had improved considerably since the end of the conflict in 2009.
17 It found:
29. I am not satisfied that the applicant was imputed to be a member of the LTTE when questioned by the CID in 2008. Having considered the evidence before me, I am not satisfied that his profile would be of ongoing interest to any Sri Lankan authorities almost 10 years later due to his limited support for the organisation's activities between 2002 and 2005, or for his links to three persons who were alleged to be members of the LTTE in 2008. I do not accept that the applicant would be imputed to be a member of the LTTE if returned to Sri Lanka. I am not satisfied that the applicant would face a real chance of harm arising from his ethnicity, his limited support for the LTTE, his association with persons suspected of being involved with the LTTE or his previous interactions with the CID, or the SLA should he be returned to Sri Lanka.
(emphasis added)
18 The Authority also rejected the appellant's claims to fear harm based on his illegal departure and failed attempt to seek asylum in Australia, which are not matters arising in the appeal. It then affirmed the delegate's decision to refuse to grant the visa.
The Proceeding before the Trial Judge
19 The trial judge dealt, relevantly, with the grounds of review in the further, further amended application on which the appellant's counsel, who appeared below and also on the appeal, relied. Essentially, there were three substantive grounds below, which have been pressed on the appeal as errors of the trial judge, namely that the Authority erred:
(1) in its reasoning process in finding that the appellant's passport was valid, given its misspelling of the appellant's name;
(2) in misinterpreting the 2017 DFAT report by impliedly finding that there were only two types of person who would remain at risk of being subjected to persecution by the Sri Lankan government, namely, high profile LTTE members or low profile ones who had not undergone rehabilitation, in circumstances where both the 2017 DFAT report and the UNHCR guidelines, to which it referred, were not exhaustive of the categories of persons who might be at risk were they to return to Sri Lanka; and
(3) in not accepting that the appellant's profile would be of ongoing interest to Sri Lankan authorities almost 10 years later because of his limited support of the LTTE's activities between 2002 and 2005, his links to the three friends alleged to be LTTE members in 2008, his Tamil ethnicity, his real or perceived associations with, limited support for and or association with persons suspected of being involved with the LTTE and his previous interactions with the CID and or the Sri Lankan Army.
20 The trial judge correctly observed that the grounds of review before him, which were repeated substantively in the notice of appeal, were less than clear, even after having been considerably amended over the course of the proceeding below. His Honour said that the three distilled grounds suggested that the Authority had acted in a legally unreasonable way (but that submission was not made on the appeal and I need not deal with it).
21 His Honour found that the appellant's complaints in each ground mischaracterised the Authority's findings and misconceived its role, namely, to assess the risk of serious or significant harm in the reasonably foreseeable future were he to be removed from Australia to Sri Lanka.
22 The trial judge rejected the first ground. He found that the Authority's conclusions that the appellant did not face a real chance of serious or significant harm for the reasons it gave were open on the material before it. His Honour was satisfied that the Authority had not committed a jurisdictional error in not accepting the appellant's version of events as to how he came to have the passport. He held that the Authority was entitled, and had a proper basis, to conclude that the passport was genuine.
23 His Honour rejected the second ground on the basis that the Authority had considered all of the material relating to the appellant, including his low level links to the LTTE for a limited period of time, his relationship with the three friends, and its finding that he had been questioned and threatened by the CID officers.
24 His Honour rejected the third ground. He said that it was open to the Authority to find that, after a passage of some 10 years and, based on all the evidence before it, the appellant did not have a profile that would attract adverse attention of the authorities were he to be returned to Sri Lanka. His Honour found that, in par 29 of its reasons, the Authority had considered the country information reports and was not satisfied that the appellant either fell within a closed category outlined within the 2017 DFAT report or UNHCR guidelines or, indeed, that he came within any other category of person that enlivened Australia's protection obligation. He found that, in concluding that the appellant was not entitled to a protection visa, the Authority had asked itself the correct questions and properly considered whether or not the appellant, directly or indirectly, might have been a person included in a category entitling him to protection. His Honour found that, in effect, the appellant was simply expressing disagreement with the Authority's findings on his claims and that that did not give rise to jurisdictional error. Accordingly, he dismissed the application with costs.
This Appeal
25 The appellant argued that the appeal should be allowed because the Authority had engaged in illogical or irrational reasoning in dealing with his claim that he did not know whether the passport was genuine because of the misspelling of his name and the circumstances in which he had obtained it. He contended that the Authority's finding, that the misspelling was due to a transliteration error and the passport was genuine, was inconsistent with the evidence in the birth certificate and the passport itself as to the spelling of his name so that it was not open to the Authority to have found the passport to have been valid. The appellant submitted that each of the second and third grounds was, in effect, the converse of the other. He argued that it was unreasonable for the Authority to arrive at its interpretation of the 2017 DFAT report's summary of the UNHCR guidelines. That was, he contended, because it had treated the word "may" in the summary as restricting those who could be at risk of harm by reason of their historical, real or imputed, association with the LTTE to only the six categories identified. He submitted that the Authority should have recognised that the list was not exhaustive and that its failure to consider his individual circumstances, otherwise than by reference to those categories, demonstrated a jurisdictional error. He argued that was because he was a person with a profile based on his interrogations and threats by the CID officers in 2008, connected to the perception of his links to the three friends and connection to the LTTE.
Consideration
26 In my opinion, the grounds of appeal have no substance. They fail to engage with the necessity that grounds of appeal in a judicial review proceeding must disclose why the trial or primary judge allegedly erred in addressing whether the challenged administrative decision was affected by jurisdictional error. Rather, the present grounds of appeal and the grounds of review below amounted to no more than complaints that the Authority arrived at erroneous factual conclusions. In Corporation of the City of Enfield v Development Assessment Commission (2000) 199 CLR 135 at 153-154 [44], Gleeson CJ, Gummow, Kirby and Hayne JJ said:
When stating the position in Quin ((1990) 170 CLR 1 at 36), Brennan J also stressed:
"The merits of administrative action, to the extent that they can be distinguished from legality, are for the repository of the relevant power and, subject to political control, for the repository alone."
However, in Australia this situation is the product not of any doctrine of "deference", but of basic principles of administrative law respecting the exercise of discretionary powers. Mason J spoke to similar effect in Minister for Aboriginal Affairs v Peko-Wallsend Ltd ((1986) 162 CLR 24 at 40. See also Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 271-272; Minister for Immigration and Ethnic Affairs v Guo (1997) 191 CLR 559 at 576-578, 597-598) when he observed:
"The limited role of a court [in] reviewing the exercise of an administrative discretion must constantly be borne in mind."
Nor, as Brennan J pointed out in Waterford v The Commonwealth ((1987) 163 CLR 54 at 77), is there an "error of law simply in making a wrong finding of fact".
(emphasis added)
27 The first ground contended that his Honour erred in rejecting the submission that the Authority should not have found the passport to be valid. The ground below, and as argued on appeal, is simply an engagement in merits review of material before the Authority on which it was able to make a finding of fact as to the genuineness of the passport. It was for the Authority to find the facts. The appellant had provided information, that the Authority had before it, that he had obtained the passport legally as well as saying that he did not know whether it was genuine. The Authority was entitled to have regard to the fact that the appellant had said that the passport was obtained legally for himself, he had been able to depart Sri Lanka on it lawfully without being of interest to the authorities there, to enter Malaysia, and then to obtain documents from the UNHCR there as to his status.
28 I am unable to see any arguable jurisdictional error in the Authority's factual conclusion that the passport was valid and that a transliteration error explained the discrepancies between the spellings of the appellant's name in the birth certificate and other material before it, as compared to how it was spelt in the passport. The discrepancy comprised the presence or absence of one letter in the middle of one of his names.
29 The second and third grounds were interrelated. The Authority made findings of fact as to what the country information revealed as to persons or categories of person who might be at risk of persecution or otherwise in need of protection under s 36(2)(a) or (aa) of the Migration Act 1958 (Cth). Those findings were on matters of fact.
30 True, it is, that the 2017 DFAT report's summary was not exhaustive in specifying persons who had real or perceived links with the LTTE as being in a category of persons who may be entitled to protection. Nonetheless, there was nothing in the Authority's dispositive reasoning in par 29 which indicated that it had relied only on those categories of persons who may be entitled to protection as exhaustive. It was not satisfied that the appellant's profile would be of ongoing interest to any Sri Lankan authorities almost 10 years later due to his limited support for the LTTE, links to his three friends or that he would be imputed to be a member of the LTTE if he were returned to Sri Lanka. It made the ultimate finding that it was not satisfied that the appellant would face a real chance of serious or significant harm arising from his ethnicity, limited support for the LTTE, association with persons suspected of being involved with the LTTE or his previous interactions with the Sri Lankan Army or the CID, which, it had accepted, included his being threatened with death in the second of the two interrogations.
31 The appellant had relied on all of those circumstances as supporting his claims to protection. But, the argument failed to identify any failure of the Authority to consider those claims or any error in its findings in par 29.
32 In my opinion, the argument that the Authority had construed the word "may" in the 2017 DFAT report's recitation of classes of persons as limiting those who may be at risk of persecution were they returned to Sri Lanka within the UNHCR guidelines, was nothing more than engaging in a contention that Brennan CJ, Toohey, McHugh and Gummow JJ proscribed in Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 272. There, they warned against a court being concerned with looseness in language or unhappy phrasing of the reasons of an administrative decision-maker or construing them minutely and finely with an eye keenly attuned to the perception of error. I reject the appellant's argument.
Conclusion
33 In my opinion, the appellant has failed to demonstrate that the trial judge erred or the Authority committed any jurisdictional error. For these reasons, the appeal must be dismissed with costs.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Rares.
Associate:
Dated: 25 November 2022
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2024-09-13T22:46:05.914023+10:00
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Federal Court of Australia
Storry v Weir [2022] FCA 362
Appeal from: Weir v Storry [2022] FedCFamC2G 183
File number(s): QUD 103 of 2022
Judgment of: COLLIER J
Date of judgment: 7 April 2022
Catchwords: PRACTICE AND PROCEDURE β application for interim orders to stay sequestration order of Federal Circuit and Family Court of Australia β whether arguable point on the proposed appeal or rational prospect of success βbalance of convenience
Legislation: Bankruptcy Act 1966 (Cth)
Federal Court of Australia Act 1976 (Cth)
Federal Court Rules 2011 (Cth)
Magistrates Courts Act 1921 (Qld)
Uniform Civil Procedure Rules 1999 (Qld)
Cases cited: Cook's Construction Pty Ltd v Stork Food Systems Australasia Pty Ltd [2008] QCA 322
Cox v Journeaux (No 2) [1935] 52 CLR 713
Dyer v Chrysanthou (No 4) [2022] FCA 51
Faulkner v Bluett [1981] FCA 3
Kitay, in the matter of Frigger (No 2) [2018] FCA 1032
National Road Transport Association Ltd v Road Safety Remuneration Tribunal (No 2) [2016] FCAFC 58
Obeid v The Queen [2016] HCA 9
Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28
Viagogo AG v Australian Competition and Consumer Commission [2021] FCA 175
Weir v Storry [2022] FedCFamC2G 183
Wynch v Ketchell [2001] QCA 391
Division: General Division
Registry: Queensland
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Number of paragraphs: 66
Date of hearing: 6 April 2022
Solicitor for the Applicant: The Applicant appeared in person
Counsel for the Respondent: P. Van Grinsven
Solicitor for the Respondent: SLF Lawyers
ORDERS
QUD 103 of 2022
BETWEEN: VENETIA LOUISE STORRY
Applicant
AND: JONATHAN DAVID WEIR
Respondent
order made by: COLLIER J
DATE OF ORDER: 7 APRIL 2022
THE COURT ORDERS THAT:
1. The interim orders sought by the appellant in her notice of appeal filed on 30 March 2022 be refused.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
COLLIER J
1 On 30 March 2022 the appellant, Ms Storry, filed a notice of appeal from a decision of the Federal Circuit and Family Court in Weir v Storry [2022] FedCFamC2G 183. In that decision the primary Judge ordered that a sequestration order be made against the estate of Ms Storry under the Bankruptcy Act 1966 (Cth), and that the costs of the petitioning creditor be paid out of the bankrupt's estate.
2 Ms Storry's grounds of appeal are:
1. His Honour erred acted outside his jurisdiction in saying the applicant exhausted her rights to appeal of the Magistrates Decision which was the basis for the Sequestration Order when an appeal existed in the District Court and the prospects of success are not within his jurisdiction to make, nor did he have all of the material, nor was this a judgement asked of him to make.
2. His Honour erred in considering the lawyer's fees that was the basis of the sequestration Order are not standard Magistrate fees but Indemnity fees that were never cost assessed and the application to bankruptcy occurred with stay applications on foot and a yet to be decided High Court appeal.
3. The lawyer's fees were double the amount of the time spend in court and the applicant had attempted to settle the car costs before a civil trial began.
4. His Honour failed to consider the time of the hospital period and that the appellant had provided to him that the matter was before the court on appeals with a stay, hours before his hearing and that he knew a District appeal was being filed the day of the hearing which would impact on the quantum that caused the decision and that the appellant did not provide evidence of not being bankrupt as the whole matter was part of a jurisdiction appeal being challenges through another court.
(errors in original)
3 Ms Storry also sought the following interim orders:
1. Interim orders are sought to restrain and stop the appointed Trustee David Clout from acting as a trustee while the matter is under appeal and can be determined.
2. The Appellant requests that she can continue to act in her full capacity as if the bankruptcy order had never been made while the matter is under appeal as agency clients need to be paid, there is every chance a trustee and or a receiver will act incompetently and do untold damage as this has been the result of a previous receiver placed over the applicants deceased fathers business on his passing.
4 It is only the interim relief which was the subject of submissions yesterday, requiring determination.
5 For the following reasons this relief should be refused.
Background
6 In summary, Ms Storry and Mr Weir were involved in a motor vehicle accident on 27 July 2016. As a result the Queensland Police Service issued a traffic infringement notice to Ms Storry for the offence of failing to give way to a vehicle at an intersection with a stop sign. Ms Storry contested the infringement in the Queensland Magistrates Court, however Ms Storry was convicted and fined.
7 Ms Storry appealed her Magistrates Court conviction to the District Court of Queensland.
8 Mr Weir had vehicle insurance with RACQ Insurance (RACQ). On 24 May 2017 RACQ commenced civil proceedings in the Magistrates Court seeking loss and damages in the sum of $13,396.00 against Ms Storry in respect of damage to Mr Weir's vehicle. When RACQ became aware of Ms Storry's District Court appeal in respect of her conviction it elected not to take further steps until the appeal was finalised.
9 On 1 December 2017 the District Court dismissed Ms Storry's appeal. An appeal against the decision of the District Court was dismissed by the Court of Appeal of Queensland on 16 August 2018.
10 RACQ then proceeded with its civil claim against Ms Storry. On 4 December 2020 Acting Magistrate Smith found in favour of RACQ. The total sum awarded totalled $39,506.86, being damages, costs, interest and witness expenses.
11 On 15 January 2021 Ms Storry filed an appeal in the Court of Appeal of Queensland against the decision of Acting Magistrate Smith. The appeal was dismissed by the Court of Appeal on 16 February 2021.
12 On 29 September 2021 SLF Lawyers on behalf of the respondent served a bankruptcy notice on Ms Storry.
13 Ms Storry filed:
A stay application in the Court of Appeal against the order of 16 February 2021. This was dismissed on 26 October 2021.
A stay application in the Magistrates Court against Acting Magistrate Smith's judgment of 4 December 2020. This was dismissed on 7 December 2021 by Acting Magistrate Turra.
14 On 14 December 2021 a creditor's petition was filed against Ms Storry seeking a sequestration order against her estate.
15 On 11 March 2022 Ms Storry filed an appeal in the District Court of Queensland against the decision of Acting Magistrate Turra.
16 On 16 March 2022 the High Court of Australia dismissed Ms Storry's application to set aside the decision of the Court of Appeal of 16 February 2021.
17 The creditor's petition was heard by the primary Judge on 17 March 2022.
PRIMARY JUDGMENT
18 The primary Judge observed:
3. As at the date of the court hearing, the respondent had not filed any document in response to the application. At the hearing, the Court admitted into evidence as Exhibit 1 an amended document dated 14 March 2022, which the applicant advised the Court had not been accepted for filing due to its lack of form. On its face, that document is of no obvious significance.
19 His Honour then set out the relevant litigation history involving Ms Storry and the respondent. His Honour noted that Ms Storry conceded that she had not paid the judgment sum to the applicant, and continued:
5. β¦ The respondent made submissions to the Court to the effect that the Court should stay the further hearing of the sequestration application pending the hearing and determination of a notice of appeal and stay application yet to be filed by her in the District Court of Queensland. The respondent had admitted into evidence as Exhibit 2 a bundle of documents which she submitted showed a good basis for the making of a stay order.
20 His Honour had regard to Exhibit 2 and observed that he had not identified any document or transcript which could constitute the basis for any reasonable argument that a stay order ought to be made in the present proceeding, continuing:
6. β¦ The respondent has exhausted her avenues of appeal against the Magistrates Court judgement entered against her. Any further appeal proceedings filed by or on behalf of the respondent have no prospects of success.
21 His Honour had regard to the affidavit material filed on behalf of Mr Weir in support of the making of a sequestration order, including a bankruptcy notice and a creditor's petition. His Honour observed:
9. The applicant [sic β I understand his Honour meant the respondent in those proceedings] has failed to provide evidence:
(a) As to her solvency as at the date of the hearing before the Court; or
(b) That the sequestration order ought not to be made for any other reason.
10. The relevant act of bankruptcy occurred on 1 November 2021, that being the date prior to which the respondent had failed to pay the judgement sum to the applicant after service upon her of the Bankruptcy Notice.
11. The Court is satisfied that the judgement sum remains unpaid, and that the respondent is unable to pay her debts as and when they fall due.
12. The Court is further satisfied that the respondent was duly served with all relevant documents, and that the applicant has otherwise established that all procedural matters required to be attended to by him have been duly carried out.
13. Accordingly, a sequestration order is made against the estate of Venetia Louise Storry.
Submissions of the PARTIES
22 Ms Storry appeared in person before me. She filed written submissions and made oral submissions at the hearing. In summary Ms Storry submitted:
The judgment of the primary Judge turned her into a bankrupt for seeking clarification of a point of law raised by the respondent.
Section 60 (4) of the Bankruptcy Act supported her claim for relief.
In the Magistrates Court proceedings Ms Storry was prejudiced by being unable to subpoena witnesses who would have given evidence that she did give way and swerve at the time of the accident involving Mr Weir.
The bill of costs used to bankrupt Ms Storry was not served on Ms Storry prior to the hearing before the primary Judge.
The balance of convenience favours Ms Storry because
β’ she is finalising her late father's financial affairs, and the recent south east Queensland floods have impacted on this;
β’ her bankruptcy is not founded on an inability to pay, but rather a legal argument;
β’ a stay of the primary decision would allow a District Court appeal to proceed in respect of the decision of Acting Magistrate Smith;
β’ Ms Storry has been prejudiced by previously following incorrect appellate procedure; and
β’ Ms Storry's status as a real estate agent is imperilled by the sequestration order.
The hearing before the primary Judge was scheduled on 17 March 2022, however the High Court decision was not given until late afternoon of 16 March 2022.
The respondent misled the District Court based on s 60 (2) and (3) of the Bankruptcy Act when the authority of Faulkner v Bluett [1981] FCA 3 was against the respondent.
The primary Judge erred at [3] when finding that Ms Storry had not filed any material in the primary proceedings, when she clearly had.
There are further appellate avenues available to Ms Storry to set aside the debt the source of her bankruptcy.
23 The respondent was represented by Counsel, and submitted in summary that the relief sought by Ms Storry should be refused.
CONSIDERATION
24 Section 29 of the Federal Court of Australia Act 1976 (Cth) provides:
Stay of proceedings and suspension of orders
(1) Where an appeal to the Court from another court has been instituted:
(a) the Court or a Judge, or a judge of that other court (not being the Federal Circuit and Family Court of Australia (Division 2) or a court of summary jurisdiction), may order, on such conditions (if any) as it or he or she thinks fit, a stay of all or any proceedings under the judgment appealed from; and
(b) the Court or a Judge may, by order, on such conditions (if any) as it or he or she thinks fit, suspend the operation of an injunction or other order to which the appeal, in whole or in part, relates.
(2) This section does not affect the operation of any provision made by or under any other Act or by the Rules of Court for or in relation to the stay of proceedings.
25 Further, r 36.08 of the Federal Court Rules 2011 (Cth) allows an appellant to apply to the Federal Court for an order to stay the execution of a proceeding until the appeal is heard and determined.
26 In Viagogo AG v Australian Competition and Consumer Commission [2021] FCA 175 Abrahams J summarised principles relating to the stay or execution or proceedings under a judgment the subject of appeal, as follows:
10. Rule 36.08 confers a broad discretion. Generally, there must be demonstrated "a reason or an appropriate case" to warrant the exercise of discretion in favour of granting a stay. It is not necessary to establish special or exceptional circumstances for the grant of a stay: Powerflex Services Pty Ltd v Data Access Corp [1996] FCA 460; (1996) 67 FCR 65 at 66.
11. Two questions must be considered: first, is there an arguable point on the proposed appeal: Nolten v Groeneveld Australia Pty Ltd [2011] FCA 1494 (Nolten) at [24] or some "rational prospect of success" in relation to any of the grounds of appeal: Burns v AMP Finance Ltd [2005] FCA 761 at [5]; and second, does the balance of convenience favour the grant of a stay: Nolten at [24], [46].
12. The party seeking the order bears the onus of demonstrating a proper basis for a stay, which must be fair to all parties: Alexander v Cambridge Credit Corporation Ltd (receivers appointed) (1985) 2 NSWLR 685 (Alexander) at 695. That party must demonstrate that there is a real risk that it will suffer prejudice or damage if a stay is not granted, which will not be redressed by a successful appeal: Kalifair Pty Ltd v Digi-Tech (Australia) Ltd, McLean Tecnic Pty Ltd v Digi-Tech (Australia) Ltd [2002] NSWCA 383; (2002) 55 NSWLR 737 (Kalifair) at [18]; Flight Centre Limited v Australian Competition and Consumer Commission [2014] FCA 658 (Flight Centre) at [9(f)]. This requirement will be satisfied if a successful appeal will be rendered nugatory unless a stay is granted: Ali v Australian Competition and Consumer Commission [2020] FCA 860 at [11]; Australian Competition and Consumer Commission v BMW (Australia) Ltd (No 2) [2003] FCA 864 (BMW) at [5]; Alexander at 695; Kalifair at [18].
13. The successful party at first instance is entitled to presume that the judgment appealed from is correct: Powerflex Services Pty Ltd v Data Access Corp [1996] FCA 460; (1996) 67 FCR 65 at 66, citing Re Middle Harbour Investments Ltd (in liq) (unreported, Court of Appeal NSW, 15 December 1976); Flight Centre at [9(b)]; Wooldridge v Australian Securities and Investments Commission [2015] FCA 349; (2015) 106 ASCR 551 (Wooldridge) at [11]; Urban Alley Brewery Pty Ltd v La Sirène Pty Ltd (No 2) [2020] FCA 351 at [48], [51].
27 See also Dyer v Chrysanthou (No 4) [2022] FCA 51 at [9]-[10] where Wigney J adopted the statement of legal principles of Abrahams J in Viagogo.
28 In relation to whether there is an arguable point on the proposed appeal against the primary decision, supporting interim restraint orders, it is my view that there is not.
29 In ground of appeal 1 Ms Storry contends that the primary Judge erred in finding that she had exhausted her rights of appeal in respect of the debt, and that his Honour ought not have formed conclusions about her prospects of success in relevant appeals.
30 Section 52 (1) of the Bankruptcy Act provides:
(1) At the hearing of a creditor's petition, the Court shall require proof of:
(a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);
(b) service of the petition; and
(c) the fact that the debt or debts on which the petitioning creditor relies is or are still owing;
and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.
31 His Honour noted at [10] that the relevant act of bankruptcy of Ms Storry occurred on 1 November 2021, being the date prior to which Ms Storry had failed to pay the judgment sum to RACQ after service upon her of the bankruptcy notice, and at [7] that the creditor's petition was personally served on Ms Storry on 29 January 2022. At [11] his Honour stated his satisfaction that the judgment debt remained unpaid.
32 The submissions of Ms Storry at the hearing before me yesterday did not cavil with these findings.
33 To that extent it is difficult to see how the primary Judge erred, when his Honour was simply applying the provisions of the Bankruptcy Act to the respondent's sequestration application.
34 However Ms Storry submitted that the bankruptcy notice issued by the Official Receiver was somehow faulty, because it was in respect of a debt arising from the decision of 4 December 2020 of Acting Magistrate Smith which Ms Storry sought to appeal to the District Court of Queensland.
35 At the hearing yesterday Ms Storry did not take the court to any notice of appeal to the District Court against the decision of Acting Magistrate Smith. The only evidence that this is the intention of Ms Storry is her evidence from the Bar table.
36 In my view, however, Ms Storry's prospects of successfully appealing the decision of Acting Magistrate Smith (thus seeking to establish error on the part of the primary Judge in the present proceedings) are practically very poor.
37 The judgment debt the subject of the decision of Acting Magistrate Smith was $13,396.06 plus costs. The quantum of the judgment debt was below the minor civil dispute limit for the purposes of s 45 of the Magistrates Courts Act 1921 (Qld). While s 45 of the Magistrates Courts Act contemplates appeals to the District Court from the Magistrates Court where the judgment debt is below the minor civil dispute limit, s 45 (2) provides that an appeal shall only lie by leave of the District Court or a District Court judge, who shall not grant such leave to appeal unless the court or judge is satisfied that some important principle of law or justice is involved.
38 Ms Storry made numerous submissions which I understood went to the importance of her proposed appeal from the decision of Acting Magistrate Smith.
39 Ms Storry submitted, inter alia, that her criminal conviction for the traffic infringement was reliant on a Queensland Traffic Crash Report, however the report was headed by a Disclaimer to the effect that the Queensland Police service in no way warranted and would not be held liable for the accuracy, correctness, currency or otherwise of the information set out in the report.
40 In this regard I note the submission by Ms Storry that an error has been made by the primary Judge in respect of the application of s 60 (4) of the Bankruptcy Act to her case. Insofar as I understand this submission, Ms Storry contends that "a personal wrong" was done to her in respect of that Crash Report for the purposes of s 60 (4).
41 In its entirety, s 60 provides:
Stay of legal proceedings
(1) The Court may, at any time after the presentation of a petition, upon such terms and conditions as it thinks fit:
(a) discharge an order made, whether before or after the commencement of this subsection, against the person or property of the debtor under any law relating to the imprisonment of fraudulent debtors and, in a case where the debtor is imprisoned or otherwise held in custody under such a law, discharge the debtor out of custody; or
(b) stay any legal process, whether civil or criminal and whether instituted before or after the commencement of this subsection, against the person or property of the debtor:
(i) in respect of the non-payment of a provable debt or of a pecuniary penalty payable in consequence of the non-payment of a provable debt; or
(ii) in consequence of his or her refusal or failure to comply with an order of a court, whether made in civil or criminal proceedings, for the payment of a provable debt;
and, in a case where the debtor is imprisoned or otherwise held in custody in consequence of the non-payment of a provable debt or of a pecuniary penalty referred to in subparagraph (i) or in consequence of his or her refusal or failure to comply with an order referred to in subparagraph (ii), discharge the debtor out of custody.
(2) An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.
(3) If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action.
(4) Notwithstanding anything contained in this section, a bankrupt may continue, in his or her own name, an action commenced by him or her before he or she became a bankrupt in respect of:
(a) any personal injury or wrong done to the bankrupt, his or her spouse or de facto partner or a member of his or her family; or
(b) the death of his or her spouse or de facto partner or of a member of his or her family.
Note: See also subsection 5(6).
(4A) Notwithstanding paragraph (1)(b), this section does not empower the Court to stay any proceedings under a proceeds of crime law.
(5) In this section, action means any civil proceeding, whether at law or in equity.
42 Plainly, s 60 (4) applies to stay of proceedings initiated by the bankrupt prior to bankruptcy. I understand that Ms Storry asserts that she may continue to prosecute appeals in respect of Magistrates Court decisions adverse to her (presumably in this case, the decisions of Magistrate Coates and Acting Magistrate Smith), in particular in respect of her criminal conviction and the judgment debt.
43 I am unable to identify how s 60 (4) assists Ms Storry in the present proceedings. It is not apparent that this section was in issue before the primary Judge in determining whether to make the sequestration order. More relevantly none of Ms Storry's litigation antecedent to the present proceedings appeared to concern any personal injury or wrong done to Ms Storry, or the death of her spouse, partner or family member. "Personal injury or wrong" in the context of what is now s 60 (4) of the Bankruptcy Act was explained by Dixon J in Cox v Journeaux (No 2) [1935] 52 CLR 713 at 721 as follows:
The plaintiff says that he himself is entitled to prosecute it under the proviso as an action for personal injury or wrong done to himself. The test appears to be whether the damages or part of them are to be estimated by immediate reference to pain felt by the bankrupt in respect of his mind, body or character and without reference to his rights of property (Wilson v United Counties Bank Ltd (1920) AC 102 at 111 and 128-133).
44 As a general proposition the existence of a Disclaimer on the Crash Report does not of itself mean that the report is a discredited document. The existence of this Disclaimer, and any grievance Ms Storry may have in relation to it, could not give rise to a "personal injury or wrong" to Ms Storry, by anyone, for the purposes of s 60 (4) of the Bankruptcy Act.
45 No principle of law is in issue in respect of the application of s 60 (4) of the Bankruptcy Act β the section simply does not apply.
46 Ms Storry also submitted that the primary Judge erred in finding that she had not filed any material in the proceedings before his Honour, when she submitted she plainly did. I note the affidavit dated 14 March 2022, filed by Ms Storry in the proceedings before the primary Judge, and now annexed to the affidavit marked as Exhibit 1(A) in the present Federal Court proceedings. I have already referred to para [3] of his Honour's reasons where the primary Judge noted the affidavit there had been admitted into evidence, but was of no obvious significance to those proceedings.
47 Ms Storry's affidavit dated 14 March 2022 annexed material described in the affidavit as:
1. The decision of Acting Magistrate Turra delivered on 7 December 2022;
2. Correspondence of Acting Magistrate Magistrate Turra denying the decision to be handed to the applicant.
3. Acting Magistrate Turra's decision held by the Department of Justice.
4. Application for Special Leave to the High Court.
5. Affidavit of Service to the High Court to SLF Lawyers.
6. District Court of Appeal Application.
7. Hearing transcript of Acting Magistrate Smith with no service of material to the applicant. No adjournment was provided.
8. Transcript of stay hearing to Justice Fraser, the costs told to his honour was for a 3 day trial when really 1.2 days and a judgment.
9. The costs of the car was turned down by SLF lawyers prior to trial.
10. High Court application for the Office of Fair trading.
48 It is unclear to me how the observation of his Honour, that this material was of no obvious significance to the question whether a sequestration order ought be made, would constitute an appellable error.
49 I also note that, insofar as appears on the material before me, there is no suggestion that before his Honour Ms Storry sought to establish for the purposes of s 40 (1)(g) of the Bankruptcy Act that she had a counter-claim, set-off or cross demand equal to, or more than, the sum claimed in the respective bankruptcy notice, being a counter-claim, set-off or cross demand she could have set up in the Magistrates Court proceedings wherein the judgment against her was obtained.
50 Finally, and ultimately, any appeal against decisions of either Acting Magistrate Smith or Acting Magistrate Turra would be subject to the Uniform Civil Procedure Rules 1999 (Qld) (Wynch v Ketchell [2001] QCA 391). Under those rules Ms Storry had 28 days to appeal. Those time periods have clearly long expired, and no evidence is before me that any extensions of time have been granted.
51 In my view ground of appeal 1 from the decision of the primary Judge has no prospect of success.
52 In grounds of appeal 2 and 3 against the decision of the primary Judge, Ms Storry claims error on the part of his Honour in respect of costs ordered by Acting Magistrate Smith on 4 December 2020.
53 In respect of ground of appeal 2, Ms Storry describes the error as "in considering the lawyer's fees that was the basis of the sequestration Order are not standard Magistrate fees but Indemnity fees that were never cost assessed and the application to bankruptcy occurred with stay applications on foot and a yet to be decided High Court appeal." Ground of appeal 3 refers to costs incurred by lawyers, presumably being lawyers of the respondent, and presumably in respect of the proceedings before Acting Magistrate Smith (although this is unclear).
54 As the High Court explained in Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28, the question raised by s 52 of the Bankruptcy Act when the Court is considering whether to make a sequestration order against the estate of a debtor, is whether there is a debt. The relevant debt for the purposes of the proceedings before his Honour was that following the order of Acting Magistrate Smith, namely $13,396.06 plus interests, costs and witness expenses.
55 In this ground of appeal, Ms Storry essentially claims error of the primary Judge in failing go behind the judgment of the Magistrates Court awarding costs to the respondent. In Ramsay however the plurality observed at [68]:
For the purposes of s 52 of the Act, a judgment may usually be taken to be sufficient evidence of a debt in that a judgment against a debtor in favour of a creditor obtained after a trial is, generally speaking, a reliable indication of the true state of indebtedness as between creditor and debtor. Indeed, such a judgment can usually be expected to provide the most reliable statement of the debt humanly attainable because the ordinary processes of the adversarial system provide a practical guarantee of reliability. The testing of the relative merits of a claim and counterclaim under the rigours of adversarial litigation will usually establish the true state of accounts as between the parties to the proceedings. Accordingly, a Bankruptcy Court will usually have no occasion to investigate whether the judgment debt is a true reflection of the real debt. But where the merits of a claim and counterclaim have not been tested in adversarial litigation, a judgment debt will not have this practical guarantee of reliability.
(emphasis added)
56 To the extent that Ms Storry in her notice of appeal asserts that the basis of the assessment of costs in the Magistrates Court was wrong, I note relevant observations of Colvin J in Kitay, in the matter of Frigger (No 2) [2018] FCA 1032, where his Honour said:
40. A costs order creates an obligation to indemnify in respect of costs incurred (which is why the indemnity principle must be met before such an order can be made or enforced). No debt can arise from that obligation unless there is a liability on the part of the party who has the benefit of the costs order to pay legal costs in respect of the conduct of the proceedings. In those circumstances, an assessment of costs on taxation is an adjudication that there is a debt which, by operation of the costs order, there is a liability to pay by way of indemnity.
(emphasis added)
57 In respect of the relevant decision of Acting Magistrate Smith it is unclear on the materials whether the assessment of costs followed taxation. However, costs were ordered by the Acting Magistrate in the amount of $22,741.52 on 4 December 2020 following a trial between the parties in the Magistrates Court. The Magistrates Court has a scale of costs in the UCPR.
58 There is nothing before the Court to support a finding that the primary Judge should have gone behind the decision of Acting Magistrate Smith.
59 The "as yet to be decided High Court appeal" is not identified in ground 2 of the notice of appeal. I note in any event however that simply because special leave to the High Court has been sought, that is, of itself, no basis for ordering a stay of a decision: see for example observations of Gageler J in Obeid v The Queen [2016] HCA 9 at [14], and Buchanan and Rangiah JJ in National Road Transport Association Ltd v Road Safety Remuneration Tribunal (No 2) [2016] FCAFC 58 at [9]-12].
60 In my view ground of appeal 2 has no prospect of success.
61 Ground of appeal 3 ground of appeal is vague, imprecise, and relates to issues which could properly have been raised in the Magistrates Court. In my view it is not competent as a ground of appeal.
62 Ground of appeal 4 is vague to the point of meaningless. In my view it has no prospect of success.
63 Insofar as the balance of convenience is concerned, I am satisfied that it favours the respondent.
64 The fact that Ms Storry has sought to appeal decisions of the Magistrates Court from several years ago does not, of itself, warrant a stay, either of the decision of the primary Judge or any other decision made in the course of this litigation.
65 Ms Storry submits that she holds a real estate agent's licence, and essentially she will lose that licence if she is a bankrupt. While this outcome is plainly prejudicial to Ms Storry, I am not persuaded that it outweighs the ongoing prejudice to, and costs incurred, by the respondent.
66 This litigation has been taken place over almost six years. It appears that at every stage, in every Court, Ms Storry has been unsuccessful in her applications. In the words of Keane JA (as his Honour then was) in Cook's Construction Pty Ltd v Stork Food Systems Australasia Pty Ltd [2008] QCA 322; [2008] 2 Qd R 453 at 455, the respondent is entitled to the fruits of its judgments, including the decision of the primary Judge.
I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Collier.
Associate:
Dated: 7 April 2022
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FEDERAL COURT OF AUSTRALIA
Comcare v Post Logistics Australasia Pty Limited [2012] FCAFC 168
Citation: Comcare v Post Logistics Australasia Pty Limited [2012] FCAFC 168
Appeal from: Comcare v Post Logistics Australasia Pty Limited [2011] FCA 1422
Parties: COMCARE v POST LOGISTICS AUSTRALASIA PTY LIMITED ACN 002 579 115
File number: NSD 105 of 2012
Judges: RARES, COWDROY & GRIFFITHS JJ
Date of judgment: 23 November 2012
Catchwords: INDUSTRIAL LAW β breach of s 16(1) Occupational Health and Safety Act 1991 (Cth) β quantity of penalty imposed under Sch 2 cl 4 β relevance of deterrence in assessing civil pecuniary penalties under Sch 2 cl 4 β relevance of prior breach of s 16(1) β foreseeability of risk of injury β whether primary judge failed to take into account admission and concession of the respondent β whether primary judge denied procedural fairness in rejection of proposed penalty ranges β whether manifest inadequacy of penalty
Legislation: Occupational Health and Safety Act 1991 (Cth) ss 3, 11, 16 and Sch 2 cl 2, 4, 5
Cases cited: Australian Communications and Media Authority v Radio 2UE Sydney Pty Ltd (No 2) (2009) 178 FCR 199
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560
Australian Prudential Regulation Authority v Derstepanian (2005) 60 ATR 518
Carroll v The Queen (2009) 254 ALR 379
Comcare v Australian Postal Corporation [2011] FCA 530
Comcare v Commonwealth (2007) 163 FCR 207
Comcare v Commonwealth of Australia (2009) 184 IR 441
Comcare v John Holland Pty Ltd [2012] FCA 449
Comcare v John Holland Rail Pty Ltd (2009) 188 IR 415
Comcare v National Gallery of Australia (2007) 98 ALD 67
Comcare v Post Logistics Australasia Pty Ltd (2008) 178 IR 200
Comcare v Subsee Explorer Pty Ltd (2011) 210 IR 322
Comcare v Transpacific Industries Pty Ltd [2012] FCA 90
Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466
Community and Public Sector Union v Telstra Corporation Ltd (2001) 108 IR 228
Dinsdale v The Queen (2000) 202 CLR 321
Draffin v Construction, Forestry, Mining and Energy Union (2009) 189 IR 145
Durayappah v Fernando [1967] 2 AC 337
Fair Work Ombudsman v Wongtas Pty Ltd (No 2) [2012] FCA 30
Greentree v Minister for the Environment and Heritage (2005) 144 FCR 388
House v The King (1936) 55 CLR 499
Kable v Director of Public Prosecutions (1995) 36 NSWLR 374
Minister for the Environment and Heritage v Greentree (No 3) (2004) 136 LGERA 89
Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd (2004) ATPR 41-993
Muldrock v The Queen (2011) 244 CLR 120
Plancor Pty Ltd v Liquor Hospitality and Miscellaneous Union (2008) 177 IR 243
R v Hamieh [2010] NSWCCA 189
R v Harrison (1997) 93 A Crim R 314
R v Radich [1954] NZLR 86
R v Romanic [2000] NSWCCA 524
R v Rushby [1977] 1 NSWLR 594
R v Porter (1933) 55 CLR 182
Rich v Australian Securities and Investments Commission (2004) 220 CLR 129
R v Scognamiglio (1991) 56 A Crim R 81
Secretary, Department of Health and Ageing v Pagasa Australia Pty Ltd [2008] FCA 1545
Trade Practices Commission v CSR Ltd (1991) ATPR 41-076
York v R (2005) 225 CLR 466
Karen Yeung in 'Quantifying Regulatory Penalties: Australian Competition Law Penalties in Perspective' (1999) 23 Melbourne University Law Review 440 at 446
Aronson, Dyer and Groves, Judicial Review of Administrative Action, 4th ed, at p 625 n779
Date of hearing: 16 May 2012
Date of last submissions: 17 May 2012
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 111
Counsel for the Appellant: Mr B Hodgkinson SC with Ms K Nomchong and Ms E James
Solicitor for the Appellant: Dibbs Barker
Counsel for the Respondent: Mr A Moses SC with Mr Y Shariff
Solicitor for the Respondent: Holding Redlich
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 105 of 2012
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: COMCARE
Appellant
AND: POST LOGISTICS AUSTRALASIA PTY LIMITED ACN 002 579 115
Respondent
JUDGES: RARES, COWDROY & GRIFFITHS JJ
DATE OF ORDER: 23 NOVEMBER 2012
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The appeal be allowed in part.
2. Order 4 made by the primary judge on 13 December 2011 be set aside and in lieu thereof it be ordered that:
"4. The respondent is to pay a pecuniary penalty of $120,000 to the Commonwealth on or before 7 December 2012."
3. The parties confer as to whether either seeks an order for costs and if so each party, file and serve on or before 7 December 2012 brief written outlines of submissions on costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 105 of 2012
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: COMCARE
Appellant
AND: POST LOGISTICS AUSTRALASIA PTY LIMITED ACN 002 579 115
Respondent
JUDGES: RARES, COWDROY & GRIFFITHS JJ
DATE: 23 NOVEMBER 2012
PLACE: SYDNEY
REASONS FOR JUDGMENT
Contents
Introduction [1]
Background [4]
The incident [5]
The relevant pleadings and the agreed facts [8]
The OH&S Act [12]
The 2004 Amendments to the OH&S Act [15]
The reasons of the primary judge [22]
Declaratory order [23]
Pecuniary penalty [29]
Appeal and notice of contention [34]
Nature of a sentencing appeal [38]
Consideration of grounds of appeal [40]
(a) The relevance of deterrence in assessing OH&S Act civil pecuniary penalties (grounds 1-3) [41]
Deterrence in criminal law [45]
Deterrence in the civil law [49]
Deterrence in OH&S Act civil contraventions [62]
(b) Foreseeability of the risk of injury and relevance of Lapidario (grounds 5 and 6) [80]
(c) Issues arising from the primary judge's rejection of an admission by the respondent (ground 7) [92]
(d) Primary judge's failure to notify parties of his proposed rejection of their suggested penalty ranges (grounds 8 and 9) [98]
(e) Manifest inadequacy of the penalty amount of $80,000 (ground 10) [102]
Notice of contention [105]
Reassessment of penalty [106]
Conclusion [111]
Introduction
1 This appeal raises certain issues concerning the Occupational Health and Safety Act 1991 (Cth) ("the OH&S Act"). The central issue, however, is whether the primary judge erred in holding that it was unnecessary to refer to deterrence when imposing and fixing a civil pecuniary penalty on a person for a breach of that Act. Two incidental matters might be noted at the outset. First, on 1 January 2012, the OH&S Act was repealed by Schedule 2 of the Work Health & Safety (Transitional and Consequential Provisions) Act 2011 (Cth) ("the Transitional and Consequential Provisions Act"). Since 1 January 2012, the OH&S Act has been replaced by the Work Health and Safety Act 2011 (Cth). However, Schedule 2 of the Transitional and Consequential Provisions Act has the effect that the OH&S Act continues to apply to breaches that occurred before 1 January 2012. The events which give rise to this appeal occurred on 31 March 2008, hence the OH&S Act still applies here. Secondly, and notwithstanding the significance of the OH&S Act to Commonwealth employment (as is partly reflected in the number of cases which have come before the Court at first instance), this appears to be the first appeal concerning the OH&S Act which has been determined by the Full Court.
2 The appellant appeals against the decision of the primary judge in respect of an incident in which an employee of the respondent, Ms Roslyn Mary Borg (nΓ©e Piscopo), was injured in an accident involving a forklift being operated by a contractor, Mr Cox. His Honour made a declaratory order to the effect that the respondent had contravened cl 2(1) of Schedule 2, Part 1 of the OH&S Act by reason of it having breached s 16(1) of that Act. The primary judge also ordered the respondent to pay a pecuniary penalty of $80,000 to the Commonwealth in relation to that breach.
3 The primary issues raised in the appeal may broadly be summarised as follows:
(a) the relevance of deterrence in determining civil pecuniary penalties under the OH&S Act both generally and in the particular circumstances of this case;
(b) whether the primary judge erred in his assessment of the foreseeability of the risk of injury and the relevance to that assessment of the respondent's earlier breach of the OH&S Act (see Comcare v Post Logistics Australasia Pty Ltd (2008) 178 IR 200 ("Lapidario")); and
(c) whether the primary judge erred in not acting upon the respondent's admission that it failed to provide adequate supervision to Mr Cox or Ms Borg.
The grounds of appeal also raise further additional issues which are dealt with below.
Background
4 The respondent did not dispute liability for the incident. It admitted that the appellant was entitled to the declaratory relief sought by it, but the parties disagreed on the amount of a civil pecuniary penalty. The proceedings were conducted in part below on the basis of a statement of agreed facts, as well as some additional evidence filed on behalf of the respondent. For the purposes of this appeal it is unnecessary to set out all that material, but the following relevant and undisputed facts should be noted.
The incident
5 Since 31 March 2005, Australia Post has held a majority shareholding in the respondent. It was common ground that the respondent is a Commonwealth authority within the meaning of s 5 of the OH&S Act, with the consequence that the OH&S Act applies to it. At the time of the relevant incident, the respondent carried on the business of logistics and warehousing at eleven warehouses around Australia, including Warehouse 9 situated at 23 Wonderland Drive, Eastern Creek in New South Wales ("the Site"), where the incident occurred. It was agreed between the parties that moving pallets of goods around each of the respondent's warehouses with the aid of forklifts of various kinds was an integral part of the respondent's business. Furthermore, at the hearing below the parties agreed that daily forklift movements at Warehouse 9 would have numbered in the hundreds. The primary judge extrapolated from that agreed position that "tens of thousands of movements occurred every year at Warehouse 9, and many more nationally".
6 The respondent had a contractual arrangement with a company called Landmark Industrial Recruitment Pty Limited ("Landmark") to supply labour to the respondent. At the time of the relevant incident, Mr Cox was an employee of Landmark and was working at the Site as a contractor in the position of store person and forklift driver. At the same time, Ms Borg was employed by the respondent as a store person whose duties were restricted to "picking and packing" on the floor of the Site. Like Mr Cox, Ms Borg also happened to be a certified high reach forklift driver.
7 On the day of the relevant incident, Mr Cox was operating a forklift at the Site. At approximately 8.00 am Ms Borg was in the process of manually wrapping cartons of a product with shrink wrapping material. The cartons were on a pallet that was stacked on another pallet. As it was too high for Ms Borg to reach all the way to the top of the cartons, she requested Mr Cox to use the forklift to move the top pallet onto the ground so she could finish the wrapping. Mr Cox did so. But instead of cutting the shrink wrap from the partly wrapped pallet, or placing the shrink wrap roll on top of the cartons, Ms Borg rolled out a length of the shrink wrap and continued to hold the shrink wrapping roll that was attached to the pallet while walking alongside the forklift being driven by Mr Cox and carrying the pallet. Ms Borg was initially standing approximately one metre away from the forklift being operated by Mr Cox as she walked alongside. Just as Mr Cox went to put the pallet down with the forklift, the forklift ran over Ms Borg's right foot, fracturing the small toe.
The relevant pleadings and the agreed facts
8 The agreed facts also included certain matters concerning the nature and adequacy of the respondent's traffic and pedestrian management system, instruction and training given to both Mr Cox and Ms Borg, as well as supervision of their work. It was common ground that, although the respondent had prior to the incident commenced a review of traffic management arrangements at the Site, those plans were still being finalised and had not been implemented prior to the incident occurring. It was a further agreed fact that the instruction and training given to Mr Cox did not include adequate training or instruction regarding proper pedestrian behaviour on or around forklifts or pedestrians and forklift traffic management arrangements at the Site.
9 It was similarly agreed between the parties that the respondent had not provided any formal induction training at the Site to Ms Borg, nor any formal instruction or training to her regarding the pedestrian exclusion zones around any working forklift, nor provided her with any instruction or training in relation to what was described as "the Mandatory Exclusion Rule". It was also agreed that, at the time of the incident, there was no supervisor present in the particular area of the Site where the incident occurred.
10 Many of the matters the subject of agreement as set out in the agreed statement of facts were also the subject of admissions by the respondent in the pleadings. Relevantly, in its amended defence, the respondent admitted all the following matters pleaded by the appellant in paragraph 36 of the amended statement of claim (including, it should be noted, paragraph 36(d):
36. In or about March 2008 and in particular on 31 March 2008, Post Logistics breached its duty under sections 16(1) and 16(4) of the OH&S Act to take all reasonably practicable steps to protect the health and safety at work of its employee Roslyn Mary Piscopo and its contractor, Kevin Cox, in that it:
(a) failed to provide adequate training or instruction to Mr Cox so as to ensure that he did not engage in the conduct pleaded at paragraph 17 of this Statement of Claim;
(b) failed to provide adequate training or instruction to Ms Piscopo so as to ensure that she did not engage in the conduct pleaded at paragraph 17 of this Statement of Claim;
(c) failed to ensure that there was an adequate traffic management system in place to prevent or reduce the risk of Ms Piscopo coming into contact with a moving forklift; and
(d) failed to provide adequate supervision to Mr Cox or Ms Piscopo so as to ensure that they did not engage in the conduct pleaded at paragraph 17.
11 Paragraph 17 of the amended statement of claim described the relevant conduct summarised above.
17. On 31 March 2008, Ms Piscopo was struck by the Forklift and was injured during the impact at the Site (the Incident).
Particulars
(a) On 31 March 2008, Mr Cox had been assigned to the Proline work area adjacent to the eastern wall of the Site to assist on the day, in light of the absence of Ms Wilma Randall who was a permanent employee in the Proline area.
(b) At all material times, both Mr Cox and Ms Piscopo were certified reach [forklift] truck drivers.
(c) At approximately 8 am on 31 March 2008, Ms Piscopo was in the process of manually wrapping cartons of Proline product with shrink wrapping material. The cartons were on a pallet that was stacked on another pallet. As it was too high for Ms Piscopo to reach all the way to the top of the cartons, she requested Mr Cox to move the top pallet onto the ground with the Forklift so she could finish the wrapping.
(d) Mr Cox got on the Forklift and used the tines to lift the top pallet.
(e) Instead of cutting the shrink wrap from the partly wrapped pallet, or placing the shrink wrap roll on top of the cartons, Ms Piscopo rolled out a length of the shrink wrap and continued to hold the shrink wrapping roll that was attached to the pallet and walked alongside the Forklift while Mr Cox was manoeuvring it and driving with the pallet.
(f) Ms Piscopo was standing approximately one metre away from the Forklift being operated by Mr Cox as she walked alongside the Forklift.
(g) Just as Mr Cox went to put the pallet down with the Forklift, the Forklift ran over Ms Piscopo's right foot.
(h) Ms Piscopo's small toe on her right foot was fractured.
(i) Ms Piscopo was assisted by first aiders at the Site and subsequently by paramedics, who transported her to hospital.
The OH&S Act
12 A key objective of the OH&S Act was to promote the occupational health and safety of inter alia persons employed by the Commonwealth. That was reflected not only in the express terms of the long title to the OH&S Act ("An Act to promote the occupational health and safety of persons employed by the Commonwealth, Commonwealth authorities and certain licensed corporations, and for related purposes"), but also in s 3 of the OH&S Act. Because of the importance of some of those objects to the disposition of the appeal (particularly the objects described in paragraphs (a), (b), (d), (f) and (g) of s 3), it is convenient to set out the paragraph in its entirety:
3. Objects
The objects of this Act are:
(a) to secure the health, safety and welfare at work of employees of the Commonwealth, of Commonwealth authorities and of non-Commonwealth licensees; and
(b) to protect persons at or near workplaces from risks to health and safety arising out of the activities of such employees at work; and
(c) to ensure that expert advice is available on occupational health and safety matters affecting employers, employees and contractors; and
(d) to promote an occupational environment for such employees at work that is adapted to their needs relating to health and safety; and
(e) to foster a co-operative consultative relationship between employers and employees on the health, safety and welfare of such employees at work; and
(f) to encourage and assist employers, employees and other persons on whom obligations are imposed under the Act to observe those obligations; and
(g) to provide for effective remedies if obligations are not met, through the use of civil remedies and, in serious cases, criminal sanctions.
13 As noted above, the respondent admitted liability concerning the alleged breaches of ss 16(1) and (4). Those sub-sections relevantly provided as follows:
16 (1) An employer must take all reasonably practicable steps to protect the health and safety at work of the employer's employees.
Note: An employer who breaches subsection (1) may be subject to civil action or a criminal prosecution (see Schedule 2).
β¦
(4) The obligations of an employer in respect of the employer's employees that are set out in subsections (1) and (2) apply also in respect of persons who are contractors of that employer but only in relation to:
(a) matters over which the employer has control; or
(b) matters over which the employer would have had control but for an express provision in an agreement made by the employer with such a contractor to the contrary, being matters over which the employer would, in the circumstances, usually be expected to have had control.
14 Relevant employers were not the only persons who had a statutory duty imposed on them by the OH&S Act to take reasonably practicable steps to protect employees. Similar obligations were also imposed upon manufacturers and suppliers of plant and substances, persons erecting or installing plant in a workplace, as well as employees themselves (see ss 18, 19, 20 and 21 respectively of the OH&S Act).
The 2004 Amendments to the OH&S Act
15 It is convenient at this point to say a little about some significant amendments to the OH&S Act made in 2004, which introduced for the first time a range of civil remedies, including civil pecuniary penalties. Prior to those amendments, the OH&S Act provided only for criminal prosecutions.
16 The following relevant features of the Occupational Health and Safety (Commonwealth Employment) Amendment (Employee Involvement and Compliance) Act 2004 (Cth) ("the 2004 Amendment Act") may be noted:
(a) Schedule 2 was inserted in the OH&S Act. It introduced a range of civil remedies as alternatives to criminal sanctions. The civil remedies included:
- declarations of contravention (Schedule 2, cl 2);
- civil pecuniary penalty orders (Schedule 2, cl 4);
- injunctions (both prohibitory and mandatory) which could be sought by Comcare or an investigator (Schedule 2, cl 14);
- remedial and consequential orders (Schedule 2, cl 15);
- enforceable undertakings in favour of Comcare (Schedule 2, cl 16); and
(b) maximum penalties under the Act were substantially increased from the previous maximum of $100,000 for a criminal offence to $242,000 in the case of a civil pecuniary penalty and $495,000 for a criminal offence.
17 The amendments made in 2004 reflected a desire on the part of the Parliament to introduce greater flexibility in enforcing the legislative scheme by providing a range of remedies, both civil and criminal. That more flexible approach to enforcement was modelled on the Commonwealth Authorities and Companies Act 1997 (Cth), whose enforcement provisions were themselves modelled on the then Corporations Law.
18 The initial Explanatory Memorandum to the Occupational Health & Safety (Commonwealth Employment) Amendment (Employee Involvement and Compliance) Bill 2002 ("the 2002 Bill"), which Bill first proposed the insertion of Schedule 2, contained the following statements concerning the proposal to introduce sanctions of both a criminal and civil nature:
1.180 This item inserts a new schedule, 'Schedule 2 β Civil proceedings and criminal prosecutions in respect of breaches of the Act'. The Act presently provides only for criminal prosecutions, requiring proof beyond reasonable doubt, and providing sanctions with a deterrent effect but limited capacity for remedial orders. New Schedule 2 will provide for civil penalties, requiring proof only to a civil standard, enabling remedial orders, and encouraging voluntary compliance through provision for enforceable undertakings. It will retain provision for criminal penalties, in more serious cases, and in cases which are more appropriately dealt with in the criminal justice system (such as contempt of the Safety, Rehabilitation and Compensation Commission). The Schedule will also make provision for maximum penalties significantly higher than the maximum penalties currently provided, consistent with current Commonwealth criminal law policy. The Schedule will also explain the interaction between civil proceedings and criminal prosecutions and the procedures for instigating civil proceedings.
1.181 New Schedule 2 is modelled in large part on the enforcement approach of the Commonwealth Authorities and Companies Act 1997, which is in turn modelled on the Corporations Law.
19 During the course of the Parliamentary debates on the 2002 Bill, the Government proposed further amendments to the Bill as originally introduced. They were dealt with in a Supplementary Explanatory Memorandum. That document reinforced that a key aspect of the proposed reforms to the OH&S Act was to create a new civil and criminal penalty regime with a view to improving enforcement of the obligations imposed by the primary Act. The Outline to that Supplementary Explanatory Memorandum contained the following relevant statements:
The new civil and criminal penalty regime proposed in the 2002 Bill will be retained to improve enforcement under the Act. The new enforcement regime will:
β’ Provide for civil penalties as far as possible, reserving criminal penalties for more serious breaches of the Act where there has been a death or serious bodily harm. Criminal penalties are also being retained for offences which are more appropriately dealt with in the criminal justice system, such as contempt of the Commission or failing to attend before the Commission as a witness;
β’ β¦
β’ Provide for a wider range of penalties under the Act to ensure more effective protection of the health and safety of Commonwealth employees at work, namely:
o Injunctions, both prohibitory and mandatory to achieve compliance with the Act;
o Remedial orders to enable effective action to be taken to remedy the effect of a breach of the Act; and
o Enforceable undertakings β¦; and
β’ Substantially increase levels of penalties. For example, currently the maximum penalty under the Act is $100,000 for a breach of the employer's duty of care. This is to be increased to 2,200 penalty units ($242,000) for a civil breach and 4,500 penalty units ($495,000) for a criminal breach.
20 It is also to be noted that, while the 2004 Amendment Act introduced a regime involving both civil and criminal penalties, the effect of s 11 of the OH&S Act was that only a Government business enterprise (and not the Commonwealth or a Commonwealth authority as defined in s 5 of the OH&S Act) was liable to be prosecuted for a criminal offence. Accordingly, while a breach of the OH&S Act by a Government business enterprise could attract either civil or criminal penalties (and, in limited circumstances, both), neither the Commonwealth nor a Commonwealth authority was liable to be prosecuted for an offence under the OH&S Act. Thus, because the respondent is not a Government business enterprise, it could not be prosecuted for the relevant incident. But it was liable to the civil penalty regime.
21 Under the OH&S Act, only Comcare or an investigator were empowered to apply for a declaration of contravention or a pecuniary penalty order (cl 5 of Schedule 2). Moreover, in any proceedings brought by Comcare or an investigator for a declaration of contravention or a pecuniary penalty order, the Act obliged the Court to apply the rules of evidence and procedure for civil matters (see cl 8 of Schedule 2 and also s 140 of the Evidence Act 1995 (Cth)). Further, cl 11 of Schedule 2 of the OH&S Act provided that, while criminal proceedings could be commenced in respect of conduct that was substantially the same as conduct constituting a contravention of cl 2(1) of Schedule 2, there was no power for a court to make a declaration of contravention or a pecuniary penalty order against a person for a contravention if the person had already been convicted of an offence constituted by conduct which was substantially the same as the conduct constituting the contravention (see cl 9 of Schedule 2).
The reasons of the primary judge
22 It is convenient to first summarise the primary judge's reasons for making the declaratory order in the terms that he did, before summarising his Honour's reasons for imposing a civil pecuniary penalty in the amount of $80,000.
Declaratory order
23 In the amended statement of claim, the appellant sought a declaration in the following terms:
A declaration that the Respondent contravened sub-clause 2(1) of Schedule 2, Part 1 of the OH&S Act in that in or about March 2008 and in particular on 31 March 2008 the Respondent breached sections 16(1) and 16(4) of the OH&S Act. (Emphasis added).
24 As noted above, the alleged breach of the OH&S Act was pleaded in paragraph 36 of the amended statement of claim and, in its amended defence, the respondent admitted that paragraph in its entirety.
25 The primary judge declined to make a declaration in the terms sought by the appellant notwithstanding that the respondent admitted the alleged breaches particularised in paragraph 36 of the amended statement of claim. The declaratory order made by his Honour differed from those sought by the appellant in the following three respects. First, the primary judge declined to make any declaratory order referring to a breach of s 16(4) of the OH&S Act on the basis that, on its proper construction, that provision did not establish any duty additional to that imposed by s 16(1). Secondly, the primary judge declined to make a declaratory order which made reference to a breach of duty in respect of the respondent's contractor, Mr Cox, on the basis that his Honour was not satisfied that there was a sufficient factual foundation to support a finding that there had been a failure to protect the health and safety of Mr Cox (as opposed to Ms Borg). Accordingly, his Honour limited the declaratory order to record a finding to the effect that the respondent had breached its duty under s16(1) of the OH&S Act in respect of Ms Borg. The appellant makes no complaint about these two particular modifications to the declaratory order sought by it.
26 The third modification made by the primary judge (which modification is the subject of appeal), concerns his Honour's reformulation of the terms of the declaratory order so as to exclude the allegation in paragraph 36(d) of the amended statement claim. As noted above, that allegation was admitted by the respondent. The admitted allegation was to the effect that there had been a breach of s 16(1) because of the respondent's failure "to provide adequate supervision to Mr Cox or [Ms Borg] so as to ensure that they did not engage in the conduct pleaded at paragraph 17" of the amended statement of claim.
27 The primary judge's reasons for not including paragraph 36(d) in the declaratory order made by him are set out in [29] of his Honour's reasons for judgment:
β¦ I give no weight to the fact that at the exact time that Ms Borg and Mr Cox embarked on their flawed approach to Ms Borg's shrink wrap task, there was no supervisor present to immediately intervene. It was not suggested that constant supervision of this kind was practical, necessary or even appropriate. Ms Borg and Mr Cox were not children to be constantly and closely watched, and scolded. In the absence of constant, intrusive, surveillance there would obviously be times when a supervisor was not in the immediate vicinity. I bear in mind an admission by Post Logistics that supervision was not fully adequate but there is force in the submission that Post Logistics was certainly not culpable by failing altogether with respect to supervision or, for that matter, in any other suggested respect. Despite the admission, the contention that lack of supervision played, in any practical sense, a part in the incident was speculative. The applicant could not identify a practical step which might have been taken to remedy the alleged lack of supervision which would probably have prevented the incident occurring.
28 The appellant contends that the primary judge erred in rejecting the respondent's admission that it contravened s 16(1) of the OH&S Act by failing to provide adequate supervision to Mr Cox or Ms Borg in circumstances where it is said that:
(a) during oral argument, his Honour had indicated that he would not go behind the admission;
(b) his Honour did not advise either party that he was considering rejecting the respondent's admission on this matter and did not allow the parties an opportunity to put on further evidence in support of the admission; and
(c) his Honour failed to give proper reasons for rejecting the admission.
Pecuniary penalty
29 Before the primary judge, the appellant described the respondent's contravention as warranting a penalty which was in the "high range" (noting that the maximum pecuniary penalty was $242,000) and it suggested a penalty of not less than $180,000. At the hearing, the respondent submitted that the contravention was in the mid-range and it suggested that an appropriate penalty would be in the range of $120,000-$140,000. As noted above, his Honour disagreed with both parties' assessments concerning the appropriate quantum. His Honour was not satisfied that the breach was in the "high range" and he imposed a penalty of $80,000.
30 The primary judge approached the task of determining the question of an appropriate pecuniary penalty by reference to the objective seriousness of the respondent's breach. His Honour saw such an approach as assisting his assessment of the level of the respondent's culpability and whether it fell within a low, middle or high range. His Honour's approach in this regard is consistent with authority and the appellant does not challenge its correctness, at least when it is stated at that high level of generality. Rather, this aspect of the appeal focused on the primary judge's identification of whether particular considerations were either relevant or irrelevant to the overall task of assessing the objective seriousness of the breach.
31 The primary judge's reasons for arriving at a pecuniary penalty of $80,000 may be summarised as follows (noting again, however, that some, but not all, of those reasons are challenged by the appellant):
(a) an allegation of the failure to protect health and safety will generally need to be tested against the circumstances of the incident which led to the proceedings, rather than in the abstract. In other words, the circumstances of the particular relevant incident will generally be "highly significant" in determining whether there has been any such failure;
(b) it is necessary to identify what steps should have been taken to avoid an alleged failure to protect health and safety which, in most cases, has to be tested by reference to the incident in question;
(c) while forklift operations at a warehouse, which also accommodated pedestrians, called for management of the movement of both forklifts and pedestrians, some allowance also needed to be made for the fact that people can normally be expected to take some care for themselves and others in such an environment;
(d) in assessing the seriousness of the respondent's admitted breach, the following two matters were of particular significance:
(i) neither Ms Borg nor Mr Cox had been given clear instructions about the need to always maintain a minimum three metre exclusion zone around any operating forklift, even though it was said that such instructions were provided as part of normal site induction to both employees and contractors; and
(ii) it was not until after the relevant incident that clearly marked, separate, areas for forklifts and pedestrians were set out in the ordinary way on the floor of Warehouse 9. The primary judge added that there was little excuse for an organisation such as the respondent not to act earlier than it did on this matter;
(e) while those two matters were of some significance, they should not be overstated because, although each matter was clearly practicable and easily achieved, neither matter could operate as a guarantee against the injury which occurred;
(f) the implementation of removable bollards or chains to prevent forklifts entering an area where someone was working (as implemented by the respondent after the relevant incident) would have provided a form of reminder of an already obvious danger, but may not have had any probable impact on the particular incident;
(g) no weight should be given to the fact that, at the time of the relevant incident, there was no supervisor present to immediately intervene because it was not suggested that such constant supervision was practical, necessary or even appropriate. While acknowledging the respondent's admission that supervision was not fully adequate, no finding was made by his Honour that the respondent was culpable by failing altogether to provide supervision (or, indeed, in any other suggested respect);
(h) little or no weight should be given to the fact that the respondent had been ordered to pay a pecuniary penalty of $165,000 arising from a death involving a forklift at another of its warehouses (see Lapidario). That case was distinguishable on the basis that the fatality there involved horseplay; and
(i) while noting the respondent's admission that the training and induction given to Ms Borg and Mr Cox were inadequate, the primary judge also took into account the fact that the respondent had initiated a system of daily safety briefings at Warehouse 9. Having regard to his Honour's finding that there was not a total failure of training or of supervision, but rather this was a case where it was admitted that not enough was done, the primary judge concluded that the appellant had not proved culpability to a high level.
32 At this point in his reasons for judgment, the primary judge expressed strong reservations concerning the relevance of principles of sentencing in criminal law cases in fixing a pecuniary penalty in civil proceedings. His Honour's reasoning on this subject may be summarised as follows (noting that this reasoning is the focus of the first three grounds of appeal):
(a) no reduction should be made to any pecuniary penalty otherwise appropriate merely because the respondent had disposed of its warehouse business by the time of the hearing. This issue arose because of a submission to the effect that no "specific deterrence" was necessary. This led the primary judge to discuss more generally the topic of the relevance of concepts from the criminal law in determining the quantum of a civil pecuniary penalty;
(b) because of their significance to the appeal (and despite their length), it is appropriate to set out in full the following paragraphs of the primary judge's reasons dealing with transposing criminal law sentencing principles (including deterrence), into a civil penalty regime:
34. Fixation of a penalty for breach of the OHS Act (whether admitted or found) stands as a statement by a court of "the seriousness of the offending conduct in all the relevant circumstances" (see Coochey v Commonwealth (2005) 149 FCR 312 at [73]). Obviously, a penalty, even a civil penalty, operates also as a punishment. However, in my view it is inappropriate to draw too freely on concepts from the criminal law, which are related to punishment of crimes, for this purpose.
35. There can be no doubt that it is expected by the legislature that courts will, by their decisions, sufficiently support the legislative scheme in the OHS Act. It is inevitable that, in part, notions of punishment for a breach of the statutory duty are involved, as are notions of culpability, but they are clearly not the only objectives and it is debatable whether they are the most important objectives of the OHS Act. It is a sufficient recognition of such matters (punishment and culpability), in my view, to identify so far as possible the objective seriousness of the failure and to fix a penalty which takes that into account, without becoming unduly distracted by efforts to apply borrowed concepts from the criminal law. An area as important as workplace health and safety should be accompanied by the greatest level of practicality which can be brought to bear on the ultimate task of providing a safe working environment. Nobody sets out to create an unsafe workplace. I entertain great doubt whether concepts of deterrence are appropriate in the context of a case such as the present. What is involved is the necessity to reinforce a positive obligation of protection rather than to emphasise an obligation not to commit a civil wrong. It is unnecessary, in my view, for the Court, when giving effect to the statutory objectives in the OHS Act, or when fixing a punishment for a particular breach, to do so by reference to "deterring" somebody from such a breach. Adoption of a concept such as this from the criminal law risks becoming a ritual incantation deflecting attention from what is a practical issue β namely, how to provide appropriate incentive and encouragement (as well as punishment) to enhance workplace safety.
36. There are other canons of the criminal law sentencing process that are also not readily applied in a practical manner in a case such as the present. The notion that an "early plea of guilty" aids in the administration of justice is less readily applied than in the criminal justice system. So is the notion of "contrition", which is bound up with the idea that intent is an element of the commission of most criminal offences. Admission of responsibility in the case of a workplace accident is not necessarily a straightforward matter of confessing guilty conduct, much less guilty intent. That is not to say that the Court would have much patience with an irresponsible refusal to admit a failure to comply with obligations to protect safety, or a failure to take prompt remedial action. But matters of that kind may be readily assessed when consideration is given to the overall seriousness of an admitted or proven breach. It is not necessary in cases such as the present, when active intention to breach a duty of protection will usually be absent, to apply formulae which were developed to guide a range of inferior criminal courts in a large variety of matters with a view to ensuring reasonable consistency of sentencing practice. (Emphasis added);
(c) other criminal law concepts, such as the significance of an early plea of guilty and the notion of "contrition", were not readily applied in such a case as the present and the primary judge also found that recognition had to be given to positive efforts by the respondent to enhance safety;
(d) reference was also made to Madgwick J's decision in Comcare v Commonwealth (2007) 163 FCR 207 ("Trooper Lawrence") and to a list of factors at [116]-[120] (the so-called "Madgwick factors"), which were distilled by Madgwick J from decisions of the Industrial Court of New South Wales in cases involving criminal sanctions under that State's workplace health and safety legislation. The primary judge reiterated his reservations about applying a criminal law approach to cases under the OH&S Act, as well as expressing more general reservations on related matters, as is reflected in the following paragraphs from his Honour's reasons for judgment:
39. In some cases in this Court agreement has been expressed with the observations by Madgwick J in Comcare v Commonwealth (2007) 163 FCR 207 where (at [120]β[123]) his Honour found useful a list of factors to be taken into account in assessing penalty which he distilled from the approach taken by the Industrial Court of New South Wales in cases under the workplace health and safety legislation in that State. Those NSW cases involved criminal sanctions. The principles developed by the Industrial Court of NSW drew heavily on sentencing principles in criminal cases. I have already expressed my reservations about that approach to cases under the OHS Act.
40. More recently in this Court, general agreement has been expressed with the observations of Flick J in Comcare v Post Logistics Australasia, where his Honour said (at [38]):
Care must be taken to ensure that any listing of potentially relevant considerations do not themselves become an impermissible substitute for considering the terms of the legislation in issue or an unnecessary constraint upon a discretion conferred in otherwise unconfined terms.
41. Cases in which this observation has been endorsed include Comcare v Commonwealth of Australia [2009] FCA 700; (2009) 110 ALD 252; (2009) 257 ALR 462, Comcare v John Holland Rail Pty Ltd [2009] FCA 771; (2009) 188 IR 415 and Comcare v Australian Postal Corporation [2011] FCA 530. I also share those reservations. It will be apparent that my reservations are even more profound, so far as the use of sentencing principles for criminal conduct is concerned. Those reservations extend to the use of principles concerning the imposition of civil penalties under different statutory regimes. As I have already indicated, I see a significant difference between the assessment of culpability for conduct which intentionally or actively breaches a legislative standard and inactivity which is, in the vast majority of cases, only revealed as significant by an accident or incident. As I said earlier, it is important not to be too wise after the event; and
(e) the primary judge saw the chief importance of imposing a pecuniary penalty in a case such as the present as drawing "attention to the importance of workplace safety in a way which provides a useful stimulus for practical and meaningful efforts and endeavours to enhance it". He reiterated the need to avoid generalised and abstract assertions about the need for more training, closer supervision or more paper work and said that such matters should be expressed with sufficient particularity to identify concrete initiatives that could and should have been taken.
33 Weighing all these matters together, the primary judge concluded that he was not satisfied that the respondent's default was in the high range nor did it involve "a truly serious breach". His Honour concluded that, having regard to all the matters he had mentioned, including the parties' agreed position on the facts and liability, a pecuniary penalty of $80,000 was sufficient to indicate the seriousness of the respondent's breach.
Appeal and notice of contention
34 The judgment below was initially challenged on the following 10 grounds:
failure to apply or adequately apply the "principle of deterrence" in determining an appropriate remedy;
erroneously distinguishing between the approach to be taken in criminal and civil matters in determining penalty;
failure to consider the proper impact of the "Madgwick factors";
denial of natural justice by not notifying the parties that his Honour did not intend to apply the "Madgwick factors";
failure to take into account, or proper account, the respondent's breach as dealt with in Lapidario;
failure to take into account the foreseeable risk of injury by collision between a pedestrian and a forklift in circumstances where there were no adequate traffic management systems at Warehouse 9;
erroneously rejecting the respondent's admissions of breach of s 16(1) of the OH&S Act by failing to provide adequate supervision to Mr Cox or Ms Borg;
failure to notify the parties that his Honour was considering rejecting both their suggested penalty ranges and imposing a significantly lower penalty of only $80,000;
failure to give sufficient reasons why his Honour rejected the respondent's concession that the penalty ought to be in the order of $120,000 to $140,000; and
manifest inadequacy of the penalty amount of $80,000.
35 The appellant indicated at the hearing that it did not press the fourth ground of appeal (relating to natural justice and the Madgwick factors). As will be seen below, when we address the remaining nine grounds of appeal, we have found it convenient to do so by reference to relevant categories.
36 The respondent also filed a notice of contention directed to upholding the primary judge's pecuniary penalty amount of $80,000 on the basis that, even if any of the grounds of appeal were established, a penalty in the amount of $80,000 was appropriate and/or within the range of discretion having regard to the objective seriousness of the contravention.
37 Before addressing the grounds of appeal and notice of contention it is convenient to say something about the nature of these appeal proceedings.
Nature of a sentencing appeal
38 The proceedings involve an appeal against the primary judge's orders granting declaratory relief and fixing a civil pecuniary penalty. Both those orders involve the exercise of discretion on the part of the primary judge. The proceedings are in the nature of a sentencing appeal.
39 The relevant principles guiding the nature and scope of a sentencing appeal (absent relevant statutory provisions) are now well settled. They may be summarised as follows:
(a) an appeal against sentence is an appeal against the exercise of discretion (namely the sentencing discretion). Its scope is governed by established principles or categories of cases, which include House v The King (1936) 55 CLR 499 at 504-505; Carroll v The Queen (2009) 254 ALR 379 at [7] and Dinsdale v The Queen (2000) 202 CLR 321 at [3]-[4];
(b) the types of error in a primary sentencing judgment which may warrant appellate correction include such errors as:
- acting upon a wrong principle;
- allowing extraneous or irrelevant matters to guide or affect the primary judgment;
- mistake as to a material fact;
- failure to take into account a material consideration; and
- the sentence being manifestly inadequate or manifestly excessive, even though no specific error is alleged;
(c) an alleged manifestly excessive or inadequate sentence is not demonstrated merely because the appellate court disagrees with the sentence actually imposed (Griffiths v The Queen (1997) 137 CLR 293 at 310; Dinsdale at [6] and Carroll at [7]); and
(d) a sentencing appeal is not a rehearing. An allegation that the sentencing judge did not give sufficient weight to a particular matter in the exercise of the sentencing discretion is not the kind of error which attracts appellate intervention in a sentencing appeal (House at 504-505).
Consideration of grounds of appeal
40 As foreshadowed above, it is convenient to deal with the nine individual grounds of appeal in the following categories:
(a) the relevance of deterrence in assessing OH&S Act civil pecuniary penalties (grounds 1-3);
(b) foreseeability of the risk of injury and the relevance of the respondent's prior breach in Lapidario (grounds 5 and 6);
(c) issues arising from the primary judge's response to an admission by the respondent (ground 7);
(d) the alleged failure of the primary judge to notify the parties of his proposed rejection of their suggested penalty ranges (grounds 8 and 9); and
(e) manifest inadequacy of the penalty amount of $80,000 (ground 10).
(a) The relevance of deterrence in assessing OH&S Act civil pecuniary penalties (grounds 1-3)
41 The first three grounds of the notice of appeal raise for direct consideration the approach to be taken when assessing civil pecuniary penalties under the OH&S Act. The appellant argued that the primary judge totally rejected any concept of deterrence as being appropriate in assessing an appropriate civil pecuniary penalty in the present case. The appellant submitted that the primary judge was required to consider the application of both specific and general deterrence and that his Honour erred by failing to do so. The appellant also contended that the primary judge rejected the relevance of the Madgwick factors and that he erred in doing so.
42 The respondent's submissions may be summarised as follows:
(a) a sentencing judge has a very broad discretion in assessing the appropriate penalty for a breach of the OH&S Act;
(b) that in order to demonstrate a need for appellate intervention, the appellant must demonstrate error of the type found in House at 504-505;
(c) while the primary judge expressed reservations about the appropriateness of importing criminal law concepts of deterrence into civil prosecutions under the OH&S Act, he did not reject altogether the notion of deterrence;
(d) even if the primary judge did not use the explicit language of "deterrence", he nevertheless proceeded on the basis that the pecuniary penalty needed to provide an appropriate incentive, encouragement and punishment with the objective of enhancing workplace safety, thus essentially accommodating by different language the same or similar purpose as the criminal law concepts of general and specific deterrence. In support of that proposition, the respondent cited Barker J's recent observations in Comcare v Transpacific Industries Pty Ltd [2012] FCA 90 at [38]:
No doubt the concept of "deterrence" can be expressed in different ways; but so long as the penalty is assessed with the importance of meeting the occupational healthy and safety obligations under the [OH&S Act] are steadfastly borne in mind β not mere punishment or retribution against contravener β then, in my view, the penalty assessment process will be properly undertaken;
(e) the primary judge's reference to providing appropriate incentive and encouragement to enhance workplace safety evidenced his Honour's consideration of general deterrence as a relevant factor in assessing the penalty, and it was immaterial that his Honour did not specifically use the phrase 'general deterrence';
(f) the primary judge clearly identified that interaction between forklifts and pedestrians obviously posed a foreseeable risk of injury. Furthermore, his Honour identified the relevant shortcomings of the respondent in responding to this risk but nevertheless considered that the procedures in place at the time of the incident were not wholly or seriously inadequate; and
(g) the primary judge's observations about "deterrence" were specifically directed to the notion of "specific deterrence", for an understandable reason. That was because his Honour was dealing with a particular submission put on behalf of the respondent below to the effect that specific deterrence was irrelevant in circumstances where the respondent was no longer conducting any warehouse business and had disposed of its relevant warehouse assets.
43 In our opinion the primary judge erred in his consideration of the role of the deterrence in fixing a civil pecuniary penalty under the OH&S Act. Deterrence, both general and specific, is a fundamental purpose of the role of civil pecuniary penalties. First, the object in s 3(g) of the OH&S Act evinced a legislative intention to provide for effective remedies where the obligations imposed by s 16 on an employer, such as the respondent, were not met. The remedy of a civil pecuniary penalty was the only form of penalty available to punish a Commonwealth authority such as the respondent in the circumstances. Thus, it was the only way in which a court could mark the seriousness of a contravention of the Act of the kind here for all employers bound by it, whether or not any particular employer was also amenable to criminal sanctions.
44 Secondly, the breach of s 16(1) found by the primary judge was of a kind that employers should realise will attract substantive punishment by way of a civil pecuniary penalty. That will assist in encouraging a general approach in the community that employers must meet the obligations imposed on them by s 16(1), and hence aid the achievement of the objects in s 3(a)-(f) of the OH&S Act.
Deterrence in criminal law
45 In sentencing for breaches of the criminal law, the concept of deterrence (both specific and general) is a fundamental element. In R v Radich [1954] NZLR 86 at 87, Fair J of the New Zealand Court of Appeal stated that one of the main purposes of punishment is:
β¦to protect the public from the commission of such crimes by making it clear to the offender and to other persons with similar impulses that, if they yield to them, they will meet with severe punishment. In all civilized countries, in all ages, that has been the main purpose of punishment, and it still continues so. The fact that punishment does not entirely prevent all similar crimes should not obscure the cogent fact that the fear of severe punishment does, and will, prevent the commission of many that would have been committed if it was thought that the offender could escape without punishment, or with only a light punishment. If a Court is weakly merciful, and does not impose a sentence commensurate with the seriousness of the crime, it fails in its duty to see that the sentences are such as to operate as a powerful factor to prevent the commission of such offences.
46 This statement has frequently been approved in Australia: see, for example, R v Rushby [1977] 1 NSWLR 594 at 597-598; R v Harrison (1997) 93 A Crim R 314; R v Hamieh [2010] NSWCCA 189 at [64] and York v R (2005) 225 CLR 466 at [21] per McHugh J. In Harrison, public deterrence was described as the main purpose of punishment in criminal law proceedings and the Court observed at 320-321:
β¦ the subjective considerations relating to the particular prisoner (however persuasive) are necessarily subsidiary to the duty of the courts to see that the sentence which is imposed will operate as a powerful factor in preventing the commission of similar crimes by those who may otherwise be tempted by the prospect that only light punishment will imposed.
47 In R v Porter (1933) 55 CLR 182, a criminal trial held in the original jurisdiction of the High Court, Dixon J in his summing up to the jury stated at 186:
The purpose of the law in punishing people is to prevent others from committing a like crime or crimes. Its prime purpose is to deter people from committing offences.
48 With the exception of atypical cases, such as those involving an offender with a mental disorder or abnormality such as in Muldrock v The Queen (2011) 244 CLR 120 and R v Scognamiglio (1991) 56 A Crim R 81, general deterrence is a relevant and important factor in sentencing for criminal offences. Where a sentencing judge is silent on the principle of general deterrence in circumstances which call for it to be considered, there is an error in sentencing: R v Romanic [2000] NSWCCA 524 at [21].
Deterrence in the civil law
49 Is deterrence (both specific and general) also a purpose or relevant matter in assessing civil pecuniary penalties under the OH&S Act?
50 As is evident from the passages we have set out in [32] above from the primary judge's reasons for judgment, his Honour approached the question whether deterrence is a relevant matter in determining an appropriate civil pecuniary penalty in the case before him substantially on the basis of distinguishing between sentencing principles in criminal law and the imposition of civil penalties. For our part, and with great respect to his Honour, we do not consider that the matter should be approached that way. There is a danger that such an approach deflects attention from the fundamental question, namely whether on a proper construction of the legislation empowering the imposition of a civil pecuniary penalty, deterrence is a relevant purpose or matter to be taken into account.
51 As the Full Court observed in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466 at [21], there is "something less than a bright line that divides the terms "civil" and "criminal" in relation to the nature of proceedings or the process by which persons are brought before courts". To similar effect, in Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 at [32] the High Court (albeit in a different context) observed that:
β¦ more fundamentally, the supposed distinction between "punitive" and "protective" proceedings or orders suffers the same difficulties as attempting to classify all proceedings as either civil or criminal. At best, the distinction between "punitive" and "protective" is elusive. That point is readily illustrated when it is recalled that, as McColl JA pointed out, account must be taken in sentencing a criminal offender of the need to protect society, deter both the offender and others, to exact retribution and to promote reform.
52 The setting of a civil pecuniary penalty can have a function of serving both specific and general deterrence. That is partly because, as North J pointed out in Comcare v Commonwealth of Australia (2009) 184 IR 441 ("Cadet Francis") at [104]:
The setting of a pecuniary penalty amount does however have a function as a general deterrent. No doubt the amount of the pecuniary penalty will be noted by those bound by the Act and also those bound by State equivalents. In this respect the amount of pecuniary penalty serves a valuable purpose in advancing awareness of the need for compliance with legislative health and safety standards.
53 In our view, several of the express objects of the OH&S Act are served if deterrence is regarded as a relevant matter in determining a pecuniary penalty under cl 4 of Schedule 2. In particular, fixing an appropriate civil pecuniary penalty by reference inter alia to specific and general deterrence helps:
(a) secure the health, safety and welfare at work of relevant employees (s 3(a));
(b) protect persons at or near workplaces from risks to health and safety (s 3(b));
(c) promote an occupational environment for such employees (s 3(d));
(d) encourage and assist employers and others to whom obligations apply under the OH&S Act to observe those obligations (s 3(f)); and
(e) contribute to providing effective remedies where obligations are not met (s 3(g)).
54 The disutility of individuals and corporations being forced to pay fines and comply with other penalties is offset by the reduction in the occurrence of that behaviour and thus the reduced negative externalities generated by that behaviour. The concept of deterrence in civil law is sometimes framed in economic terms. Karen Yeung in 'Quantifying Regulatory Penalties: Australian Competition Law Penalties in Perspective' (1999) 23 Melbourne University Law Review 440 at 446, describes how conduct which violates the law can be viewed as a commodity that is 'purchased' by requiring the offender to pay a penalty for breaking the law. In other words, in deciding whether to violate the law a prospective offender weighs up the benefits of its actions against the potential cost. If the offender determines that it is more advantageous to break the law, they will do so. Deterrence in assessing civil penalties amounts to increasing the cost of lawbreaking, so that persons are deterred from breaking the law.
55 In Community and Public Sector Union v Telstra Corporation Ltd (2001) 108 IR 228, Finkelstein J gave judicial voice to this concept: His Honour stated at [9]:
On the other hand, the basic objective of punishment should be to enhance social welfare by minimising the net social cost of wrongdoing. This is achieved by deterrence. Here I speak not only of specific deterrence but also general deterrence. In a case such as the present, that may be of some importance. The reason is that Telstra submits that there is no need to impose any penalty because it will not offend again. That may be true. But even if there be no need for specific deterrence, there will be occasions when general deterrence must take priority, and in that case a penalty should be imposed to mark the law's disapproval of the conduct in question, and to act as a warning to others not to engage in similar conduct: R v Thompson (1975) 11 SASR 217. It is also important to remember that proscribed conduct is often engaged in because it is profitable, or will enhance the profitability of the company. To deter conduct engaged in with that purpose, any penalty imposed must have the potential to render the conduct unprofitable. The achievement of that object is subject to the limitations placed upon the court's power by the legislation in question.
56 Several decisions provide general guidance on matters which may be relevant to the imposition of pecuniary penalties for breach of obligations under civil statutes. For example, in Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 ('CSR'), French J (as his Honour then was) made the following observations in the context of assessing a civil penalty under s 76(1) of the Trade Practices Act 1975 (Cth) (at 52,152 β 52,153):
The assessment of a penalty of appropriate deterrent value will have regard to a number of factors which have been canvassed in the cases. These include the following:
1. The nature and extent of the contravening conduct.
2. The amount of loss or damage caused.
3. The circumstances in which the conduct took place.
4. The size of the contravening company.
5. The degree of power it has, as evidenced by its market share and ease of entry into the market.
6. The deliberateness of the contravention and the period over which it extended.
7. Whether the contravention arose out of the conduct of senior management or at a lower level.
8. Whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention.
9. Whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention.
57 The non-exhaustive factors described by French J were all directed to the task of determining a pecuniary penalty which was of "appropriate deterrent value". His Honour clearly regarded deterrence as a relevant purpose in setting an appropriate civil pecuniary penalty in the context of the Trade Practices Act.
58 A similar approach has been taken in determining civil pecuniary penalties in other Commonwealth statutory contexts. In particular, deterrence has been regarded as an important purpose in setting such pecuniary penalties in such Commonwealth legislative settings as: regulation of petroleum retailing sites (Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd (2004) ATPR 41-993; superannuation (see Australian Prudential Regulation Authority v Derstepanian (2005) 60 ATR 518); environmental harm (Minister for the Environment and Heritage v Greentree (No 3) (2004) 136 LGERA 89 and, on appeal, (2005) 144 FCR 388 at [51]-[57]); therapeutic goods (Secretary, Department of Health and Ageing v Pagasa Australia Pty Ltd [2008] FCA 1545 ("Pagasa")); broadcasting (Australian Communications and Media Authority v Radio 2UE Sydney Pty Ltd (No 2) (2009) 178 FCR 199 at [31] ff); and industrial laws (Plancor Pty Ltd v Liquor Hospitality and Miscellaneous Union (2008) 177 IR 243 at [37] and [61]; Draffin v Construction, Forestry, Mining and Energy Union (2009) 189 IR 145 at [89] and Fair Work Ombudsman v Wongtas Pty Ltd (No 2) [2012] FCA 30 at [54])).
59 It has also been recognised that, while the approach taken by French J in CSR provides general guidance to the task of determining appropriate pecuniary penalties in other statutory contexts, some modification may be required in the light of a specific legislative context. Accordingly, primacy must be given to the relevant terms of the particular Commonwealth legislation which empowers the imposition of a civil pecuniary penalty. This fundamental requirement was well expressed by Sackville J (at first instance) in Greentree (No 3) at [58]:
The principles formulated in the context of s 76(1) of the TP Act provide guidance in proceedings for pecuniary penalties under the EPBC Act, although they cannot be transferred uncritically into the rather different context of proceedings seeking the imposition of penalties for environmental damage to protected sites. Obviously enough, for example, the degree of market power is a consideration likely to be highly relevant to a penalty for a contravention of Part IV of the TP Act, but is not likely to be relevant to the imposition of a penalty under the EPBC Act. Similarly, the question of a corporate culture may not necessarily have relevance to proceedings under the EPBC Act, although whether a contravener has taken remedial action to minimise environmental damage may be significant on the question of penalty. On the other hand, there may be circumstances relevant to proceedings under the EPBC Act that have no relevance to proceedings under the TP Act. In the end, while the statutory criteria must of course be taken into account, each case must depend upon its own unique circumstances.
60 We also note that, in Pagasa, after helpfully reviewing many cases involving civil penalties under a range of Commonwealth statutes, Flick J made the same point regarding the paramountcy of the particular statutory context. His Honour observed at [27]:
Although the form of words set forth in other legislative provisions may be the same or comparable to those employed in the 1989 Act, the legislative mandate that the Court "must have regard to all relevant matters" in s 42Y(3) assumes obvious importance. It is that mandate which directs attention to those more specific matters which can only be discerned from an analysis of the 1989 Act itself. Of central importance in identifying those matters which are "relevant" β and which must therefore be taken into account β are the objects and purposes of the 1989 Act. (Original emphasis).
61 We respectfully agree with those observations.
Deterrence in OH&S Act civil contraventions
62 There is a long line of decisions at first instance in this Court which accept that, as a general proposition, specific and general deterrence are relevant matters in fixing a civil pecuniary penalty under the OH&S Act (see, for example, Trooper Lawrence at [116]-[120]; Cadet Francis at [101]-[104]; Comcare v National Gallery of Australia (2007) 98 ALD 67 at [5]; Comcare v John Holland Rail Pty Ltd (2009) 188 IR 415 ("John Holland") at [135]-[136]; Comcare v Australian Postal Corporation [2011] FCA 530 at [57]; Comcare v Subsee Explorer Pty Ltd (2011) 210 IR 322 at [50] and Comcare v John Holland Pty Ltd [2012] FCA 449 at [45]). We respectfully agree with that approach, particularly having regard to its consistency with several of the express objects set out in s 3 of the OH&S Act, as discussed above in [53].
63 Acknowledgment at a level of general principle of the relevance of general and specific deterrence in determining civil pecuniary penalties under the OH&S Act should, however, be qualified in the following two respects. First, because of the individual nature of specific deterrence, there may be good reason why that concept has no or little relevance in the circumstances of a particular case. For example, at first blush it may be difficult to see any meaningful role for specific deterrence to play in a case where the Commonwealth is the party which has contravened the OH&S Act and any pecuniary penalty must be paid to the Commonwealth, presumably into the Consolidated Revenue Fund (see, for example, Cadet Francis at [102]). However, it may be important to appreciate that the individual officer or officers of the Commonwealth with general or particular responsibility for the conduct will ordinarily be publicly associated with the penalty imposed, he or she will have to allocate scarce public funds that were not appropriated to pay such a penalty, and thus cause a reduction in what the Commonwealth department, authority or agency involved can now provide. That is, the imposition of the penalty will have an impact on the department's, authority's or agency's capacity to perform its role, even if the sum is small in its overall budget. And, most importantly, the department, authority or agency will have to account to the Parliament and the public as to why it had had to pay a penalty and not use the money appropriated to it for the purposes that the Parliament intended. The impact of the penalty may vary depending on whether there is any evidence demonstrating the practical effect on internal budget allocations within the Commonwealth if the particular Commonwealth department, authority or agency is ordered to pay a civil pecuniary penalty.
64 The second qualification relates to the need to ensure that any list of relevant considerations guiding the exercise of a discretion to impose a civil pecuniary penalty not be permitted to fetter the proper exercise of the discretion which is expressed in relatively unconfined terms in the OH&S Act. The importance of this consideration was emphasised in Lapidario where, after referring to the Madgwick factors and the guidance provided by French J in CSR, Flick J stated at [37]β[38]:
These considerations may also be applied to the task of assessing the penalty to be imposed under the current legislation. To some extent the considerations set forth by Madgwick J overlap with those set forth by French J; to some extent they do not.
Care must be taken to ensure that any listing of potentially relevant considerations do not themselves become an impermissible substitute for considering the terms of the legislation in issue or an unnecessary constraint upon a discretion conferred in otherwise unconfined terms. But the attempts that have been made by both Madgwick and French JJ (in particular) provide a useful touchstone of those matters that may be taken into account when assessing the penalty to be imposed. Those considerations set forth by Madgwick J are obviously more directed to the specific statutory context of ensuring the health and safety of workers than the more generally expressed considerations set forth by French J. But both, it is considered, are relevant to the present assessment of penalty.
65 To similar effect, in John Holland at [142], Barker J stated:
However, I also concur with North J, in his emphasis of the overriding caution expressed by Flick J in [Lapidario], where His Honour said that care must be taken to ensure that any listing of potentially relevant considerations do not themselves become an impermissible substitute for considering the terms of the legislation in issue or an unnecessary constraint upon a discretion conferred in otherwise unconfined terms.
66 It is to be noted at this juncture that the primary judge below expressly associated himself with the reservations expressed in those cases regarding the utility of the Madgwick factors. Indeed, his Honour went further than that, stating that his reservations were "even more profound" in respect of the use of sentencing principles in imposing civil penalties under different statutory regimes.
67 For convenience, we set out immediately below the Madgwick factors:
(i) the penalty must be such as to compel attention to occupational health and safety generally, to ensure that workers whilst at work will not be exposed to risks to their health and safety;
(ii) it is a significant aggravating factor that the risk of injury was foreseeable even if the precise cause or circumstances of exposure to the risk were not foreseeable;
(iii) the offence may be further aggravated if the risk of injury is not only foreseeable but actually foreseen and an adequate response to that risk is not taken by the employer;
(iv) the gravity of the consequences of an accident does not of itself dictate the seriousness of the offence or the amount of penalty. However the occurrence of death or serious injury may manifest the degree of the seriousness of the relevant detriment to safety;
(v) a systemic failure by an employer to appropriately address a known or foreseeable risk is likely to be viewed more seriously than a risk to which an employee was exposed because of a combination of inadvertence on the part of an employee and a momentary lapse of supervision;
(vi) general deterrence and specific deterrence are particularly relevant factors in light of the objects and terms of the Act;
(vii) employers are required to take all practicable precautions to ensure safety in the workplace. This implies constant vigilance. Employers must adopt an approach to safety which is proactive and not merely reactive. In view of the scope of those obligations, in most cases it will be necessary to have regard to the need to encourage a sufficient level of diligence by the employer in the future. This is particularly so where the employer conducts a large enterprise which involves inherent risks to safety;
(viii) regard should be had to the levels of maximum penalty set by the legislature as indicative of the seriousness of the breach under consideration;
(xi) the neglect of simple, well-known precautions to deal with an evident and great risk of injury, take a matter towards the worst case category;
(x) the objective seriousness of the offence, without more may call for the imposition of a very substantial penalty to vindicate the social and industrial policies of the legislation and its regime of penalties.
68 We agree with the reservations expressed by Flick and Barker JJ concerning the Madgwick factors. If a court applied the Madgwick factors dogmatically or inflexibly, there is a significant chance an error would be committed in the reasoning process. As Mahoney JA stated in Kable v Director of Public Prosecutions (1995) 36 NSWLR 374 at 394, "If justice is not individual, it is nothing". The various factors for consideration in assessing a penalty for breach of the OH&S Act may have greater or lesser importance in any given case, depending on the various objective and subjective elements of the breach. The penalty assessment process cannot be reduced to an inflexible set of criteria.
69 That being said, we consider that the Madgwick factors provide a useful foundation or starting point for an assessment of a civil pecuniary penalty. They are consistent with the body of authority from this Court and other courts. Furthermore, they are consistent with the theoretical principles concerning the role of deterrence considered above. In our view they properly recognise that deterrence is a relevant matter to be taken into account in assessing a civil pecuniary penalty under the OH&S Act. Although a court is not required to specifically refer to these factors, in most cases it would be prudent to do so. Having regard to the fact that, since 1 January 2012, the OH&S Act has been replaced by the Work Health and Safety Act 2011 (Cth) (subject to the Transitional and Consequential Provisions Act), the Court sees little or no advantage in reformulating either the Madgwick factors or any of the other factors which have been identified in the caselaw as having a potential relevance to the determination of a pecuniary penalty under the OH&S Act. The position may need to be revisited if and when an appropriate occasion arises in respect of the new legislation.
70 A critical issue raised by this appeal is whether the primary judge took into account the concept of deterrence in determining what was an appropriate civil pecuniary penalty in the particular circumstances here. If, on a proper reading of his Honour's reasons for judgment, the concept of deterrence was rejected as an irrelevant matter, the question then arises whether that involves an appellable error. We now turn to address those questions.
71 The essence of the primary judge's reasoning on this matter is to be found in [34] to [36] of his Honour's reasons, which we have set out in [32] above. Those paragraphs contain a detailed discussion by the primary judge of the inappropriateness, as his Honour described it, of drawing too freely on concepts from the criminal law in setting a civil penalty. Despite his Honour's strong reservations about applying concepts and canons of criminal law sentencing in that civil context, it is to be noted that his Honour recognised and accepted that notions of punishment and culpability are to be included among the objectives to be considered in determining an appropriate penalty for the purposes of the OH&S Act. In our view, however, a fair reading of [35] of his Honour's reasons indicates that his Honour regarded the concept of deterrence β both specific and general β as inappropriate and irrelevant in fixing a civil penalty, both under the OH&S Act generally and, more specifically, in the present case.
72 With great respect to the primary judge, we find it difficult to see the distinction drawn in [35] of his Honour's reasons between avoiding a breach of the Act and upholding positive obligations of protection of workplace health and safety. The stated objectives of the OH&S Act include securing the health, safety and welfare of employees and protecting persons at or near workplaces from risks to health and safety arising out of the activities of such employees at work. Another important and relevant stated objective is to provide for effective remedies if obligations are not met, through the use of civil remedies and, in serious cases, criminal sanctions.
73 In our view, general deterrence is an important consideration in fixing an appropriate pecuniary penalty for a contravention of the OH&S Act if that remedy is to be effective and if other relevant statutory objects are to be served. The Act encourages positive steps to be taken to achieve these objectives by, inter alia, providing for civil and criminal penalties to be imposed in cases where these positive obligations are not observed. The OH&S Act reinforces the positive obligations contained in s 16 and elsewhere by emphasising the obligation not to commit the civil wrongs that are stated in the Act. The two concepts are inextricably linked. Moreover, as noted above, we consider that the fixing of an amount of pecuniary penalty serves a valuable purpose in raising awareness on the part of both the particular contravenor and others who are bound by the OH&S Act of the need for compliance with statutory occupational health and safety standards.
74 It appears from the reasoning of the primary judge that no weight was given to deterrence because of his Honour's views that:
(a) no further practical steps could have been taken by the respondent to prevent the incident from occurring. The minor shortcomings that his Honour identified were taken into account in assessing the penalty; and
(b) adopting the concept of deterrence from the criminal law risked introducing a "ritual incantation" which would divert attention from the relevant practical issue of giving effect to the statutory objectives of the OH&S Act, namely how to provide appropriate incentive and encouragement (as well as punishment) to enhance workplace safety.
75 With great respect to his Honour, we consider that that reasoning reflects too narrow a view of the role of deterrence in fixing an appropriate civil pecuniary penalty. A penalty has the consequence of providing a salutary reminder of the importance of observing the obligations specified in the Act to both the contravenor and other potential contravenors (see, for example, Subsee Explorer at [50]). The imposition of a penalty shifts the economic calculus in favour of taking necessary steps to ameliorate the risk of OH&S incidents generally.
76 The views we have expressed above do not mean that we disagree with the primary judge's concerns about the need to avoid using concepts in this area which carry the risk of becoming "a ritual incantation". But acceptance of that proposition does not mean that the concept of deterrence (both specific and general) is irrelevant. We respectfully agree with the following observations of Barker J in Transpacific Industries at [38]:
β¦ I do not disagree with observations recently made by Buchanan J in Comcare v Post Logistics Australasia Pty Limited [2011] FCA 1422 (Post Logistics 2011), where his Honour expressed his concerns about adopting an automatic application of a checklist drawn from criminal law sentencing principles, as suggested in Trooper Lawrence. I agree there is a danger in any ritual incantation of a set of considerations in deciding what penalty is appropriate in a particular case. In the present case, the fundamental need to impose a penalty that highlights the importance of compliance with occupational health and safety law in order to ensure the safety of employees at work must always be kept at the forefront of the penalty assessment process. That is not to say that notions of "deterrence", either specific or general, are irrelevant, for, in my view, they plainly are closely allied to this primary objective of ensuring the objects of the OHS Act are met. It is important that a particular respondent who admits contravention of the OHS Act or is found guilty of contravening the OHS Act should suffer a sufficient penalty, having regard to the seriousness of the contravention, so as to remind them of the significance of their responsibilities under the OHS Act. It is also important to remind employers more generally of the significance of their responsibilities under the OHS Act. No doubt the concept of "deterrence" can be expressed in different ways; but so long as the penalty is assessed with the importance of meeting the occupational health and safety obligations under the OHS Act are steadfastly borne in mind β not mere punishment or retribution against a contravener β then, in my view, the penalty assessment process will be properly undertaken.
77 Furthermore, in our view, to say that deterrence has no relevance because no practical measures could have been taken to prevent this particular incident is too narrow a view. Incidents involving forklifts and pedestrians in a warehouse or other place of employment can manifest themselves in myriad ways. A description of the incident, a declaration that the employer was at fault and an appropriate penalty are all factors that the wider community will take into account in analysing their own procedures regarding forklift-pedestrian interactions. Even though safety mechanisms in a particular place of business may prevent this particular iteration of a forklift accident from being replicated, a penalty has the capacity to provide impetus to persons and to organisations who are the subject of duties under the Act to ensure that all aspects of forklift safety are optimally designed.
78 The discussion above has largely focused on general deterrence but, in our view, it is also evident that the primary judge viewed specific deterrence as an irrelevant concept in setting an appropriate pecuniary penalty. In [33] of his reasons for judgment, his Honour said that he saw no reason for reducing an otherwise appropriate penalty because the respondent had disposed of its warehouse business. This issue arose, as the primary judge pointed out, because a submission had been made to that effect relying on the concept of "specific deterrence". In explaining why he rejected that submission, the primary judge then proceeded to express his reservations concerning the transposition of criminal law concepts into this civil penalty context. In our view, it is evident that the rationale for his Honour's rejection of the submission concerning "specific deterrence" was tied to his Honour's view that the concept of deterrence β whether general or specific β was simply irrelevant.
79 It follows that, in our view, the primary judge erred in taking too narrow a view of the role of deterrence. This amounts to his Honour acting upon a wrong principle and thus the discretion to impose a pecuniary penalty under cl 4 of Schedule 2 of the OH&S Act miscarried.
(b) Foreseeability of the risk of injury and relevance of Lapidario (grounds 5 and 6)
80 It is convenient to deal with these two grounds together as they both relate to challenges to the primary judge's consideration of the foreseeability of the risk of injury. The appellant contends that the primary judge erred in not taking into account the respondent's prior contravention of the OH&S Act (which was the subject of the proceedings in Lapidario). It argued that the Lapidario incident was relevant to the foreseeability of risk and reflected on the objective seriousness of the contravention. The appellant further argued that the primary judge erred in not taking into account the fact that the penalty imposed in Lapidario (for breach of what was alleged to be of "an identical nature") had not operated as a sufficient deterrent in the case of the respondent.
81 At [30] of his reasons, the primary judge stated:
The applicant also relied on the fact that, in [Lapidario], Flick J imposed a penalty of $165,000 on Post Logistics arising from a death involving a forklift at another warehouse, suggesting that this imposed some heightened obligation on Post Logistics, including at Warehouse 9. As the judgment makes clear, that fatality involved horseplay. That is not this case. The fatal injury which occurred in that case did not lead to a higher or different level of responsibility to protect the health and safety of employees at Warehouse 9. Nor did it identify a new measure which should have been taken at Warehouse 9 to achieve that objective. I could not impose a penalty in this case simply because there had been an earlier fatality at a different warehouse arising from different circumstances. As counsel for Post Logistics submitted, I must deal with the present case, and only the present case.
82 In Lapidario, Flick J found that the respondent "failed to ensure that there was an adequate traffic management system in place to prevent or reduce the risk of Mr Lapidario coming into contact with a moving forklift". In the present matter the primary judge reached a similar conclusion at [26] and [28] of his Honour's decision. However, his Honour found that the adoption of a traffic management system involving the use of bollards and chains would not have had a probable impact on the incident in question.
83 The factual conclusion by the primary judge that the traffic management system would not have had a probable impact on the incident in question diminished the weight that his Honour gave to Lapidario. Because his Honour came to this conclusion, his Honour decided that Lapidario did not provide any assistance.
84 Furthermore, the appellant submitted that his Honour was required to give consideration to the fact that the respondent had previously been found to have breached the OH&S Act in Lapidario in circumstances which also involved an incident between a forklift and an employee. The appellant submitted that the respondent had failed to take necessary precautions arising out of that incident and that this was a relevant consideration for his Honour in assessing a penalty.
85 In our view, the appellant's contentions should not be accepted for the following reasons. First, it is evident that the primary judge found that there was an obviously foreseeable risk of injury arising from the potential of contact between forklifts and pedestrians, as is reflected in the following statements in [22] and [31] of his Honour's reasons for judgment:
Forklift operations at a warehouse where people are also moving about obviously calls for management of the movement of both forklifts and pedestrians to avoid contact between them. Obviously also, the consequences of such contact could be very serious, even fatal.
[There was an] obvious need for separation between forklift operations and pedestriansβ¦
86 Furthermore, it is evident the primary judge found that the respondent had failed to "take obvious and easy steps" to address that foreseeable risk by not:
(a) providing Ms Borg and Mr Cox with clear instructions about the need to always maintain a minimum three metre "exclusion zone" around any operating forklift (at [24] and [31]); or
(b) arranging for clearly marked and separate areas for forklifts and pedestrians ([24] and [31]).
87 Having regard to these findings, which all relate to his Honour's conclusion that there was a highly foreseeable risk of injury arising from contact between forklifts and pedestrians, the Lapidario incident added nothing to the question of foreseeability or, indeed, to the objective seriousness of the contravention the subject of these later proceedings.
88 Secondly, while accepting that the House principles permit appellate intervention where it can be demonstrated that the primary judge has made a mistake as to material facts, we do not consider that the appellant has demonstrated any such error in respect of the primary judge's findings relating to foreseeability of risk of injury and the relevance of Lapidario.
89 Thirdly, in our view the primary judge was correct in his conclusion that a higher penalty could not be imposed on the respondent "simply because there had been an earlier fatality at a different warehouse arising from different circumstances". As his Honour pointed out, his task was to "deal with the present case, and only the present case". A similar approach had been taken by Flick J who held in Lapidario that it would be inappropriate to increase the respondent's penalty by reason of two earlier contraventions (albeit of State workplace health and safety legislation).
90 Finally, in our opinion, the primary judge was correct in distinguishing Lapidario on its facts. That case involved a fatality when a contractor working on the respondent's premises was fatally injured while engaging in "horseplay". The contractor had climbed onto a forklift being operated by another worker, Mr Tran, placing his hands on Mr Tran, and causing Mr Tran accidentally to engage the reverse pedal and collide with Mr Lapidario. In our view, those circumstances are far removed from the circumstances surrounding the incident involving Mr Cox and Ms Borg. The primary judge was correct to distinguish Lapidario.
91 For all these reasons, we consider that grounds 5 and 6 should be rejected.
(c) Issues arising from the primary judge's rejection of an admission by the respondent (ground 7)
92 By ground 7, the appellant challenges the primary judge's rejection of the respondent's admission that it had failed adequately to supervise Mr Cox or Ms Borg. As noted above the respondent admitted that part of the appellant's pleading which claimed that the respondent had failed to provide adequate supervision to Mr Cox or Ms Borg so as to ensure that they did not engage in the conduct which caused the incident. Notwithstanding that admission, the primary judge found at [16] and [29] of his reasons for judgment that he was not satisfied that lack of supervision played any part in the incident. His Honour plainly had in mind the respondent's admission but held that, despite the admission, the appellant's claim that lack of supervision played, in any practical sense, a part in the incident was "speculative". His Honour added that the appellant was unable to identify any practical step which might have been taken to remedy the alleged lack of supervision and which would have prevented the incident (see [29]).
93 For the following reasons, we consider that those findings were open on the evidence and that no appellable error has been established in respect of his Honour's findings and reasons.
94 First, the precise terms of the admission are significant. The respondent admitted that it had failed to provide "adequate supervision" to Mr Cox and Ms Borg so as to ensure that they did not engage in the relevant conduct. It did not admit that it provided no supervision at all to those persons. On the contrary, there was unchallenged evidence in the Court below concerning the following relevant matters:
(a) Ms Borg had received some instructions about maintaining safe distances from pedestrians when she was engaged in the "logbook" training process;
(b) Ms Borg gave unchallenged evidence to the effect that, when employees came too close to a forklift, she observed team leaders and supervisors saying "stay away";
(c) similarly, Ms Borg said that where such incidents occurred, team leaders and supervisors had called group meetings and gave instructions to avoid getting too close to forklifts;
(d) Ms Borg gave evidence that her supervisor often came into the area where the incident occurred to check on her and others working in that area; and
(e) she also gave evidence that she was given training and instruction in the course of her obtaining her own forklift licence about the need to stay at least two metres away from pedestrians and to keep away from forklifts when they were moving.
95 Furthermore, when regard is had to the precise terms of the respondent's admission, we consider that the appellant's argument is not strengthened by the fact that the primary judge indicated that he would not "go behind the admission". In our view, his Honour did not go behind the admission but, rather, he accepted the admission in the terms that it was made but then proceeded to assess the respondent's culpability. The respondent's admission went to liability, not culpability. It was open to the primary judge to go beyond the respondent's admission as to liability in assessing its culpability having regard to the overall circumstances of the case, including the appellant's acceptance of the proposition that the relevant incident may not have been avoided even if there was full supervision.
96 Secondly, as noted above, the primary judge found that there was no supervisor present on the day of the incident but the appellant never suggested that constant supervision was practical, necessary or even appropriate. As his Honour observed in [29], Ms Borg and Mr Cox "were not children to be constantly and closely watched, and scolded" and, absent constant surveillance, "there would obviously be times when a supervisor was not in the immediate vicinity". Again, we consider that this finding was open to be made by the primary judge, not the least because during argument below the appellant's counsel conceded that neither Mr Cox nor Ms Borg required constant visual surveillance to perform their type of work.
97 Thirdly, we do not accept the underlying implication in the appellant's argument to the effect that the primary judge was bound by the respondent's admission. It was ultimately a matter for the Court to determine the quantum of an appropriate civil pecuniary penalty. As his Honour made clear in [29] of his reasons, he took into account the respondent's admission, but accorded it little or no weight because of his other findings regarding the immateriality of the lack of supervision as contributing to the incident. As we have explained above, these matters went to culpability, not just liability.
(d) Primary judge's failure to notify parties of his proposed rejection of their suggested penalty ranges (grounds 8 and 9)
98 In ground 8, the appellant claimed that procedural fairness requirements obliged the primary judge to notify the parties of his proposed rejection of their respective penalty ranges. The appellant's ninth ground of appeal concerned the allegation that the primary judge failed to give reasons (or sufficient reasons) as to why he rejected the respondent's "concession" that the penalty ought to be in the range $120,000 to $140,000.
99 We have approached ground 8 on the basis that the appellant is complaining of a denial of procedural fairness to itself. The appellant cannot complain of a denial of procedural fairness to someone else (see, for example, Durayappah v Fernando [1967] 2 AC 337 at 354-355 and Aronson, Dyer and Groves, Judicial Review of Administrative Action, 4th ed, at p 625 n779). On that basis we consider that that contention must be rejected having regard to the following relevant matters which occurred during the course of the hearing below. Those factors are also relevant to the ninth ground.
100 First, the primary judge put both parties on notice during the course of oral argument that he might not be satisfied with their respective positions regarding penalty. For example, his Honour made clear to the appellant's counsel that he was "struggling with the idea that [the contravention] is a high range offence" as claimed by the appellant. Secondly, his Honour indicated to the parties that he would not exclude the possibility of an amount outside of the mid-range. Thirdly, his Honour indicated that, although he did not exclude something outside of a "mid range", he "would not be instinctively uncomfortable within the mid range". Finally, in circumstances where the parties were unable to agree on an appropriate proposed penalty and they each put forward their own preferred range, each of the parties must have been aware that there was a possibility that its proposed range would not be accepted.
101 Having regard to these matters, we consider that the appellant's complaint of procedural unfairness lacks any proper factual foundation and must be rejected. Likewise, because the imposition of a penalty was a matter for his Honour, it was not necessary in the circumstances for him to have discussed any particular figure put forward, even as a concession. His Honour gave sufficient reasons why he considered the penalty he arrived at was appropriate. However, as we have found, his Honour erred in his approach to the role of deterrence and for this reason we will have to reassess penalty.
(e) Manifest inadequacy of the penalty amount of $80,000 (ground 10)
102 The appellant contended that a penalty of $80,000 was manifestly inadequate having regard to the objective seriousness of the contravention, the circumstances in which it occurred and the safety measures which were said to be readily available and were not adopted by the respondent.
103 As the appellant correctly pointed out in its written submissions, manifest inadequacy does not depend upon the identification of a specific sentencing error in the reasoning of the primary judge (see Dinsdale at [6] per Gleeson CJ and Hayne J and at [59] per Kirby J, with whom Gaudron and Gummow JJ agreed). A similar approach has been adopted in the context of an appeal against a civil penalty (see Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at [105] per Buchanan J).
104 In view of our conclusion above that the primary judge erred in discarding deterrence as a relevant purpose or matter in fixing the appropriate level of the civil pecuniary penalty, his Honour's assessment cannot stand. It is not necessary to consider separately the appellant's contention that a penalty of $80,000 was manifestly inadequate. That claim was effectively advanced in the alternative to the other grounds of appeal.
Notice of contention
105 As noted above, the respondent's notice of contention advances the proposition that, if any of the errors alleged in the notice of appeal was established, the primary judge's penalty figure of $80,000 was appropriate or within the available range of discretion. For the following reasons, we consider that the civil penalty that is appropriate is $120,000. Accordingly, the notice of contention must be dismissed.
Reassessment of penalty
106 During the course of argument, the Court raised the issue whether the matter should be remitted to the primary judge for the reassessment of penalty in the event that the Court concluded that his Honour's discretion miscarried in determining an appropriate pecuniary penalty. The parties were invited to make whatever submissions they wished in the event that the Court determined that it should proceed to exercise the discretion for itself. The parties each indicated that they relied on all the material and submissions before the primary judge in support of their respective positions concerning an appropriate level of penalty.
107 We see no reason why the Court should remit the matter to the primary judge for a reassessment of penalty in circumstances where the Court is in as good a position as the primary judge to redetermine that matter. Moreover, we consider that the resources of both the Court and the parties would be spared if the Court was to determine the matter for itself, rather than order its remittal.
108 With the exception of that part of the primary judge's reasons for judgment dealing with deterrence, we consider that his Honour properly weighed the relevant primary mitigating and aggravating factors bearing upon the issue of appropriate penalty. In our view, however, an additional allowance has to be made in this case for both specific and general deterrence. As to the former, evidence was given below on behalf of the respondent to the effect that the majority of the assets used to carry on its warehouse business were transferred to a third party on 1 October 2011. There was also evidence, however, that the respondent, which is a wholly-owned subsidiary of Australia Post, still had at the time of the hearing below "a small number of employees carrying on administrative duties (for example, collecting outstanding revenue, paying creditors and preparing final accounts)". Furthermore, those employees were working from an office located in the office/administration area of Warehouse 9. In our view, notwithstanding the sale of the respondent's warehouse business, a modest allowance should be made for specific deterrence to reinforce to the respondent the need for it to comply with its obligations generally under the OH&S Act. In our view, this is appropriate in circumstances where, at least at the time of the proceedings below, the respondent continued to carry those statutory obligations in respect of its significantly reduced workforce and notwithstanding that it had ceased to carry on its warehouse business.
109 We also consider that an upwards adjustment needs to be made to the level of the pecuniary penalty to serve the function of general deterrence, in the sense of sending a clear message to other entities bound by the OH&S Act about the need for compliance with their relevant statutory obligations under that Act.
110 In our view, having regard to all these matters, an appropriate pecuniary penalty is $120,000.
Conclusion
111 Accordingly, for these reasons, we will allow the appeal, in part, and fix a penalty of $120,000. Given that each side had a measure of success, we have not made, at this stage, any order as to costs. If either party wishes to apply for costs, it should notify the other within 7 days and the parties should file and exchange written submissions on the issue of costs within 14 days.
I certify that the preceding one hundred and eleven (111) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Rares, Cowdroy & Griffiths.
Associate:
Dated: 23 November 2012
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FEDERAL COURT OF AUSTRALIA
Applicant S1914/2003 v Minister for Immigration & Citizenship [2007] FCA 737
APPLICANT S1914/2003 v MINISTER FOR IMMIGRATION AND CITIZENSHIP AND REFUGEE REVIEW TRIBUNAL
NSD 444 OF 2007
MARSHALL J
15 MAY 2007
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD 444 OF 2007
BETWEEN: APPLICANT S1914/2003
Applicant
AND: MINISTER FOR IMMIGRATION AND CITIZENSHIP
First Respondent
REFUGEE REVIEW TRIBUNAL
Second Respondent
JUDGE: MARSHALL J
DATE OF ORDER: 15 MAY 2007
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The application for leave to appeal is dismissed.
2. The applicant is to pay the costs of the first respondent, fixed at $2000.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD 444 OF 2007
BETWEEN: APPLICANT S1914/2003
Applicant
AND: MINISTER FOR IMMIGRATION AND CITIZENSHIP
First Respondent
REFUGEE REVIEW TRIBUNAL
Second Respondent
JUDGE: MARSHALL J
DATE: 15 MAY 2007
PLACE: SYDNEY
REASONS FOR JUDGMENT
1 The applicant applies for leave to appeal an interlocutory judgment of a Federal Magistrate. His Honour dismissed an application for judicial review of a decision of the Refugee Review Tribunal ('Tribunal') on the basis that it did not raise an arguable case.
2 The application for leave to appeal is without merit and should be dismissed. The Court below correctly determined that the Tribunal did not err in holding that it lacked jurisdiction to entertain an application to review a decision of a delegate of the first respondent Minister where the Tribunal, differently constituted, had already affirmed the delegate's decision and where there was no order of a Court invalidating the original Tribunal's decision. In fact, the applicant applied unsuccessfully for judicial review of the original Tribunal's decision.
3 The applicant does not contend that the original Tribunal's decision involved a failure to discharge its statutory function such that the decision may be re-opened (see Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597). In any event, the appropriate course, in such circumstances, would have been for the applicant to seek leave to appeal out of time the earlier Court decision. The original Tribunal reviewed the delegate's decision. The Migration Act 1958 (Cth) does not permit further reviews of the same decision where there is no error in the decision of the Tribunal which originally reviewed the delegate's decision.
4 The application for leave to appeal must be dismissed because the proposed appeal from the Court below is bound to fail. It is unnecessary to address the other proposed grounds relied on by the applicant because no issue of procedural fairness or natural justice arises where the Tribunal declines to entertain a review on the basis that it has no power to do so.
5 The Court will order that the application for leave to appeal is dismissed with costs.
I certify that the preceding five (5) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall.
Associate:
Dated: 15 May 2007
The Applicant represented himself.
Counsel for the First Respondent: Mr James Mitchell
Solicitor for the First Respondent: Blake Dawson Waldron
Date of Hearing: 15 May 2007
Date of Judgment: 15 May 2007
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FEDERAL COURT OF AUSTRALIA
ALD15 v Minister for Immigration and Border Protection [2018] FCA 94
Appeal from: ALD15 v Minister for Immigration & Anor [2016] FCCA 2503
File number: WAD 462 of 2016
Judge: BARKER J
Date of judgment: 15 February 2018
Catchwords: MIGRATION β application for protection (class XA) visa β appeal from Federal Circuit Court of Australia β whether primary judge's decision affected by jurisdictional error β whether appellable error raised before the Court β unparticularised assertion of jurisdictional error β no error detected
Legislation: Migration Act 1958 (Cth) s 36(2)(aa), s 499
Prevention of Terrorism (Temporary Provisions) Act 1978 (Sri Lanka)
Cases cited: Applicant WAEE v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 236 FCR 593; [2003] FCAFC 184
Dranichnikov v Minister for Immigration and Multicultural Affairs (2003) 197 ALR 389; [2003] HCA 26
Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259; [1996] HCA 6
Minister for Immigration and Multicultural Affairs v Jia Legeng (2001) 205 CLR 507; [2001] HCA 17
NAHI v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 10
SZTAL v Minister for Immigration and Border Protection (2017) 347 ALR 405; [2017] HCA 34
Tran v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 297
WZAVL v Minister for Immigration & Anor [2015] FCCA 2388
WZAVW v Minister for Immigration and Border Protection [2016] FCA 760
Date of hearing: 13 February 2018
Registry: Western Australia
Division: General Division
National Practice Area: Administrative and Constitutional Law and Human Rights
Category: Catchwords
Number of paragraphs: 78
Counsel for the Appellant: The Appellant appeared in person
Counsel for the First Respondent: Ms A Lucchese
Solicitor for the First Respondent: Sparke Helmore
ORDERS
WAD 462 of 2016
BETWEEN: ALD15
Appellant
AND: MINISTER FOR IMMIGRATION AND BORDER PROTECTION
First Respondent
ADMINISTRATIVE APPEALS TRIBUNAL
Second Respondent
JUDGE: BARKER J
DATE OF ORDER: 15 FEBRUARY 2018
THE COURT ORDERS THAT:
1. The appeal be dismissed.
2. The appellant pay the costs of the first respondent, to be assessed if not agreed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
BARKER J:
1 This is an appeal from a decision of the Federal Circuit Court of Australia dismissing an application for judicial review of a decision of the former Refugee Review Tribunal, now the Administrative Appeals Tribunal, affirming a decision of a delegate of the Minister for Immigration and Border Protection not to grant the appellant a protection (class XA) visa.
2 The appellant is a male citizen of Sri Lanka of Tamil ethnicity and Hindu faith. At material times, he resided in the Trincomalee area of Sri Lanka and worked as a farmer.
3 He arrived in Australia in July 2012 without a visa, and applied for a protection (class XA) visa in October 2012. In his written claims, the appellant said that in 1986 the Sri Lankan army surrounded his area and arrested many people around the age of 14 or 15, including his brother, who went missing after he was arrested.
4 The appellant also claimed that the Criminal Investigation Department (CID) and the Sri Lankan army regularly arrested Tamil people, and those people were either interrogated or disappeared.
5 The appellant resided in Sri Lanka until 1989, when he went to India as a refugee, returning to Sri Lanka in 1992.
6 The appellant claimed that he was taken by the CID in 1993. He said the CID were rounding up and arresting people aged between 18 and 35, and he was kept at Planton Point camp for a week. During this time, he said, he was interrogated about his knowledge of specific members of the Liberation Tigers of Tamil Eelam (LTTE) and assaulted. He said that after he was released, he had to sign in at the CID office once a week for a month.
7 The appellant said he was arrested again in 1994, taken to the CID office and interrogated about whether he had been helping the LTTE, and in particular, whether his family supplied food to the LTTE from their fields. The appellant claimed he was released after one month.
8 The appellant also claimed that in 2001 he was arrested and detained for 15 days during which time he was beaten. He further claimed he was arrested in 2004 and was dragged along the ground while his legs were tied, and had to get treatment for the injuries he sustained.
9 In his protection visa application the appellant stated that in 2008 he travelled to South Africa for one month. The application listed the reason for travel as "employment". The appellant said that while he was in South Africa, the CID arrested and assaulted his wife, wanting to know where he was. The appellant said his wife was kept for a day before being released. He further said that he was arrested by the CID when he returned from South Africa and was detained for 10 days.
10 The appellant also said that his uncle was taken and detained by the CID in 2011 and had not been released (as at 7 November 2012, at the time of the appellant's interview with the delegate), and his sister-in-law's husband was arrested and detained by the CID in 2012.
11 In 2012 the appellant claimed he received a letter from the CID requesting his attendance at the CID office. He said he did not attend and decided to leave the country.
12 The appellant claimed to fear that he would be killed by the army or the CID if he returned to Sri Lanka on the basis that he had already been arrested several times and had now fled Sri Lanka illegally by boat to Australia. The appellant added that the Sri Lankan government would not protect him because they support the army, and because he is Tamil.
13 The appellant's application for a protection visa was refused by the delegate on 12 August 2013.
14 On 19 March 2015 the Tribunal affirmed the delegate's decision following review.
15 The appellant applied to the Federal Circuit Court for judicial review of the Tribunal's decision. On 30 September 2016 the primary judge held that the Tribunal's decision was not affected by jurisdictional error and so dismissed the appellant's application. See ALD15 v Minister for Immigration & Anor [2016] FCCA 2503.
16 The appellant now appeals from the decision of the Federal Circuit Court by a notice of appeal filed on 5 October 2016, on the grounds of error discussed below.
17 On 22 February 2017 I made orders, by consent, adjourning the appeal in this matter, pending the decision of the High Court of Australia in SZTAL v Minister for Immigration and Border Protection (2017) 347 ALR 405; [2017] HCA 34. The judgment in that case was delivered on 6 September 2017.
DELEGATE'S DECISION
18 On 7 November 2012 the appellant attended an interview before the delegate. During this interview the appellant raised two further claims, firstly, that he witnessed five people being killed on a beach in 2005, and secondly, that his co-worker was killed and young people were being abducted in 2008.
19 The appellant's migration agent also made a further submission containing articles from 2009 and 2010 which contained country information highlighting troubles faced by people of Tamil ethnicity in Sri Lanka.
20 With regard to the 1993 and 1994 claims, the delegate accepted the incidents may have occurred, but found they had no influence on the appellant's current profile in Sri Lanka because the events had occurred two decades prior.
21 In relation to the appellant's claims regarding 2001 and 2004, the delegate asked the appellant why he had not mentioned these incidents during his entry interview. The appellant stated that he wanted to raise the claims during the entry interview but was told that he would be able to submit more detail at a later point.
22 In respect of the 2005 beach killings, the delegate also asked the appellant why this was not raised in his entry interview. The appellant responded that he did not realise he could mention incidents that did not involve him directly. In the decision record the delegate stated that the appellant said he was with his friends who were shot and knew those who were killed. The delegate considered that the appellant was therefore involved in the incident. The delegate pointed to the appellant's inability to provide additional details regarding this claim other than that the families of the victims were granted asylum in Switzerland. Based on the appellant's failure to mention the incident earlier, the delegate concluded that this claim was not credible and was manufactured to strengthen the appellant's protection claim, stating:
As it would have been a traumatic experience, as well as being relevant to his claims, I would have expected it to have been mentioned in any of his prior interviews or submissions.
23 In considering the 2008 incident, the delegate stated that the appellant had claimed the fundamental reason he left for South Africa was to protect himself and his family. The delegate found that instead it was more likely that he went to South Africa for employment prospects rather than to escape persecution. The delegate pointed to a number of inconsistencies he found in the appellant's evidence and did not accept the incident occurred in the way the appellant described.
24 With regard to the 2012 summons claim, the delegate said the appellant could not give any reason why he, his uncle or brother in law would be of interest to the authorities, other than due to their Tamil ethnicity. The delegate considered this "unusual" because Tamils are the majority in the area. The delegate also stated that the appellant was able to avoid the authorities for four years, and that the authorities were aware of his address because he claimed plain clothed men delivered the summons.
25 The delegate did accept that the Sri Lankan government would charge the appellant for departing Sri Lanka illegally.
26 The delegate found that there were major discrepancies in the appellant's claims as follows:
He failed to mention being detained in 1994, 2001, and being beaten in 2004.
He did not mention in his entry interview or statement of claim that he witnessed the death of five of his friends in 2005 or the shooting death of his friend in 2008.
The applicant did not mention the 2008 claims stated in the entry interview where he was detained for 15 days for being a Tamil businessman, and denied it occurred when questioned.
The 2008 incident stated in the statement of claim where he went to Colombo for six months, and that he was detained for 10 days was not mentioned in the entry interview previously.
27 Accordingly, the delegate did not accept the following claims:
That he was arrested in 2001, or beaten in 2004.
That he witnessed the killing of five of his friends on a beach in 2005.
Had a friend killed and was in danger of being abducted for be a young Tamil male in 2008.
Was of interest to the authorities from 2008 to 2012, considering he remained in Colombo without incident for three months after claiming to be targeted by the CID, and that he was at the same Trincomalee address for years and was well known in the community.
That the applicant departed Sri Lanka in 2008 for fear of his life but for employment prospects.
That he was summoned by the CID in April 2012.
28 The delegate found the appellant was not a credible witness and that his claims from 2001 onward were created to strengthen his claims. He was not satisfied that the appellant was owed protection obligations.
TRIBUNAL'S DECISION
29 On 14 August 2013 the appellant lodged an application for review in the Tribunal.
30 The appellant's migration agent provided a detailed submission in support of his application for review on 28 March 2014 regarding his fear of persecution based on his Tamil race, his imputed political opinion as a supporter of the LTTE or being anti-government, and his membership of the "failed asylum seekers from western countries" particular social group. This submission contained extensive country information regarding the treatment of Tamil people and returned asylum seekers in Sri Lanka.
31 The 28 March 2014 submissions also addressed the delegate's failure to accept the appellant's claims regarding 2001 and 2004 because he did not mention the incidents in his entry interview. It was submitted that the appellant did mention these events in his statutory declaration and his interview with the delegate, and that the entry interview was the first the appellant would have completed in Australia while he was without legal representation.
32 Further, the appellant's migration agent submitted that entry interviews do not focus on the claims of the person but rather on the methods of departing their country, including questions regarding people smugglers. The submission pointed to the "Handbook on Procedures and Criteria for Determining Refugee Status" and the "Refugee Review Tribunal, Guidance on the Assessment of Credibility" publications regarding refugee status determination which stated that the person's ability to give evidence may be affected by trauma or mistrust of people in positions of authority.
33 On 5 December 2014, the appellant appeared before the Tribunal at a hearing with the assistance of a Tamil interpreter and was represented by his migration agent who participated via telephone. He provided a further submission and a range of documents. This submission outlined the appellant's concern that Sri Lankan authorities would have access to his biographical data details which the Department of Immigration and Border Protection advised him was contained in leaked documents.
34 The Tribunal allowed the appellant to prepare a further submission, which was provided on 19 January 2015. This contained further information about the whereabouts of the appellant's uncle and his sister-in-law's husband. It also referred to inconsistencies raised by the Tribunal regarding statements he made in his entry interview, his interview with the delegate and in his statutory declaration. Finally it referred to information regarding the appellant bribing security officials to get through the airport to go to South Africa.
35 In its statement of reasons dated 19 March 2015, the Tribunal commented on the delegate's findings regarding inconsistencies in the appellant's claim:
The Tribunal referred to the delegate's decision record and to the inconsistencies identified by the delegate between what the applicant had said at the entry interview and what was claimed in his statement of claims and also at the departmental interview. The applicant told the Tribunal that during the interview he was without food and he was very tired. He said that the interviewing officer told him that he could provide more detail later. The Tribunal asked the applicant about his claim to have witnessed the killing of five friends on a beach and that this was not referred to in the applicant's entry interview or in his statement of claims. He replied that at the entry interview the officer told him not to talk about what happened to other people but what had happened to him.
36 The Tribunal said that it considered the reason for inconsistences in the appellant's claims was that he was an unreliable witness in respect of essential matters in issue. Its decision record ultimately stated:
The Tribunal assessed the applicant's individual claims for protection and in each case has found after considering the substance of his claim, his evidence, and the relevant country information, that the applicant does not face a real chance of serious harm for any of the individual bases he has claimed. It then considered whether, when all the claims are considered cumulatively, he faces a real chance of serious harm, and finds it is not satisfied that even cumulatively the applicant faces a real chance of serious harm amounting to persecution if he returns to Sri Lanka.
37 It was also not satisfied that the appellant was a person in respect of whom Australia had protection obligations under s 36(2)(aa) of the Migration Act 1958 (Cth).
JUDICIAL REVIEW IN THE FEDERAL CIRCUIT COURT
38 On 8 April 2015, the appellant filed an application for judicial review based on the following grounds:
1. Jurisdictional error
2. Bias based on conscious or unconscious prejudice by ignoring relevant materials
3. Identifying a wrong issue on a wrong question.
39 The Minister filed a response on 5 May 2015 stating that:
1. The applicant has not filed any evidence in support of the serious allegation of bias. This ground cannot be established.
2. The application for judicial review does not establish any jurisdictional error in the decision of the Refugee Review Tribunal dated 19 March 2015.
40 The primary judge found that the appellant's three grounds of appeal were not made out because an unparticularised assertion of jurisdictional error could not succeed, citing WZAVW v Minister for Immigration and Border Protection [2016] FCA 760 at [35] (Gilmour J); WZAVL v Minister for Immigration & Anor [2015] FCCA 2388 at [26] (Lucev J).
41 With regard to the second ground, the primary judge also held that the appellant made no attempt to comply with the requirement that the serious allegation of bias be firmly and distinctly made and clearly proven, citing Minister for Immigration and Multicultural Affairs v Jia Legeng (2001) 205 CLR 507; [2001] HCA 17.
42 In relation to the third ground, the primary judge cited Dranichnikov v Minister for Immigration and Multicultural Affairs (2003) 197 ALR 389; [2003] HCA 26 and stated that it was for the Tribunal to consider the claims made by the appellant, subject to exercising its power in a manner which did not manifest jurisdictional error. Further, his Honour stated that it was also for the Tribunal to identify the material it found relevant to its reasoning and to give it appropriate weight, citing Tran v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 297 at [5]-[7] (Kiefel, RD Nicholson and Downes JJ); Applicant WAEE v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 236 FCR 593 at [46]; [2003] FCAFC 184 (French, Sackville and Hely JJ).
43 The primary judge concluded that the Tribunal did not identify a wrong issue based on a wrong question but rather set out seemingly relevant country information, correctly identified the relevant law, made detailed findings regarding the appellant's credibility, claims, evidence and materials and drew conclusions reasonably open to it on the materials before it.
44 On 17 February 2016, the appellant filed a further affidavit which annexed a media article from "The Island Online" and a document titled "Fact Book β Sri Lanka's Prevention of Terrorism Act". Neither of the annexures was before the Tribunal. The Minister objected to the annexures being read into evidence.
45 The primary judge held that both annexures were inadmissible. "The Island Online" article was considered as such because it post-dated the Tribunal's decision by over ten months.
46 The second document consisted of a statement attributed to the International Commission of Jurists regarding the nature of the powers conferred by the Prevention of Terrorism (Temporary Provisions) Act 1978 (Sri Lanka) (POT Act) and various extracts from sections of the POT Act. The primary judge held that the provisions of the POT Act were irrelevant to the Court's judicial review function because the Tribunal concluded as a matter of fact that the appellant was of no interest to the Sri Lankan authorities and was not to be imputed with pro-LTTE opinions.
47 The 17 February 2016 affidavit provided:
(1) I am the Applicant in this case ALD 15, No PEG145 of 2015 before the Federal Circuit Court of Perth Division which has been listed to be heard on the 14th of March 2016 at 21.15pm [2.15pm].
(2) I submit that the decision of the Tribunal was affected by jurisdictional error by reason that the Tribunal applied the wrong test and was biased.
(3) The relevant legislation is the Tribunal Amalgamation Act, 2015, item 15AG of sch.9, and the Migration Act 1958, ss.36, 474.
I also rely on section 75(1) of the of the Australian Constitution dated 1 July 1900, which relates to any matter ar[i]sing under any treaty: in this instance the Refugee Convention. The Australian government is a signatory to this Convention.
(4) In terms of the UNRCR eligibility guidelines for assessing the international protection needs from asylum seekers from Sri Lanka. It has been specifically stated that there is a need for international refuge protection to persons suspected of certain links with the Liberation Tigers of Tamil Elam.
(5) As there had been a data breach in my case the Sri Lankan authorities have a suspicion and belief that I have certain links with the Liberation Tigers of Tamil Elam.
(6) The Tribunal only cited the Immigration and Emigration Act of Sri Lanka and did not take into account the Prevention of terrorism Act no 48 of 1979, which is a part of the permanent law of that country and under the provisions of which I was arrested and detained while in Sri Lanka.
(7) I submit in document marked 1 a report from Sri Lanka which refers to the visit of the Commissioner of the UNHCR to Sri Lanka and the ongoing investigations into human right abuses of the Sri Lankan armed forces against the Sri Lankan Tamils living in the north and east of Sri Lanka.
(8) I submit excerpts from the Prevention of Terrorism Act marked II.
I submit, therefore, that I have at present a well-founded fear of returning to Sri Lanka given the present circumstances.
48 The primary judge noted that this affidavit could arguably give rise to the following grounds of judicial review:
a) at [2] and [3] that the Tribunal Decision was affected by jurisdictional error by reason that the Tribunal applied the wrong test and was biased ('Ground 4');
b) at [4] that the applicant falls into the category of persons suspected of certain links with the LTTE in terms of the UNHCR Eligibility Guidelines and therefore is at risk if forcibly returned to Sri Lanka ('Ground 5');
c) at [4]-[5] that as the applicant falls into the category of persons suspected of certain links with the LTTE, that link is reinforced by the data breach, and the applicant is therefore at risk if forcibly returned to Sri Lanka by reason of a suspicion of certain links with the LTTE ('Ground 6'); and
d) at [6]-[8] that the Tribunal failed to take into account relevant material, namely the POT Act, under which the applicant would be arrested and detained, or suffer ongoing human rights abuses at the hands of the Sri Lankan authorities, if he was returned to Sri Lanka ('Ground 7').
49 His Honour found that none of the additional grounds were made out. He held that the fourth ground did not set out what wrong test the Tribunal applied or the way it was biased, meaning no jurisdictional error was established.
50 The primary judge found that the fifth ground must fail because the Tribunal concluded as a matter of fact that the appellant was not of interest to the Sri Lankan authorities and was not to be imputed with pro-LTTE opinions. He stated that this conclusion was based on "lengthy consideration of the relevant evidence and country information" and for the Court to arrive at a different view would mean engaging in fact-finding for the purposes of merits review which is impermissible for a Court conducting judicial review of the Tribunal's decision, citing Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 272; [1996] HCA 6 (Brennan CJ, Toohey, McHugh and Gummow JJ).
51 In finding the sixth ground was not made out, the primary judge noted that the Tribunal expressly considered if the data breach gave rise to the appellant being of interest, adverse or otherwise, to the Sri Lankan government. His Honour stated that the Tribunal did not accept that there was a real chance the appellant would face serious harm because of the data breach if he returned to Sri Lanka in the reasonably foreseeable future.
52 In relation to the seventh ground the primary judge again stated that the POT Act was irrelevant and that it was not the Court's task to engage in fact-finding: Wu Shan Liang.
53 At the Federal Circuit Court hearing the appellant also handed up further written submissions which stated:
1. The Second Respondent followed the directions of the First Respondent in regard to the assessment of the situation in Sri Lanka.
2. Hence, the Second Respondent went by the assessment given by the Department of Foreign Affairs and Trade and did not in this process give the needed weightage to the reports from other international organisations like Amnesty International.
3. Reference was made by the Second Respondent only to the Immigration and Emigration Act of Sri Lanka and failed to apply and study the provisions of the Prevention of Terrorism Act under which most the human right abuses were committed by the armed forces and this has now been made a part of normal law of the country. Earlier, it was only operative for a few years. All the arrest and detention by the Sri Lankan armed forces are made under the provisions of this Act. All the arrests and detentions that I suffered was due to this Act, which gives tremendous powers to the armed forces to arrest and detain and such acts cannot be reviewed by the law courts of Sri Lanka.
4. This is reason why I submit that there was judicial error made by the Second Respondent.
5. The present situation in Sri Lanka is the same as when the Second Respondent examined my claims. In fact the government of Sri Lanka is failing to hold a proper inquiry into human right abuses done by the armed forces on the Sri Lankan Tamils on a large scale.
6. I have a fear that my name is in the data of the Sri Lankan armed forces and authorities, and that I will be arrested and detained under the Prevention of Terrorism Act.
7. The Commissioner of Human Rights of the UNHCR on a recent visit to Sri Lanka had stated as reported in the international media that no action had been taken by the Sri Lankan government to investigate human right abuses in that country, committed by the armed forces.
8. I, therefore, have a well-founded fear of retuning to Sri Lanka mainly due to the fact that I fear that I will be investigated under the Prevention of Terrorism Act as a perceived supporter of the Liberation of Tamil Tigers of Tamil Elam and therefore one who stands for a independent state for the Sri Lankan Tamils in the North and East of the country.
54 The primary judge noted that this submission could arguably give rise to further grounds of judicial review as follows:
a) that the Tribunal failed to conduct a proper review of the Delegate's Decision because it adopted the reasons of the Delegate with respect to the assessment of the situation in Sri Lanka ('Ground 8');
b) that other than DFAT Reports, the Tribunal failed to have regard to recent and relevant country information, or failed to give any or any sufficient weight to recent and relevant country information, including 'reports from other international organisations like Amnesty International' ('Ground 9'); and
c) that the Tribunal failed to have regard to the POT Act, and to human rights abuses committed by the Sri Lankan authorities under the POT Act, in relation to the applicant as a person who would be a person perceived to support the LTTE, and therefore one who stands for an independent state for Sri Lankan Tamils in the North and East of Sri Lanka ('Ground 10').
55 The primary judge found with respect to ground eight that an assertion that the Tribunal adopted the reasons of the delegate regarding the situation in Sri Lanka and thus failed to conduct a proper review was "wholly at odds" with the Tribunal's decision. In finding that the Tribunal conducted a thorough and independent assessment of the situation in Sri Lanka, his Honour said the Tribunal had:
(1) set out the application for review including all of the relevant background and claims made by the applicant up to and including at the Tribunal hearing: CB 266-273 at [1]-[34];
(2) set out independent country information as indicated: CB 273-279 at [35]-[47];
(3) set out the relevant law with respect to the refugee and complementary protection criterion and noted the requirement to take account of policy guidelines by reason of a Ministerial Direction under s 499 of the Act: CB 279-281 at [48]-[62];
(4) set out its consideration of the claims and evidence by reference to the country of reference, findings on credibility, the appellant's claims, both as to his refugee and complementary protection claims, and drew conclusions in respect thereof: CB 281-290 at [63]-[114],
56 In considering the ninth ground, the primary judge noted that it was well established that the selection and weight given to country information was a matter for the Tribunal, citing NAHI v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 10 at [11]-[13] (Gray, Tamberlin and Lander JJ). His Honour said it was fair to observe that the Tribunal placed considerable emphasis on the Department of Foreign Affairs and Trade reports it referred to, but that it was entitled to do this because the reports were relevant and relatively recent. He noted that the Tribunal also had regard to other reports from international organisations. The primary judge held no jurisdictional error was established here.
57 In dismissing the final ground the primary judge again stated that the POT Act was irrelevant and the Tribunal was not obliged to have regard to its terms.
58 The primary judge concluded that none of the grounds of review were successful and dismissed the judicial review application.
APPEAL TO this court
59 The appellant's notice of appeal states his appeal is with regard to the whole Federal Circuit Court judgment and contains a single ground of appeal:
Jurisdictional error β due to not following the law/or facts presented in the evidence
60 The appellant also filed an affidavit in support of his appeal where he stated:
(1) I am the Appellant to the Federal Court of Australia from the decision of the Federal Circuit Court of Australia dated 30th September 2016 in case no PEG145 of 2015, ALD15 Applicant v Minister for Immigration and Border Protection First Respondent and Administrative Appeals Tribunal. Second Respondent.
(2) The First and Second Respondent fell into jurisdictional error by the way of facts, law and regulations, in examining my case for a protection visa under the Immigration Act of 1958.
(3) In this regard reference is made to the following paragraphs of the judgement delivered on the 30th September 2016 paragraphs: 2C1, 2CII, 2CIII, 2CIV, 2CVI, 2CVII, 2CVIII 4β¬, 5C, 5D, 5E, 7A, 8C, 10A, 11C, 12A, 12B, 12F and 12G.
(4) In this context I have a well-founded fear of retuning of retuning to Sri Lanka for fear of persecution under the Prevention of Terrorism Act as a failed asylum seeker who had a perceived part in the Tamil revolt for self-determination under the UN Charter.
61 The appellant did not file submissions in the appeal.
62 On 6 February 2018, the Minister filed an outline of submission which relevantly states in regard to the appeal before this Court:
38 The task of the FCC was to determine whether the Tribunal's decision was affected by jurisdictional error: section 474 of the Migration Act 1958 (the Act); Plaintiff S157/2002 v Commonwealth (2003) 211 CLR 476. The task of this Court is to determine whether the judgment of the FCC is affected by appealable error: SLMB v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 129 at [11].
39 Although an appeal to the Federal Court is an appeal by way of rehearing, it remains necessary to demonstrate an error in the judgment appealed from. As the Full Court has explained, 'an appeal by way of rehearing β¦ does not mean it is an opportunity to revisit the decision of the Tribunal. Save for exceptional cases, the task of a court on an appeal by way of rehearing is to correct error on the part of the primary judge': Rawsthorne v Minister for Immigration and Citizenship (2013) 140 ALD 524, 529 [28] (Cowdrey, Katzmann and Farrell JJ); cited in BZAHB v Minister for Immigration and Border Protection [2015] FCA 1205 at [33] (Edelman J).
40 The single ground of appeal does not identify any appealable error in the judgment of the Federal Circuit Court nor does it demonstrate any jurisdictional error in the Tribunal's decision. Furthermore, the paragraphs referred to by the appellant simply relate to the primary judge's recount of background of the matter and the Tribunal's findings. At its highest, the ground merely seeks to re-agitate the arguments advanced before the primary judge without identifying any error in the primary Judge's clear findings on the evidence. As the primary judge held, no jurisdictional error is disclosed in the Tribunal's assessment of the material before it. The appellant has not otherwise established an appealable error on the part of the primary judge.
41 For these reasons, the first respondent submits that these proposed grounds do not raise a reasonably arguable case of appealable error in the primary Judge's decision.
63 At the hearing, the appellant was assisted by an interpreter. He handed up some written submissions in his name which he said had been prepared by the Tamil Association, he having advised them of his circumstances.
64 He was also invited to make any other submissions on his grounds of appeal but indicated that he could not afford to hire a lawyer and the Tamil Association had not provided any legal analysis of the decision of the primary judge.
65 On behalf of the Minister, it was submitted that there were no questions raised in the written submissions handed up that identified any legal error, and that the document further agitated the questions of merit so far as the Tribunal was concerned.
Consideration
66 This is a case where, despite the submissions both oral and in writing made by the appellant, I cannot detect any error in the decision of the primary judge.
67 As may be seen from the grounds of appeal set out above, the appellant has merely asserted very generally that the first and second respondent "fell into jurisdictional error" by the way of facts, law and regulations in examining his case for a protection visa.
68 While certain paragraphs of the decision of the primary judge are adverted to, in all instances the appellant has taken issue with findings of fact made by the Tribunal and recounted by the primary judge.
69 I have set out in some detail above, the reasons given by the primary judge for dismissing the judicial review application. It is not necessary to repeat them in any detail.
70 The general assertion of jurisdictional error was not particularised in the first ground before his Honour. The reasons of the primary judge in rejecting this ground are unassailable.
71 No questions of bias expressly arose in this Court, that being the second of the grounds in the Court below. There is nothing to support this claim, as the primary judge found.
72 So far as the third ground in the Court below is concerned, identifying a wrong issue or a wrong question, as the primary judge found after a careful analysis, no jurisdictional error is identifiable from the Tribunal's decision. His Honour is correct in so finding.
73 Indeed, when one turns to the Tribunal's decision, which has been set out in some detail above, the Tribunal provided the appellant with ample opportunities to develop his case, including by way of further submissions, before finding against him.
74 It is clear that the appellant was considered, on reasonable grounds explained in the Tribunal's decision record, to be an unreliable witness in respect of key issues.
75 In all of these circumstances, no jurisdictional error is made out in relation to the primary judge's reasons.
76 As a result, the continued assertion of the appellant that he has a well-founded fear of returning to Sri Lanka for fear of persecution under the POT Act as a failed asylum seeker, who had a perceived part in the Tamil revolt for self-determination under the United Nations Charter, is not material when the Court comes to consider whether, in fact, any jurisdictional error in the decision of the primary judge (or the Tribunal before that) is evident.
77 For these reasons, the appeal should be dismissed.
CONCLUSIONS AND ORDERS
78 For the reasons given above, the Court makes the following orders:
(1) The appeal be dismissed.
(2) The appellant pay the costs of the first respondent, to be assessed if not agreed.
I certify that the preceding seventy-eight (78) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker.
Associate:
Dated: 15 February 2018
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FEDERAL COURT OF AUSTRALIA
SZTKE v Minister for Immigration and Border Protection [2015] FCA 1002
Citation: SZTKE v Minister for Immigration and Border Protection [2015] FCA 1002
Appeal from: SZTKE v Minister for Immigration & Border Protection [2015] FCCA 103
Parties: SZTKE v MINISTER FOR IMMIGRATION AND BORDER PROTECTION and REFUGEE REVIEW TRIBUNAL
File number: NSD 182 of 2015
Judge: BROMBERG J
Date of judgment: 10 September 2015
Catchwords: MIGRATION β application for Protection (Class XA) visa β whether FCC erred in failing to discern jurisdictional error in Tribunal's decision β where delegate had accepted certain propositions of fact β where Tribunal rejected those propositions of fact β whether Tribunal had failed to accord procedural fairness as required by s 425 of the Migration Act in that it failed to sufficiently alert appellant that those questions of fact were live issues β whether Tribunal made finding in absence of evidence β whether Tribunal's reasons were illogical or whether Tribunal failed to consider claims β whether Tribunal failed to consider and appropriately deal with evidence β whether Tribunal had constructively failed to exercise jurisdiction in regard to the appellant's claim that he feared harm as a member of a social group β whether Tribunal erred in its application of s 36(2)(aa) of the Migration Act β Tribunal failed to comply with s 425 of the Migration Act β FCC erred in failing to discern Tribunal's error β FCC's judgment otherwise sustainable β whether relief ought to be refused notwithstanding Tribunal's failure to accord procedural fairness β relief not refused β appeal allowed
Legislation: Migration Act 1958 (Cth), ss 36(2)(a), 36(2)(aa), 36(2A), 91R, 425, 474
Migration and Maritime Powers Legislation Amendment (Resolving the Asylum Legacy Caseload) Act 2014 (Cth), Part 2 Schedule 5 Item 12, Part 4 Schedule 5
Cases cited: Applicant A v Minister for Immigration and Ethnic Affairs (1997) 190 CLR 225
Applicant NAFF of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 221 CLR 1
Applicant WAEE v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 75 ALD 630
BZAFM v Minister for Immigration and Border Protection (2015) 321 ALR 117
Commissioner for Australian Capital Territory Revenue v Alphaone Pty Ltd (1994) 49 FCR 576
Minister for Immigration and Border Protection v WZAPN [2015] HCA 22
Minister for Immigration and Citizenship v SZNWC (2010) 190 FCR 23
MZZUO v Minister for Immigration & Border Protection [2014] FCA 1267
Plaintiff S157/2002 v Commonwealth of Australia (2003) 211 CLR 476
Re Refugee Review Tribunal; ex Parte Aala (2000) 204 CLR 82
SLMB v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCAFC 129
SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs (2006) 228 CLR 152
SZSGA v Minister for Immigration, Multicultural Affairs and Citizenship [2013] FCA 774
SZTBW v Minister for Immigration and Border Protection [2014] FCA 1277
SZTEQ v Minister for Immigration and Border Protection (2015) 229 FCR 497
SZTKE v Minister for Immigration & Border Protection [2015] FCCA 103
VAAC v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 129 FCR 168
VAAD v Minister for Immigration & Multicultural & Indigenous Affairs [2005] FCAFC 117
VUAX v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCAFC 158
WZAPN v Minister for Immigration and Border Protection (2014) 229 FCR 477
Date of hearing: 14 May 2015
Place: Melbourne
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 95
Counsel for the Appellant: Mr A Kumar
Counsel for the First Respondent: Mr G Johnson
Solicitor for the First Respondent: Sparke Helmore Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION NSD 182 of 2015
ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA
BETWEEN: SZTKE
Appellant
AND: MINISTER FOR IMMIGRATION AND BORDER PROTECTION
First Respondent
REFUGEE REVIEW TRIBUNAL
Second Respondent
JUDGE: BROMBERG J
DATE OF ORDER: 10 September 2015
WHERE MADE: MELBOURNE
THE COURT ORDERS THAT:
1. The appeal is allowed.
2. Order 1 made on 13 February 2015 by the Federal Circuit Court of Australia is set aside and, in lieu thereof, there be an order in the nature of certiorari to quash the decision of the second respondent made on 20 September 2013 in case number 1302603.
3. A writ of mandamus be issued, directed to the second respondent, requiring that it hear and determine according to law, the application of the appellant for review of the decision of a delegate of the first respondent made on 23 January 2013 to refuse to grant the appellant a Protection (Class XA) visa.
4. The first respondent pay the appellant's costs of the appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION NSD 182 of 2015
ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA
BETWEEN: SZTKE
Appellant
AND: MINISTER FOR IMMIGRATION AND BORDER PROTECTION
First Respondent
REFUGEE REVIEW TRIBUNAL
Second Respondent
JUDGE: BROMBERG J
DATE: 10 September 2015
PLACE: MELBOURNE
REASONS FOR JUDGMENT
1 The appellant is a citizen of Sri Lanka. On 20 June 2012 he arrived in Australia. On 31 October 2012, he lodged an application for a Protection (Class XA) Visa (Visa). On 23 January 2013, his application was rejected by a delegate (delegate) of the first respondent (Minister). On 20 September 2013 the Refugee Review Tribunal (Tribunal) affirmed the delegate's decision (Tribunal's decision). The appellant sought judicial review of the Tribunal's decision in the Federal Circuit Court. The subject of this appeal is the primary judge's dismissal of that application on 13 February 2015. The primary judge's judgment is published as SZTKE v Minister for Immigration & Border Protection [2015] FCCA 103.
2 The primary judge's task was to determine whether the Tribunal's decision was affected by jurisdictional error: s 474 of the Migration Act 1958 (Cth) (Migration Act) and Plaintiff S157/2002 v Commonwealth of Australia (2003) 211 CLR 476. The task of this Court is to determine whether the primary judge's judgment is affected by appellable error: SLMB v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCAFC 129 at [11] (Branson, Finn and Finkelstein JJ).
background
3 The appellant claimed that in May 2009, during the final stages of the civil war in Sri Lanka, he was taken by the Sri Lankan army and detained in a detention camp (Camp). He claimed to have been physically abused in the course of interrogation while in the Camp. He claimed that he was released in July 2009 as a consequence of members of his family having paid a bribe to persons they suspected to be with the Criminal Investigation Division (CID). He claimed that for a time thereafter he worked in his brother's shop, and that during that time persons from the CID came into the shop on two occasions and asked about his whereabouts.
4 He claimed that in August 2009 he applied for and received a Sri Lankan passport with the assistance of an agent, and that in order to facilitate the procurement of that passport his agent paid a bribe to the passport officer. He said that on 31 August 2009 he travelled to India, that he was questioned when passing through security, but that his agent intervened and paid another bribe and he was allowed to leave. He stated that he remained in India until May 2010, whereupon he returned to Sri Lanka having been told by his parents that the situation had improved. On his return, he commenced to work as an electrical assistant and also (again) for his brother. He claimed that after his return to Sri Lanka CID agents came to his brother's shop a further three times (in June and October 2010 and March 2011) asking about his whereabouts. He said that, commencing in March 2012, Sri Lankan authorities commenced to arrest people who had previously been detained in camps, that he feared for his own safety, and that he commenced making arrangements for his departure. In June 2012 he left Sri Lanka for Australia.
5 The appellant claimed that he feared persecution based on his Tamil race and because of imputed links with the Liberation Tigers of Tamil Elam (LTTE), and because of his membership of a particular social group being returning failed asylum seekers. He claimed a well-founded fear of persecution by the Sri Lankan Army, the CID, and paramilitary groups.
The delegate's decision
6 The appellant's first ground of appeal relates to the Tribunal having departed from the delegate's findings without his having been given adequate notice that the matters the subject of those findings were live issues. Thus, it is necessary to summarise aspects of the delegate's decision. The delegate accepted that the appellant had been detained in the Camp for two months, accepted that the appellant was able to obtain a genuine passport in 2009 and travel to India with the assistance of his agent and then return to Sri Lanka in 2010. The appellant's evidence was that the most-recent occasion on which the CID came looking for him was in March 2011. The delegate disbelieved that the CID had come looking for him, and noted that, even if that was accepted, that meant that members of the CID most-recently enquired about the appellant almost two years previously.
7 The delegate noted the appellant's evidence that in April 2012 the SLA had begun to "round up" Tamil returnees and that he was afraid he would be arrested or questioned, noted country information consistent with the appellant's evidence of an SLA "search operation" in April 2012, but also noted that the appellant's evidence was that nobody had approached him or come looking for him at that time, and that the appellant had not claimed that he was an LTTE combatant. Accordingly, the delegate did not accept that anyone from the CID or the Sri Lankan authorities was searching for or interested in the applicant. The delegate also set out evidence that suggested that returned Tamil asylum seekers were not generally treated differently to other returned asylum seekers. The delegate noted an exception, being the case of Tamil returnees from the UK who had perceived links to the LTTE. The delegate did not accept that the appellant fitted that profile, and therefore was unsatisfied that the appellant may be subject to detention or torture by Sri Lankan officials at the airport. The delegate held that the appellant did not have a real chance of serious harm amounting to persecution at that time or in the reasonably foreseeable future.
8 In regard to the complementary protection criterion in s 36(2)(aa) of the Migration Act, the delegate held that the "real risk" test required a higher standard of proof that the "real chance" test that applied for the purposes of s 36(2)(a), and therefore treated a state of dissatisfaction as to the "real chance" test as being dispositive for the purposes of the "real risk" test.
The Tribunal's decision
9 In broad terms the Tribunal did not accept that the authorities were looking for the appellant with a view to his arrest, did not accept that a passport office official would take a bribe so as to issue a passport to a person on an alert or watch list (and thus held that the appellant had fabricated his claim to be on an alert list), did not accept that if the CID had come to the hospital to arrest him (as the appellant claimed before the Tribunal) they would failed then to arrest him, and thus held that he had fabricated that claim, did not accept that the appellant ceased working for his brother other than when departing Sri Lanka (and thus held that he had fabricated his work history so as to make himself appear to be a person of interest to the authorities), did not accept that he obtained his passport through a bribe, did not accept that the CID looked for him at any time, and did not accept that he had had any difficulty departing from or entering Sri Lanka. Overall, the Tribunal did not consider the appellant to be a credible witness.
10 At paragraph [50], the Tribunal said this:
I have considered how these findings impact on the overall history of the applicant, and whether I can accept as true that he was wounded as claimed and detained in a detention centre. I have carefully considered those matters, and I am prepared to accept as true that he was wounded in a shelling incident and later detained. I do not however accept that he was released through the payment of a bribe or that he was released irregularly. I consider it more reasonable to believe he was knowingly and legally released by the authorities, and subsequently obtained medical treatment at a hospital. The applicant's accepted history following this of obtaining a legally issued passport without difficulty, travelling in and out of Sri Lanka without difficulty and not being on any watch or alert list, living at home, working for his brother and also for another person and not being of any interest to the CID indicates that the applicant was released by the authorities from detention as he was not consider[ed] to have any connection with or association with the LTTE. I also find that the applicant's brother was released at the same time, and also find he is of no adverse interest to the authorities. I do not accept he has to report to them on a monthly basis. The applicant has said at interview with the delegate that in April 2012 no one came looking for him at that time. I accept that is true. He has also said he didn't know anyone who was detained at that time. I also accept that as true. I find that the applicant was not of adverse interest to the authorities at the time he departed from Sri Lanka.
11 The Tribunal further disbelieved that the appellant and his father had undergone training with the LTTE. It accepted that the appellant's father and cousin had some minor association with Tamil organisations in LTTE-controlled areas, and that his uncle and brother had been detained in a detention camp, but did not accept that those matters would have any consequence for the appellant on his return to Sri Lanka.
12 The Tribunal further did not accept that Tamil Sri Lankans faced serious harm because of their ethnicity, or because of other factors including being from the north or east of Sri Lanka, or being young and male. The Tribunal accepted that the appellant would be detained on his return, but held that the motivation of Sri Lankan authorities for so detaining the appellant would not be for reason of a Convention ground, but instead would be in the implementation of a law of general application relating to illegal departure from Sri Lanka. The Tribunal held that the harm in question was not serious harm. It held (at [61]) that there was no "particular social group of failed asylum seekers as such a group is necessarily in these circumstances defined by the harm they fear." It held that prosecution was legitimate action in the circumstances and that there was no evidence that the law, any period of detention and fine, or the condition of detention, were being applied in a discriminatory fashion.
13 At [63], the Tribunal said this:β
Further, I do not accept that he has a level of profile that would cause him to be considered as suspect by the authorities for any matter. I do not accept that his having been detained in 2009 and then legally released is of any adverse consequence for him now. At the time tens of thousands of Tamils were detained and then released. Whilst I accept he has a scar from the shrapnel wound I consider the authorities would have been aware of that when they released him in 2009.
14 Overall, the Tribunal held that the appellant's fear of persecution was not well founded (at [64]), that there was not a real chance he would suffer serious harm amounting to persecution (at [64]), and that he did not have a well-founded fear of persecution for reason of a Convention ground (at [65]). In dealing with s 36(2)(aa), the Tribunal held that appellant did not have a level of adverse profile such that he was of any adverse interest to the authorities in Sri Lanka. It accepted he may be arrested on return and held on remand, and would most likely be fined and questioned, but did not accept that anything other than that would happen. It did not accept that that was "significant harm" within the meaning of s 36(2A).
The primary judge's judgment
15 Before the Circuit Court, the appellant raised these grounds of appeal by his Further Amended Application:
1. The Tribunal engaged in jurisdictional error by failing to comply with its obligations under s.425 of the Act.
Particulars
a. The Tribunal rejected the applicant's credibility by virtue of the matters set out at CB210[46]-[52]. These matters were not matters that the delegate considered dispositive to the review, yet the Tribunal failed to take steps to identify all of these matters and provide the applicant with an opportunity to give evidence and present arguments in relation to the same.
b. Further and in the alternative, the Delegate accepted the credibility of the applicant's account concerning his detention in a detention centre (including his account of being released by virtue of a payment of a bribe) (CB114) and his account of obtaining his passport and departing the country through the payment of a bribe (CB115). The Tribunal, however, rejected the plausibility of the applicant's account in these respects without informing the applicant that it doubts these aspects of his account and providing him with an opportunity to give evidence and present arguments in relation to the same.
2. The Tribunal engaged in jurisdictional error by making a finding in the absence of evidence or by misconstruing the applicant's claims when it found that the applicant "clearly states he had no difficulty in obtaining his passport" (CB210.7).
Particulars
a. There was no evidence before the Tribunal upon which it could have held that the applicant "clearly states he had no difficulty in obtaining his passport" in his original application. Words to this effect are not found in anything constituting an original application and the evidence before the Tribunal was to the effect that the initial Irregular Maritime Arrival Entry Interview (Entry Interview) was "suspended as client could not communicate effectively via interpreter" (CB14).
b. The applicant claimed in his Entry Interview that "my family paid money to get us out of the camp and then we went to India, we had to pay for our passport [as] well" (CB26). A fair reading of this is that the applicant claimed to pay a bribe to obtain his passport and it does not support the finding that the applicant "clearly states he had no difficulty in obtaining his passport".
3. The Tribunal engaged in jurisdictional error by asking itself the wrong question or by failing to address the applicant's claims.
Particulars
a. The applicant claimed that factors personal to him that increased the risk of him being imputed with LTTE cadre profile in the future included his scarring (CB154). The Tribunal did not address this claim but, rather, asked itself an irrelevant question (being whether the Sri Lankan authorities knew that he had a scar when they released him in 2009).
b. Further and in the alternative, the applicant claimed that he feared persecution by paramilitary groups and the material put before the Tribunal by the applicant was to the effect inter alia (CB156) that paramilitary groups were: (a) involved in assisting government military forces in the assault and murder of civilians; (b) impeding the movement of residents, especially Tamils; (c) assisting government authorities in detaining and torturing individuals alleged to have LTTE connections, (d) frequently harassing Tamil men, and (e) practicing illegal seizure of private land extortion with impunity. The Tribunal did not deal with this claim and its integers but rather, limited its consideration of the applicant's claims to a consideration of feared persecution at the hands of Sri Lankan authorities only;
d. Further and in the alternative, the applicant claimed that there was a practice of arbitrarily detaining and seriously mistreating individuals in detention, particularly during the interrogation process. The Tribunal found that the Applicant would be questioned, but failed to ask whether there was a real chance that the questioning process would involve persecution or significant harm.
4. The Tribunal engaged in jurisdictional error by making a critical finding in the absence of evidence, by failing to take into account a relevant consideration, by asking itself the wrong question or by failing to apply the correct test.
Particulars
a. The Tribunal concluded at [60] and [70] that the applicant would be arrested and held on remand for a few days while awaiting a court appearance and that he would be fined between 50,000 and 100,000 rupees. This finding was based solely upon a statement made by a Sri Lankan lawyer recorded in a Sydney Morning Herald article dated 8 December 2012 concerning the fate of certain returnees from Australia returned in late November 2012 as to the 'likely' outcome of the proceedings.
b. In this regard, the Tribunal failed to ask itself the correct question because it was obligated to ask itself whether the applicant had a well-founded fear of persecution in the reasonably foreseeable future upon his return to Sri Lanka. Instead of asking this question, the Tribunal considered what the likely outcome of the applicant's court proceedings would be based on practice prevalent in late November 2012.
c. Further and in the alternative, the Tribunal's finding was made in the absence of evidence because the article relied upon by it was only capable of going to the likely penalty to be given to the November 2012 returnees referred to in the article rather than the penalty to which the applicant had a real chance of being exposed to in the reasonably foreseeable future.
d. Further and in the alternative, the Tribunal's finding failed to take into account relevant considerations, being:
i. DFAT's report to the effect that from late November 2012, all returnees from Australia were charged and remanded for offences regarding their illegal departure and that Sri Lankan authorities were focused on enforcing Sri Lankan law (CB207β208); and
ii. paragraph 45(1)(b) of the Sri Lankan Immigrants and Emigrants Act, which provided inter alia that there was a mandatory imprisonment period of at last 1 year and not more than 5 years for illegally departing Sri Lanka.
e. Further and in the alternative, the Tribunal failed to carry out its statutory obligation by failing to resolve the contradictory material before it (which it apparently accepted uncritically) going to the question of the penalty that would likely be imposed.
5. The Tribunal engaged in jurisdictional error by misunderstanding the applicable law and, as a consequence, constructively failing to exercise its jurisdiction.
Particulars
The Tribunal made an error of law by finding that "failed asylum seekers' was a group that was incapable of constituting a particular social group for Convention purposes. As a consequence, the Tribunal misconstrued or constructively failed to deal with this claim.
6. The Tribunal engaged in jurisdictional error by failing to ask itself the right questions when addressing (at [61]) whether Sri Lankan law concerning illegal departure was a law of general application and whether, as such, prosecution pursuant to it could not attract protection under the Refugees Convention.
16 The primary judge rejected ground 1 on the basis that the questions put to the appellant by the Tribunal sufficiently demonstrated that the issues identified in the particulars were in issue. Ground 2 was rejected on the basis that "the Tribunal's credibility conclusion turn[ed] on the inconsistency in the applicant's claims, not the temporal question of when the claim changed." Particular (a) of ground 3 was rejected on the basis that there was a logical connection between the Tribunal's observation that the appellant's scars were unproblematic for him in 2009 and its finding that there was no real risk that they would be problematic for him now; particular (b) was rejected on the basis that the Tribunal had understood and dealt with the issue of paramilitary groups; particular (d) was rejected on the basis that the claim had been dealt with by findings of greater generality, namely, that the appellant was not a person with an LTTE profile sufficient to attract adverse attention.
17 Grounds 4 to 6 were dealt with together. The primary judge held (as his Honour was then bound to do) that the Tribunal's consideration of "serious harm" could not be reconciled with WZAPN v Minister for Immigration and Border Protection (2014) 229 FCR 477. The primary judge nevertheless refused relief on the basis that the harm would arise as a consequence of the non-discriminatory operation of a law of general application. The primary judge allowed that the Tribunal "may have been wrong" to say that there was no particular social group of failed asylum seekers, but said (at [47]):
β¦ the legal correctness of the Tribunal's reasoning is effectively irrelevant because the Tribunal's decision is supported by the alternative finding of a lack of a Convention nexus to the harm feared. β¦
The present appeal
18 Before me, the appellant raised these grounds of appeal (errors and emphasis in original):
GROUND 1
His Honour should have found that the Tribunal committed jurisdictional error by failing to comply with its obligations under s 425 of the Act. His Honour erred in his findings (SZTKE v Minister for Immigration & Anor [2015] FCCA 103 at [13]β[21]).
Particulars
a. The Tribunal rejected the Appellant's credibility by virtue of the matters set out at CB210 [46]β[52]. The Tribunal failed to provide the Appellant with an opportunity to give evidence and present arguments in relation to the same.
b. The Delegate accepted the credibility of the applicant's account concerning his detention in a detention centre (including his account of being released by virtue of a payment of a bribe) (CB 114) and his account of obtaining his passport and departing the country through the payment of a bribe (CB 115). The Tribunal rejected the plausibility of the Appellant's account in these respects without informing the Appellant that it had doubts these aspects of his account and providing him with an opportunity to give evidence and present arguments in relation to the same
GROUND 2
His Honour should have found that the Tribunal engaged in jurisdictional error by making a finding in the absence of evidence or by misconstruing the Appellant's claims when it found that the Appellant "clearly states he had no difficulty in obtaining his passport" (AB210.7).
Particulars
a. There was no evidence before the Tribunal upon which it could have held that the Appellant "clearly states he had no difficulty in obtaining his passport" in his original application. Words to this effect are not found in anything constituting an original application and the evidence before the Tribunal was to the effect that the initial Irregular Maritime Arrival Entry Interview (Entry Interview) was "suspended as client could not communicate effectively via interpreter" (CB14).
b. The Appellant claimed in his Entry Interview that "my family paid money to get us out of the camp and then we went to India, we had to pay for our passport [as] well" (CB26). A fair reading of this is that the Appellant claimed to pay a bribe to obtain his passport and it does not support the finding that the Appellant "clearly states he had no difficulty in obtaining his passport".
GROUND 3
His Honour should have found that the Tribunal engaged in jurisdictional error by asking itself the wrong question or by failing to address the Appellant's claim (SZTKE v Minister for Immigration & Anor [2015] FCCA 103 at [27]β[36]).
Particulars
a. The Appellant claimed that factors personal to him that increased the risk of him being imputed with LTTE cadre profile in the future included his scarring (AB154). The Tribunal did not address this claim but, rather, asked itself an irrelevant question (being whether the Sri Lankan authorities knew that he had a scar when they released him in 2009).
b. Further and in the alternative, the appellant claimed that he feared persecution by paramilitary groups and the material put before the Tribunal by the Appellant was to the effect inter alia (CB156) that paramilitary groups were: (a) involved in assisting government military forces in the assault and murder of civilians; (b) impeding the movement of residents, especially Tamils; (c) assisting government authorities in detaining and torturing individuals alleged to have LTTE connections, (d) frequently harassing Tamil me, and (e) practicing illegal seizure of private land extortion with impunity. The Tribunal did not deal with this claim and its integers but rather, limited its consideration of the Appellant's claims to a consideration of feared persecution at the hands of Sri Lankan authorities only;
c. Further and in the alternative, the appellant claimed that there was a practice of arbitrarily detaining and seriously mistreating individuals in detention, particularly during the interrogation process. The Tribunal found that the Appellant would be questioned, but failed to ask whether there was a real chance that the questioning process would involve persecution or significant harm.
GROUND 4
His Honour should have found that the Tribunal committed jurisdictional error by making a critical finding in the absence of evidence, by failing to take into account a relevant consideration, by asking itself the wrong question or by failing to apply the correct test.
Particulars
a. The Appellant repeats the particulars enumerated in the the Further amended application filed in the proceedings below.
GROUND 5
His Honour should have found that the Tribunal fell into error (SZTKE v Minister for Immigration & Anor [2015] FCCA 103 at [41]β[45]) and had constructively failed to exercise jurisdiction in relation to the claim of a particular social group.
Particulars
a. His Honour should have found that the Tribunal fell into error in recognising the attributes / characteristics of a particular social group expressly claimed (AB 66; AB 158β164).
b. The Tribunal fell into error in failing to failing to deal with the claim and committed jurisdictional error.
GROUND 6
His Honour should have found that the Tribunal fell into error (SZTKE v Minister for Immigration & Anor [2015] FCCA 103 at [39]β[41]) when it failed to identify and apply the correct test.
Particulars
a. The Tribunal applied the same test for Convention protection and complementary protection. His Honour should have found that the Tribunal conflated the findings (RRT decision at [60]β[72]) and the length of the detention / law of general application was irrelevant for the purposes of complementary protection.
19 Grounds 1β5 raise the same issues as were before the primary judge. Ground 6 raises the relevance of the Tribunal's finding that the Immigrants and Emigrants Act was a law of general application (as before the primary judge) but raises two additional questions being whether the Tribunal erred by applying the same test for s 36(2)(aa) purposes as it did for s 36(2)(a) purposes, and whether the length of the appellant's detention and the law being of general application were irrelevant. The Minister opposes a grant of leave to raise the new matters on the basis that they have insufficient prospects of success.
Relevant statutory provisions
20 This appeal raises ss 36(2)(a), 36(2)(aa), 36(2A), and 425 of the Migration Act. They provide as follows.
36 Protection visasβcriteria provided for by this Act
(2) A criterion for a protection visa is that the applicant for the visa is:
(a) a nonβcitizen in Australia in respect of whom the Minister is satisfied Australia has protection obligations because the person is a refugee; or
(aa) a nonβcitizen in Australia (other than a nonβcitizen mentioned in paragraph (a)) in respect of whom the Minister is satisfied Australia has protection obligations because the Minister has substantial grounds for believing that, as a necessary and foreseeable consequence of the nonβcitizen being removed from Australia to a receiving country, there is a real risk that the nonβcitizen will suffer significant harm; or
β¦
(2A) A nonβcitizen will suffer significant harm if:
(a) the nonβcitizen will be arbitrarily deprived of his or her life; or
(b) the death penalty will be carried out on the nonβcitizen; or
(c) the nonβcitizen will be subjected to torture; or
(d) the nonβcitizen will be subjected to cruel or inhuman treatment or punishment; or
(e) the nonβcitizen will be subjected to degrading treatment or punishment.
425 Tribunal must invite applicant to appear
(1) The Tribunal must invite the applicant to appear before the Tribunal to give evidence and present arguments relating to the issues arising in relation to the decision under review.
(2) Subsection (1) does not apply if:
(a) the Tribunal considers that it should decide the review in the applicant's favour on the basis of the material before it; or
(b) the applicant consents to the Tribunal deciding the review without the applicant appearing before it; or
(c) subsection 424C(1) or (2) applies to the applicant.
(3) If any of the paragraphs in subsection (2) of this section apply, the applicant is not entitled to appear before the Tribunal.
21 Section 91R of the Migration Act was also relevant to the issues before the primary judge. Item 12 within Part 2 of Schedule 5 to the Migration and Maritime Powers Legislation Amendment (Resolving the Asylum Legacy Caseload) Act 2014 (Cth) repealed the section. That item commenced on 18 April 2015. But, pursuant to the transitional provisions in Part 4 of Schedule 5, that repeal does not affect the appellant's application, as it was made before the relevant date of effect. Section 91R provided as follows:
91R Persecution
(1) For the purposes of the application of this Act and the regulations to a particular person, Article 1A(2) of the Refugees Convention as amended by the Refugees Protocol does not apply in relation to persecution for one or more of the reasons mentioned in that Article unless:
(a) that reason is the essential and significant reason, or those reasons are the essential and significant reasons, for the persecution; and
(b) the persecution involves serious harm to the person; and
(c) the persecution involves systematic and discriminatory conduct.
(2) Without limiting what is serious harm for the purposes of paragraph (1)(b), the following are instances of serious harm for the purposes of that paragraph:
(a) a threat to the person's life or liberty;
(b) significant physical harassment of the person;
(c) significant physical illβtreatment of the person;
(d) significant economic hardship that threatens the person's capacity to subsist;
(e) denial of access to basic services, where the denial threatens the person's capacity to subsist;
(f) denial of capacity to earn a livelihood of any kind, where the denial threatens the person's capacity to subsist.
(3) For the purposes of the application of this Act and the regulations to a particular person:
(a) in determining whether the person has a wellβfounded fear of being persecuted for one or more of the reasons mentioned in Article 1A(2) of the Refugees Convention as amended by the Refugees Protocol;
disregard any conduct engaged in by the person in Australia unless:
(b) the person satisfies the Minister that the person engaged in the conduct otherwise than for the purpose of strengthening the person's claim to be a refugee within the meaning of the Refugees Convention as amended by the Refugees Protocol.
Ground 1
22 Ground 1 complained that the Tribunal determined certain matters otherwise than in accordance with s 425 of the Migration Act. The respondent's submissions proceeded on the basis that the ground raised these three claims made by the appellant, which were rejected by the Tribunal:
(1) his detention and subsequent release from the camp through payment of a bribe;
(2) his procurement of a passport by payment of a bribe; and
(3) his departure from Sri Lanka which included payment of a bribe by an agent following the applicant being questioned by CID,
which, for short, I will refer to as the three claims.
Preliminary issues
23 There are three preliminary matters that arise. First, while particular (b) to ground 1 was limited to the three claims, particular (a) was not. Particular (a) raised all of the Tribunal's findings set out in paragraphs [46]β[52]. So, too, did the appellant's written submissions (at [10]), and the appellant's originating application before the primary judge. The appellant made no complaint that the primary judge had failed to deal with particular (a), nor did the appellant's counsel in oral submissions agitate any findings other than the three claims. Further, in oral submissions the appellant's counsel, after making submissions in regard to the three claims, said that the appellant was not challenging the other findings about the appellant's credit. In that light I consider that particular (a) of ground 1 was, in substance, not pressed and I intend to deal only with the three claims.
24 Second, in regard to the first of the three claims, the Tribunal accepted that the appellant had been detained so I read that ground as complaining about only the second half of the issue identified β namely, the Tribunal's rejection of the appellant's proposition that he had been released from the camp upon payment of a bribe.
25 Third, both the appellant and the Minister proceeded on the basis that the Minister's delegate had determined the three claims favourably to the appellant. I am not certain that that is the fact. Certainly the delegate recorded the appellant's submissions that he had been released on payment of a bribe, that he had procured his passport through payment of a bribe, and that he had departed Sri Lanka on payment of a bribe, but when the delegate made findings she said only these things:
For these reasons I accept the applicant's claim that he was detained in [the Camp] for two months β¦ in 2009.
β¦
I accept the applicant was able to obtain a genuine passport in 2009 and travel to India with his agent and then return to Sri Lanka in 2010. I also consider this indicates that there was no court order or arrest warrant issued for the applicant at the time he travelled in and out of Sri Lanka β¦ .
26 When the delegate summarised her findings of fact she said this:
In summary I accept the following as fact:
β’ The applicant is a Tamil, born in [his birthplace] and regularly travelled between [particular locations] during his childhood
β’ The applicant was detained at [the Camp in 2009]
β’ [T]he applicant applied for his passport in approximately August 2009 and travelled to India β¦
β’ The applicant lived and worked in [a town] from May 2010βJune 2012
27 While the delegate did not reject the three claims, she did not expressly accept them. Although I harbour some doubt, on balance I think that the better reading of the delegate's reasons is that she did accept the claims. She referred to them, did not reject them, and accepted other relevant and connected claims (i.e., that the appellant was detained, that the appellant obtained a passport and travelled to India, and that he later returned). I will proceed on the same assumption as the parties, namely, that the delegate determined the three claims in the appellant's favour.
The law
28 The relevant authority is SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs (2006) 228 CLR 152. In that case the appellant was employed as a seaman on a ship of the Islamic Republic of Iran Shipping Line. He jumped ship in Port Kembla and applied for a protection visa. His application was refused and he appealed to the Tribunal, before whom he put a statutory declaration setting out the facts upon which he relied in support of his application. As the Court (Gleeson CJ, Kirby, Hayne, Callinan and Heydon JJ) said at [3]):
β¦ The Tribunal member then asked the appellant questions that elicited from him the same description of events as he had given in his statutory declaration. At no stage did the Tribunal challenge what the appellant said, express any reaction to what he said, or invite him to amplify any of the three particular aspects of the account he had given in his statutory declaration, and repeated in his evidence, which the Tribunal later found to be "implausible". Rather, the first that the appellant knew of the suggestion that his account of events was implausible in these three respects was when the Tribunal published its decision.
29 The question was whether the Tribunal had failed to afford procedural fairness. As in the instant case there were three relevant issues. The delegate considered only one of the three, and rejected the appellant's version of events. The Tribunal, however, disbelieved the appellant in regard to each of the three issues. The Court held that SZBEL had not been afforded procedural fairness. It referred to the proposition in Commissioner for Australian Capital Territory Revenue v Alphaone Pty Ltd (1994) 49 FCR 576 at 591β2 that, where procedural fairness is required by statute, the entitlement of a person likely to be affected by the decision-maker's decision:
β¦ extends to require the decision-maker to identify to the person affected any issue critical to the decision which is not apparent from its nature or the terms of the statute under which it is made. The decision-maker is required to advise of any adverse conclusion which has been arrived at which would not obviously be open on the known material. Subject to these qualifications however, a decision-maker is not obliged to expose his or her mental processes or provisional views to comment before making the decision in question. β¦ .
30 In the context of the Migration Act, the Court held (at [35]) as follows (emphasis added):
The Tribunal is not confined to whatever may have been the issues that the delegate considered. The issues that arise in relation to the decision are to be identified by the Tribunal. But if the Tribunal takes no step to identify some issue other than those that the delegate considered dispositive, and does not tell the applicant what that other issue is, the applicant is entitled to assume that the issues the delegate considered dispositive are "the issues arising in relation to the decision under review". That is why the point at which to begin the identification of issues arising in relation to the decision under review will usually be the reasons given for that decision. And unless some other additional issues are identified by the Tribunal (as they may be), it would ordinarily follow that, on review by the Tribunal, the issues arising in relation to the decision under review would be those which the original decision-maker identified as determinative against the applicant.
31 At [36], the Court held that unless the Tribunal told the applicant something different, the applicant would be entitled to assume that the reasons given by the delegate for refusing to grant the application identified the issues that arose in relation to that decision. At [37] the Court gave as a instance that if the Tribunal "invited the applicant to appear, said nothing about any possible doubt about the applicant's nationality, and then decided the review on the basis that the applicant was not a national of the country claimed," the applicant would not have been accorded procedural fairness. At [43], the Court said that the Tribunal "did not identify β¦ aspects of his account as important issues," "did not challenge what the appellant said," and "did not say anything that would have revealed to him that these were live issues."
32 Paragraphs [47] and [48] contain important delimitations:
[47] First, there may well be cases, perhaps many cases, where either the delegate's decision, or the Tribunal's statements or questions during a hearing, sufficiently indicate to an applicant that everything he or she says in support of the application is in issue. That indication may be given in many ways. It is not necessary (and often would be inappropriate) for the Tribunal to put to an applicant, in so many words, that he or she is lying, that he or she may not be accepted as a witness of truth, or that he or she may be thought to be embellishing the account that is given of certain events. The proceedings are not adversarial and the Tribunal is not, and is not to adopt the position of, a contradictor. But where, as here, there are specific aspects of an applicant's account, that the Tribunal considers may be important to the decision and may be open to doubt, the Tribunal must at least ask the applicant to expand upon those aspects of the account and ask the applicant to explain why the account should be accepted.
[48] Secondly, as Lord Diplock said in F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry,
"the rules of natural justice do not require the decision maker to disclose what he is minded to decide so that the parties may have a further opportunity of criticising his mental processes before he reaches a final decision. If this were a rule of natural justice only the most talkative of judges would satisfy it and trial by jury would have to be abolished."
Procedural fairness does not require the Tribunal to give an applicant a running commentary upon what it thinks about the evidence that is given. On the contrary, to adopt such a course would be likely to run a serious risk of conveying an impression of prejudgment.
(citations omitted; emphasis in original)
33 Further guidance may be derived from SZBEL as to what is required to "identify" issues. The facts there were that the Tribunal had elicited the same description of events from SZBEL as he had given in an earlier statutory declaration. Therefore, that an issue is the subject of oral evidence before the Tribunal, or that the appellant's version of events is elicited, is insufficient by itself to identify an issue.
34 What is required is that the appellant be somehow alerted to the fact that the issue is live. That may be done in a number of different ways including by the Tribunal challenging what the applicant has said and asking the applicant to explain why his or her account should be accepted. But, that does not require the Tribunal to put to the applicant (in so many words) that he or she is lying or embellishing, nor to disclose what it is minded to decide.
35 Counsel for the Minister submitted, "as long as there's nothing the tribunal member says that gives the appellant the impression his evidence will be accepted then that is sufficient," and that "nowhere in that passage could it be suggested to the appellant that his claim about offering a bribe to be released from detention was going to be accepted or that the delegate's finding was going to stand in relation to that point. So there has been no procedural unfairness β¦ ." That was in keeping with the Minister's submission elsewhere that it was sufficient for the appellant to have been given an opportunity to explain himself in regard to a particular issue.
36 I do not accept those submissions. More is required than that the Tribunal abstain from positively indicating to an appellant that his or her account will be accepted. More is required than that an appellant be merely given an opportunity to explain himself or herself. So much is evident from the fact that in SZBEL the relevant evidence was "elicited" by the Tribunal without further comment and that, notwithstanding that elicitation, it was held that procedural fairness had not been afforded. There must be something that indicates to the appellant that the issue is live.
The facts
37 A transcript of an audio recording of the Tribunal proceedings was before me. As I will set out extracts below, it is important to note that it was explained at the outset of the transcription that italicisation was not to indicate emphasis, but instead to indicate "[a]ny words that have not been understood clearly." The Minister submitted that the question was whether "the appellant below had been given sufficient opportunity to give evidence and present arguments about those matters on which he ultimately was not believed." As I have explained, I do not accept that that is an exhaustive statement of what is required by SZBEL. To gainsay the appellant's proposition of error the Minister pointed to passages from the transcript wherein "sufficient opportunity" had been afforded.
38 In regard to the first claim (that the appellant was released from the Camp through the payment of a bribe), the Minister identified the following passage, which arose in the context of a discussion of whether the appellant's uncle had been taken from one detention camp to another (errors as in original, bold text added by way of emphasis):
MEMBER: So he was released from [the Camp] and then later detained at [the other camp]?
INTERPRETER: He wasn't released from [the Camp], okay. He was taken away from [the Camp] straight to [the other camp].
MEMBER: And why was that? Because my understanding is that the only people taken to [the other camp] were people who were known to be LTTE operatives.
INTERPRETER: Because they suspected that they, he make an arrangements for me to get escape and that's why they suspected I was involved with the LTTE and he had some connection with LTTE and that's how he managed to arrange, ah arrange my escape. And he was 55 years old and because of that, I think the authorities have took him to [the other camp] and they were very inhumane to him.
MEMBER: I don't really understand what you just told me, so, what I don't understand is you said that they thought he was connected to the LTTE and therefore was able to make the arrangements for you to leave the camp. But that doesn't make sense to me.
INTERPRETER: Yes that's what I'm saying because we all live together in, like in one tent in the camp. So after I escaped they suspected him. That's why they took him.
β¦
MEMBER: And when you use the word "escaped" you mean that some money was paid to the CID and you left the camp?
INTERPRETER: Yes.
39 In regard to the second claim (that the appellant procured a passport by the payment of a bribe) the Minister pointed to the following passage (errors and italicisation as in original, bold text added by way of emphasis):
MEMBER: When β¦ How long before your passport was issued did you apply for it?
β¦
INTERPRETER: In 2009, I didn't personally apply for that. I tried to arrange it though an agent. So I obtained it through the agent.
MEMBER: Did you actually attend the passport office in Colombo?
INTERPRETER: Yes, I went along with the agent. I actually gave money to him, paid him money and that's how I obtained the passport.
MEMBER: In your submission β¦ there's a reference to the passport official questioning you about your period of detention in [the Camp], and threatening to inform the CID[.] How would he know?
INTERPRETER: The agent who actually prepared all these applications and he β¦ for me and my brother, and he actually gave it to me and asked me to go to the passport office. And he told me that he had made all the arrangement there, so I don't need to worry about it. Just go and hand over the application and they will give you the passport. So when I went to the passport office, after handing over my application and all the documents, they actually checked it in their computer and they found out that I'm been detained in [the Camp]. And they started asking questions and they threatened me saying that they will call CID. Asked me β¦ forcing me to tell them the truth how I was released from the detention centre. And I was so scared and I just β¦ just walked out, didn't reply to them anything. And I called my agent, I told him I'm very scared because if they detain me again I don't have β¦ I can't come out, so better you approach them and got the passport for us.
MEMBER: So what you're saying β¦ what you want me to believe is that you approached the passport office, it's on their computer that you're actually β¦ you'd been detained at [the Camp]. They threatened to inform the CID, you walk out, and then later on your agent, notwithstanding that, is able to get the passport for you?
INTERPRETER: Yeah, he, the agent, told me to go back to the hotel and the next day he actually delivered the passport to me in the hotel.
40 Finally, in regard to the third claim (that the appellant departed Sri Lanka by payment of a bribe) the Minister pointed to this passage of transcript (errors and italicisation as in original, bold text added by way of emphasis):
MEMBER: Now I'm aware that passport security at airports is fairly tight in Sri Lanka. How were you .. or how do you say that you were able to pass through the international passport on two occasions without being detected if, as you've already told me, the authorities are aware of you and on a database?
INTERPRETER: The first time I went with the help of the agency β¦ I went only once. So the first β¦ the, when I β¦ when I try, when I went through the airport the agent help me. He came along with me. When they actually try to enquire me, the agent bribed the officers and he managed to actually β¦ you know, exit the airport .. I was managed the airport.
β¦
MEMBER: What about when you travelled back. Did you travel back with the agent or by yourself?
INTERPRETER: When I came back I came alone. They enquired me β¦ you know, and but they let me go. And they didn't want to release me, why they allowed me to go is because they want capture me on the spot so that could be the reason.
MEMBER: Sorry, I don't understand what you mean.
INTERPRETER: What I am saying is, my family members help me to escape from the camp, so they could actually have allowed me to β¦ allowed me to pass through the airport because they could watch me and they could catch me with other people.
MEMBER: I am aware that when you arrive at [the] airport there's a whole bank of immigration officials and you just join a line and you end up being seen by one of them. If your name was on some sort of alert, as you've told me that it is, I'd find it extremely β¦ difficult to believe that you could have passed through the airport without detection.
INTERPRETER: We are not a criminals. I don't know like, I'm not an LTTE person, or a terrorist.
MEMBER: But what you want me to believe is that you're on some sort of alert list such that the airport office knew of you, and they knew without anyone telling them, that you'd actually been detained at [the Camp] and had somehow got out? That's what you want me to believe?
INTERPRETER: I'm not saying like what to believe or what you shouldn't believe. What I'm saying is, in my country it's not often happens systematically. So I'm actually coming back to the country so β¦ they might keep me on the watch list you know. They may not want to take any action at that moment but whenever the necessity happens they will take me.
Discussion
41 Unless the Tribunal "identified" issues other than those that were dispositive for the delegate, the appellant was entitled to assume that the issues that were dispositive for the delegate were the "issues arising in relation to the decision under review." In my opinion, the issues that were dispositive for the delegate were that (as she found) the CID had not come looking for the appellant in March 2011 and that nobody had approached him or come looking for him in April 2012 when the SLA had begun to "round up" Tamil returnees. It was on the basis of those findings that the delegate found that the appellant was not of interest to the Sri Lankan authorities and thus that he did not have a real chance of serious harm amounting to persecution now or in the reasonably foreseeable future.
The first claim: exit from the Camp
42 With respect to the primary judge, I consider that his Honour was wrong to conclude that the Tribunal "put questions to the applicant that sufficiently demonstrated that the issue was being assessed by the Tribunal" (at [18]). I do not accept that the Tribunal sufficiently identified that whether the appellant had been released from the camp lawfully or instead on payment of a bribe was an "issue arising in relation to the decision under review." Counsel for the Minister submitted that sufficient identification came from the matter having been "raised at the hearing and discussed in the sense of the tribunal member asking questions in order to clarify the evidence, and then putting to the appellant each of those claims to allow the appellant an opportunity to explain them." Counsel relied in particular upon the Tribunal having indicated that it did not understand what it was being told and inviting further evidence "about the bribe to leave the camp claim, which the appellant goes on to do."
43 For two reasons, I do not accept that submission. First, in context, it seems to me that the Tribunal's statement that it did not understand was not an indication of doubt as to the proposition that had been put, it was an indication of lack of comprehension in regard to what was a fairly convoluted answer. It was seeking clarification, not amplification. That clarification was then given. The clarification was not challenged, doubt was not expressed, and the appellant was not asked to amplify his evidence or expand upon his account or explain why it should be accepted.
44 Second, the Tribunal's expression of a lack of understanding did not relate to the relevant issue. What was there being discussed was why the appellant's uncle had been moved from one camp to another. The appellant's answer (which the Tribunal did not understand) was directed to that question. The only directly-relevant passage is the final question and answer. The Tribunal asked whether by "escaped" the appellant meant on payment of a bribe, the appellant confirmed that he did, and the Tribunal moved on to the next issue. That would not have identified to the appellant that the issue of whether a bribe had been paid was live. It was mere elicitation of evidence.
The second claim: bribery in regard to the passport
45 Counsel for the Minister here emphasised the words, "what you want me to believe," which (it was submitted) indicated scepticism. Counsel submitted that the appellant had been given the opportunity to give evidence and present arguments. Counsel submitted that "the mere raising of those matters was enough," and that there was a material distinction between that (raising of matters) and simply saying, "explain to me what your claims are." That was because (it was submitted) the raising and teasing out of issues indicated to the appellant that his claims would not simply be accepted.
46 I do not accept those submissions and have come to a different conclusion than that reached by the primary judge. In my view, the proposition that merely raising matters is sufficient is irreconcilable with SZBEL. Nor do I think that the words "what you want me to believe," in context, indicate scepticism. There had gone before those words a series of questions and answers concerning the appellant's obtaining of a passport, including quite a lengthy answer immediately before the emboldened passage in the Tribunal's reasons. The emboldened passage, which commences "So what you're saying," seems to me to do no more than repeat for the purposes of confirmation what the Tribunal understood the appellant's evidence to be. Although I accept that the phrase "what you want me to believe" could, in other contexts, indicate that the Tribunal doubted a proposition, I do not think that is the meaning it here conveys. I do not think it expresses doubt, nor asks for amplification, nor invites explanation of why the claim ought be accepted. Indeed, what the question was likely to elicit from the appellant was either an answer in the affirmative (as occurred, with the proffering of additional relevant information), or in the negative so as to indicate that his evidence had been misunderstood. It was not likely to elicit an explanation from the appellant as to why his evidence ought be accepted, and it did not.
The third claim: departure from Sri Lanka including payment of a bribe following questioning
47 There was some disconnection between the finding of which the appellant complained and the passage of transcript to which the Minister pointed. The issue the appellant raised was that the Tribunal disbelieved he had left Sri Lanka in the way he described. The passages the Minister emphasised in his oral submissions mainly addressed the way in which the appellant returned to Sri Lanka. With regard to the appellant leaving, only the first question and answer in the extract above are directly relevant and his answer β that his agent bribed him through β was not directly the subject of any comment or exploration by the Tribunal.
48 If the Tribunal's comments as to extreme difficulty in disbelieving the appellant's evidence related more directly to the appellant's departure from Sri Lanka, I would have said that this was a clear case. Because those comments were of direct relatedness to return and only indirect relatedness to departure I think that this case is less clear. But, in my view, the context determines this issue in favour of the Minister. The Tribunal prefaced its question about the appellant's departure with information that was prima facie inconsistent with his claims. The Tribunal's observations in the emboldened passages of the extract β while directly relevant to the appellant's return β were indirectly relevant to his departure. The Tribunal's reservations in accepting that it was possible to pass through airport security whilst on a watch list would have indicated that the Tribunal doubted the appellant's evidence on the whole topic, and that it was a live issue. Indeed it prompted a defensive response and a further explanation as to why his evidence ought be accepted.
49 I conclude that the appellant was afforded procedural fairness with respect to the third claim.
Discretionary considerations
50 The Minister submitted that, if I found that procedural fairness had not been afforded regarding some or all of the three claims, I ought to decline relief because the Tribunal's operative finding β that the appellant was not of interest to the authorities β was sustainable on other grounds. The appellant submitted that to enter into analysis of whether the Tribunal's finding was sustainable on grounds unaffected by procedural unfairness would require a problematic process of guesswork and surmising.
51 There is force in the appellant's submission. In Re Refugee Review Tribunal; ex Parte Aala (2000) 204 CLR 82, McHugh J said as follows (at [104]):
Not every breach of the rules of natural justice affects the making of a decision. The decision-maker may have entirely upheld the case for the party adversely affected by the breach; or the decision may have turned on an issue different from that which gave rise to the breach of natural justice. Breach of the rules of natural justice, therefore, does not automatically invalidate a decision adverse to the party affected by the breach. This principle was acknowledged by this Court in Stead v State Government Insurance Commission when it said that "not every departure from the rules of natural justice at a trial will entitle the aggrieved party to a new trial". Nevertheless, once a breach of natural justice is proved, a court should refuse relief only when it is confident that the breach could not have affected the outcome because "[i]t is no easy task for a court ... to satisfy itself that what appears on its face to have been a denial of natural justice could have had no bearing on the outcome". β¦
(citations omitted; emphasis added)
52 Further, in Applicant NAFF of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 221 CLR 1, Kirby J said as follows at [84]β[85] (a passage cited in VAAD v Minister for Immigration & Multicultural & Indigenous Affairs [2005] FCAFC 117 at [81]) (citations omitted, emphasis added):
It is not the function of judicial review to retry the merits or, as such, to re-assess the merits of the case and excuse an established departure from fair procedures because the merits seem strongly one way. If the departure from procedural fairness might have affected the outcome, the function of judicial review is to say so. Subject to the consideration of any residual discretion to deny relief, the courts will set aside the flawed decision. This is because, in the eye of the law, it is not a "decision" as contemplated by law.
Every person, in respect of whom material decisions are made by a repository of public power conferred by the Parliament, is ordinarily entitled to have such power exercised in accordance with law. That includes, relevantly to this case, in accordance with the requirements of procedural fairness. The ultimate outcome of such insistence on fair procedures might eventually be the same. But where the issue is whether additional evidence and submissions might have affected the outcome of the decision-maker's consideration of the matter, it cannot normally be said with certainty that affording such an opportunity was futile.
53 Relatedly, Kirby J said at [81] (in a passage also cited in VAAD, at [79]):
β¦ decision-making is a complex mental process. Disbelief of a litigant or witness on one point might carry over to affect the decision-maker's disbelief of the same person on other points. Contrary-wise, establishing that an initial disbelief of a person's credibility on one matter was erroneous might convince a decision-maker of the need to revisit other conclusions and to look at the person's entire evidence in a new light.
54 This sets a high bar. Especially relevant is that departure from fair procedures ought not be excused only because the merits seem strongly against the appellant. Having found that there was procedural unfairness in the Tribunal proceedings, it is necessary to consider whether this is a case where it can confidently be concluded that the unfairness could have had no bearing on the outcome. The Tribunal considered the appellant's claims and evidence from [46]β[52] of its decision. The finding that seems to have been dispositive was that the appellant was not of adverse interest to the authorities at the time he departed Sri Lanka (at [50], [54]). There were six steps in the Tribunal's reasoning:
(1) It referred to additions to the appellant's story, which it said were minor though indicated that the appellant had not been fully truthful in his original application or was fabricating evidence.
(2) It referred to other "additions to or changes in claims" which were not minor and seriously impacted on the appellant's credibility. They were:
(a) the inconsistency regarding his claims about obtaining a passport;
(b) his having altered his evidence about involvement with the LTTE;
(c) his claim at one time to have known a person that had been taken in April 2012 as against his later claim not to have known anyone who was arrested at that time.
(3) It said that those issues were not, of themselves, significant enough to result in an adverse credibility finding but, in combination with other matters going to the overall implausibility of his claims, did result in such a finding. The other matters that the Tribunal did not accept were that:
(a) the authorities were searching for him with a view to his arrest;
(b) he was on an alert list at the passport office and bribes had to be paid both to that office and also at the airport when he departed for India;
(c) the CID had come to the hospital looking for him;
(d) he ceased working full time for his brother because he was concerned that authorities were looking for him.
(4) The Tribunal then said that those matters went to the core claims, and said this:
(a) "I do not accept that he is on any watch list."
(b) "I do not accept he obtained a passport through a bribe."
(c) "I do not accept the CID looked for him at any time."
(d) "I do not accept that he had any difficulty departing from or entering Sri Lanka."
(e) "Overall, I find that the applicant is not a credible witness.
(5) At [50], the Tribunal went on to consider how "these findings" impacted other aspects of the appellant's claims. It held that he had been released from the Camp regularly rather than through payment of a bribe. It based that conclusion upon "the applicant's accepted history" of obtaining a passport and travelling without difficulty, not being on any alert list, living at home, working for his brother, and not being of any interest to the CID, which it said indicated that the appellant was released "as he was not consider[ed] to have any connection with or association with the LTTE."
(6) Finally, and also at [50], the Tribunal accepted that nobody came looking for the appellant in 2012, and that he did not know anyone who was detained at that time. It concluded, "I find that the applicant was not of adverse interest to the authorities at the time he departed from Sri Lanka."
55 In broad terms, I think that the Tribunal's reasoning was as follows. It took into account the seven matters listed in points (2) and (3) in arriving at the conclusions in (4). It relied upon some of the findings from (4) and some of the findings from (3) in order to conclude, in (5), that the appellant had been released regularly from camp. For the reasons given in (2), (3), (4), and (5), and the two matters listed in (6), it concluded that the appellant was not of adverse interest to the authorities at the time he departed from Sri Lanka.
56 Within (2) no findings were affected by the procedural unfairness outlined above. Finding (2)(a) appears at first blush to be of that nature, but what the Tribunal is there relying upon is inconsistency between claims, not a disbelief that the appellant had obtained his passport through bribery. Within (3), finding 3(b) is affected. Within (4), only finding (4)(b) is affected by procedural unfairness. Finding (5) itself is affected by procedural unfairness, as are the findings upon which it is predicated, being findings (3)(b) and (4)(b). Given that, ultimately, the fact that the Tribunal regarded the appellant to be of no interest to the Sri Lankan authorities was a weighty consideration, it is significant that as part of finding (5) the Tribunal came to the view that the appellant was not considered by the authorities "to have any connection with or association with the LTTE" at the time he was released from the Camp and that, in coming to that view, the Tribunal relied upon its rejection of the appellant's first and second claims. Finding (6) appears to be based in part upon finding (5).
57 Most of the Tribunal's findings were unaffected by procedural unfairness. However, procedural unfairness creeps in at the third step of the Tribunal's reasoning and that arguably infects all subsequent and resultant findings. As the Court said in VAAD (at [79]):
β¦ an assessment of credibility is not necessarily linear. It is possible that had the Tribunal considered the UNP Letter as part of the file received from the Secretary, it may have accepted it as genuine. If so, it is possible that the Tribunal would have been more likely to accept other aspects of the appellants' account of their experiences in Sri Lanka. As Gleeson CJ commented in Aala at [4]:
'β¦ Decisions as to credibility are often based upon matters of impression, and an unfavourable view taken upon an otherwise minor issue may be decisive β¦'
58 I think that, had the Tribunal afforded procedural fairness to the appellant consistently with SZBEL, it would probably still have found that the appellant was not of interest to the authorities. It gave many reasons apart from the two affected claims for disbelieving the appellant's claims, including some that appear have been quite probative. But I cannot say with confidence that the denial of natural justice could have had no bearing on the outcome. It seems to me not impossible that, if procedural fairness had been afforded to the appellant regarding his claims to have been released from the Camp, and to have obtained a passport by payment of bribes, he might have offered a sufficiently convincing explanation in order to be believed by the Tribunal, as he was by the delegate. Although the Tribunal might have decided against him anyway (as, indeed, did the delegate), I cannot say that that was an inevitability. Thus, I cannot accede to the Minister's submission that I ought to decline relief.
Ground 2
59 The Tribunal, in saying that the appellant "clearly state[d] he had no difficulty in obtaining his passport," was referring to question 53 of the appellant's visa application. Therein, the appellant was asked, "Did you have difficulties obtaining a travel document (such as a passport) in your home country?" The appellant checked the box marked, "No." I accept, as the appellant submitted, that he had stated in his entry interview, "we had to pay for our passport tas [sic] well." Earlier in that interview he had stated, "[w]e were there for two months my family paid money to get us out of the camp," and so, in that light, the reference to payment for a passport "as well" refers to payment by way of a bribe. Thus, I reject the Minister's submission that the appellant "modified his claim" before the delegate. The appellant had earlier maintained that he paid a bribe for his passport.
60 But, that does not suffice to make good ground 2, which complains of an absence of evidence in support of the statement that the appellant "clearly states he had no difficulty in obtaining his passport." There was evidence for that proposition, being the appellant's answer to question 53 of his visa application. What the Tribunal made of that answer was a matter for the Tribunal. In the event, it considered that the answer was inconsistent with other and later statements that a bribe had been paid.
61 Nor did the Tribunal misconstrue the appellant's claim. The Tribunal's reasons establish that it was well aware that the appellant claimed that he had paid a bribe to obtain a passport.
62 Ground 2 is not established.
Ground 3
63 This ground raises three issues, being:
(1) illogicality or irrelevancy in regard to the Tribunal's reasoning concerning the appellant's scarring leading to a failure to consider the appellant's claim;
(2) failure to deal with the appellant's claim that he feared persecution at the hands of paramilitary groups;
(3) failure to consider whether the appellant's claim of arbitrary detention and serious mistreatment of individuals, particularly during interrogation, amounted to persecution or significant harm.
The appellant's scarring
64 The impugned passage is at [63] of the Tribunal's reasons:
Further, I do not accept that he has a level of profile that would cause him to be considered as suspect by the authorities for any matter. I do not accept that his having been detained in 2009 and then legally released is of any adverse consequence for him now. At the time tens of thousands of Tamils were detained and then released. Whilst I accept he has a scar from the shrapnel wound I consider the authorities would have been aware of that when they released him in 2009.
65 I think that the Tribunal was saying this: it was known to authorities in 2009 that the appellant had a shrapnel wound; notwithstanding that knowledge, he was released from detention, which necessitates that the shrapnel wound was not sufficient to result in the appellant having a profile (e.g., as an LTTE cadre or affiliate) such that authorities considered he ought be detained; there is no reason to think that the same scarring would now be sufficient to result in the appellant having that nature of profile; accordingly his scarring does not contradict the proposition in the first sentence of [63], that he does not have a profile that would cause him to be considered suspect by the authorities.
66 That is not illogical nor is it irrelevant, and it was a line of reasoning that was open to the Tribunal and which gave consideration to the claim made.
Paramilitary groups
67 The appellant did not develop this particular in oral submissions. In written submissions it was said that the appellant had submitted to the Tribunal that paramilitary groups were:
(1) involved in assisting government military forces in the assault and murder of civilians;
(2) impeding the movement of residents, especially Tamils;
(3) assisting government authorities in detaining and torturing individuals alleged to have LTTE connections;
(4) frequently harassing Tamil men; and
(5) practicing illegal seizure of private land and extortion, with impunity,
and that the Tribunal had not dealt with that claim but instead only with a claim that the appellant feared persecution at the hands of Sri Lankan authorities.
68 The Minister submitted (as before the primary judge) that the Tribunal was aware of the claim and had dealt with it in the course of findings of greater generality. The Minister relied upon Applicant WAEE v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 75 ALD 630 at [47], whereat French, Sackville and Hely JJ said this:
The inference that the tribunal has failed to consider an issue may be drawn from its failure to expressly deal with that issue in its reasons. But that is an inference not too readily to be drawn where the reasons are otherwise comprehensive and the issue has at least been identified at some point. It may be that it is unnecessary to make a finding on a particular matter because it is subsumed in findings of greater generality or because there is a factual premise upon which a contention rests which has been rejected. Where, however, there is an issue raised by the evidence advanced on behalf of an applicant and contentions made by the applicant and that issue, if resolved one way, would be dispositive of the tribunal's review of the delegate's decision, a failure to deal with it in the published reasons may raise a strong inference that it has been overlooked.
69 As the primary judge observed (at [33]), the Tribunal referred to the claim of feared persecution by paramilitaries at [28]. It found that the appellant was not of adverse interest to authorities when he departed Sri Lanka ([50], [54]). It considered whether the appellant was at risk for reason of being a young Tamil male, or more generally a Tamil ([55]). It was not satisfied that Tamils faced serious harm because of their ethnicity, or that other factors including being from the north or east of Sri Lanka, or being young and male, put them at greater risk (at [58]). It rejected that the appellant had an adverse profile ([70]).
70 The primary judge reasoned that findings in regard to paramilitary groups had been subsumed within findings of greater generality. The primary judge further held that the claim rested on a factual premise that had been rejected, namely that the appellant would have an imputed LTTE profile. With respect to the primary judge, I consider that the second of his Honour's reasons was only partly right. Only the third of the items identified by the appellant concerning paramilitary groups relied upon an imputed LTTE profile. Notably, that one was emphasised by the appellant in his submission to the Tribunal, but I think, in fairness to the appellant, that his claim was broader and did include, for example, that paramilitaries frequently harassed Tamil men. Whether β if accepted β that constituted serious harm may have been in issue, but the claim was made.
71 However, the first of the primary judge's reasons is (with respect) sound and dispositive. In circumstances where the appellant's fear of harm at the hands of paramilitaries was expressly mentioned, the Tribunal considered whether Tamils simpliciter were at risk, and held that they were not. That deals with items (2), (4) and (5) of the items listed above. Further, the Tribunal considered whether the appellant was of interest to the authorities and held that he was not. As items (1) and (3) had as a predicate that paramilitaries were "assisting" authorities, the Tribunal's reasoning appears to have been that if the appellant was not of interest to Sri Lankan authorities he was not at risk of harm from paramilitaries assisting Sri Lankan authorities. I accept the Minister's submission that findings of greater generality addressed the appellant's claim.
Arbitrary detention or and serious mistreatment
72 The appellant did not develop this particular in oral submissions. His written submissions did not go much beyond restatement of the ground of appeal. The Minister's written submissions indicated where the primary judge had dealt with this particular in his reasons for judgment and asserted that there was no error.
73 I accept the Minister's submission. With respect, I concur with the primary judge that the Tribunal's finding that the appellant did not have an LTTE profile sufficient to attract adverse attention ([50]), its finding that the appellant was likely to be detained for a few days and fined ([62]), and its finding that that did not constitute serious harm for the purposes of s 91R of the Migration Act, were sufficient to dispose of the appellant's claim. This particular fails. So, too, does the third ground.
Ground 4
74 In oral submissions, counsel for the appellant clarified that only particulars (d) and (e) of the particulars to the correlate of this ground before the primary judge were pressed. Particular (d) alleged, in terms, that the Tribunal had failed to take into account a DFAT report to the effect that all returnees from Australia were being charged and remanded and that authorities had a focus on enforcing Sri Lankan law, and that it had failed to take into account what was set out in s 45(1)(b) of the Sri Lankan Immigrants and Emigrants Act in regard to a minimum and maximum period of imprisonment. Particular (e) alleged that the Tribunal failed to carry out its statutory obligation to resolve contradictory material going to the question of likely penalty, and accepted some of that evidence uncritically. In oral submissions, counsel for the appellant put that the Tribunal had not referred specifically to the material to which the particulars referred.
75 I reject the appellant's submissions. The DFAT report is referred to at paragraphs [45] and [60] of the Tribunal's reasons. The possibility of mandatory imprisonment is referred to at paragraphs [59] and [69] of the Tribunal's reasons. Cognisant of that evidence, the Tribunal nevertheless held (at [70]) that "[the appellant] may be arrested on return and held on remand awaiting grant of bail. He will most likely be fined. He may be questioned about where he has been however I do not accept that anything other than this will happen." There is no basis for saying that the Tribunal accepted one or other aspect of the evidence "uncritically." It made a finding of fact on the basis of the evidence before it, including the evidence to which the particulars refer. While the primary judge dealt with grounds 4 to 6 together and did not, it seems to me, address the questions raised by ground 4, the error asserted by the appellant is not made out and it follows that the primary judge did not err in failing to hold that the Tribunal had committed jurisdictional error.
Ground 5
76 It was alleged in ground 5 that the primary judge should have found that the Tribunal erred and had constructively failed to exercise jurisdiction in relation to the appellant's claim that he feared harm as a member of a social group. The Tribunal had held (at [61]), "I have considered whether there is any element of membership of a particular social group and cannot identify one. I do not accept there is a particular social group of failed asylum seekers as such a group is necessarily in these circumstances defined by the harm they fear."
77 Before me, the parties proceeded on the basis that the primary judge held that the Tribunal erred in finding that returned asylum seekers could not be a "particular social group." I am not convinced that the primary judge did so find. His Honour said (at [41], with emphasis added), "The Tribunal may also have been wrong β¦ to find that there is no particular social group of failed asylum seekers in Sri Lanka" and later his Honour said (at [44], with emphasis added), "This reasoning was probably erroneous β¦ ." At [47], the primary judge said, "However, the legal correctness of the Tribunal's reasoning is effectively irrelevant β¦ ." His Honour found that the Tribunal's approach fell foul of WZAPN v Minister for Immigration and Border Protection (2014) 229 FCR 477 and thus said (at [37], with emphasis added), "I accept that the Tribunal made one (and possibly two) errors in dealing with this claim." The possible second error must be the finding that returned asylum seekers could not be a particular social group. While it seems that his Honour would likely have found that the Tribunal had erred, if he had thought it necessary, the better reading of the primary judge's reasons is that the primary judge perceived that the appellant's claim in this regard failed for another reason, and that he did not therefore have to find (and he deliberately refrained from finding) that the Tribunal had erred.
78 I agree with the primary judge. First, I agree that the Tribunal's finding was probably wrong. It seems to me incorrect to say that the posited "particular social group" of returned asylum seekers is defined by reference to the harm its putative members fear, as that notion was explained by McHugh J in Applicant A v Minister for Immigration and Ethnic Affairs (1997) 190 CLR 225 at 263β4. Second, however, I agree with the primary judge that the answer to that question of law does not matter in this case because the Tribunal's conclusion is sustainable on another basis. That basis (which the primary judge identified at [40]) is that the harm that the appellant claimed to fear was harm that would arise from the non-discriminatory application of a law of general application.
79 Before the primary judge and before this Court the Minister referred to MZZUO v Minister for Immigration & Border Protection [2014] FCA 1267. There, the Tribunal had made a qualitative assessment of the harm feared by MZZUO and held that it was not serious harm. By the time the matter came before Pagone J, it had been held in WZAPN v Minister for Immigration and Border Protection (2014) 229 FCR 477 that to make such a qualitative assessment was a wrong approach. Pagone J held that, apart from the "serious harm" finding, there was an independent and alternative finding that was dispositive against MZZUO, namely that any detention of MZZUO would be pursuant to a law of general application that would not be applied differently to MZZUO (at [15]). The primary judge could not distinguish MZZUO; nor can I distinguish it. As in MZZUO, the Tribunal here held that "β¦ the motivation of the Sri Lankan authorities in arresting, detaining for a few days and fining people is not for reasons of a Convention ground but the implementation of a law of general application β¦ [and there] is no evidence that the law, any period of detention and fine, or the condition of detention, are being applied in a discriminatory manner." As was explained by Perram J (with whom Moore J agreed) in Minister for Immigration and Citizenship v SZNWC (2010) 190 FCR 23 at 32 [40]:
In a case where a person applying for a protection visa claims to be a member of a particular social group which is persecuted by the operation of some criminal law, the approach to be taken by those deciding the visa application is well settled. First, the decision-maker must ask whether the particular social group claimed exists. Secondly, if the group exists then the decision-maker must ask whether the nominated criminal law discriminates against that group. This is necessary because unless the criminal law discriminates against the group then there can be no question of the group being persecuted by that criminal law. β¦
In this case, as in MZZUO, if the appellant passed the first hurdle he would fall at the second.
80 Further, in BZAFM v Minister for Immigration and Border Protection (2015) 321 ALR 117 and SZTEQ v Minister for Immigration and Border Protection (2015) 229 FCR 497 (decided after the primary judge's judgment but before the hearing of the appeal in this Court) it was held that WZAPN was wrongly decided. In Minister for Immigration and Border Protection v WZAPN [2015] HCA 22 (decided after the hearing of this appeal), WZAPN was overturned. The primary judge was right (at the time of his judgment) in finding that the Tribunal's paragraph [62] suffered the vice identified in WZAPN, and therefore was right (at the time) in not relying upon that paragraph as another alternative and independent finding dispositive of the appellant's claims. In light, however, of the subsequent decisions of the Full Court of this Court and of the High Court, paragraph [62] of the Tribunal's decision is orthodox and the finding contained therein β that the harm likely to be suffered by the appellant was not serious harm for the purposes of s 91R of the Migration Act β is another alternative and independent finding that would be dispositive of the appellant's claim under s 36(2)(a).
81 Accordingly, irrespective of any error by the Tribunal in regard to its social group finding, this is an appropriate case for the Court to decline to exercise jurisdiction to grant relief.
Ground 6
82 Ground 6, which was not raised in the same terms before the primary judge, alleged that the Tribunal erred by applying the same test for Convention protection and complementary protection. It also alleged that the Tribunal's findings as to length of detention and whether or not the Immigrants and Emigrants Act was a law of general application were irrelevant for the purposes of complementary protection. The appellant's written submissions, however, went not to that issue but instead to whether the Tribunal had applied (as the appellant said it must) a "proportionality" analysis to the Immigrants and Emigrants Act. It was the "proportionality" argument that the appellant developed in oral submissions.
83 Really, therefore, the appellant sought to advance three arguments purportedly under the auspices of ground 6. The first and second, contained in the ground itself, were not developed either in oral or written submissions beyond mere restatement. His "proportionality" argument was not articulated in his ground of appeal, nor was it raised before the primary judge (as counsel for the appellant frankly acknowledged). The appellant thus requires leave to advance all of these arguments: the conflation and irrelevancy arguments because they were not advanced before the primary judge, and the "proportionality" argument both because that was not raised before the primary judge and because it was not set out in the notice of appeal.
84 The Minister submitted that the appellant should not have leave to advance the ground articulated in the notice of appeal and said nothing about whether leave should be given to advance the "proportionality" argument. The Minister relied upon what was said in VAAC v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 129 FCR 168 at [26] (North, Merkel and Weinberg JJ):
It is therefore necessary to consider whether it is expedient in the interests of justice to allow the new ground to be argued and determined. In the present case, the interests of justice require reference to a number of considerations, namely, the appellant's prospects of success on the appeal on the new argument, the explanation given by the appellant for failing to raise the argument before the primary judge, the prejudice to the respondent in allowing the appellant to raise the new argument, the potentially serious consequences to the appellant if leave to amend is refused, and the integrity of the appellate process.
85 In VUAX v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCAFC 158, the Court (Kiefel, Weinberg and Stone JJ) said this (at [46]β[48]):
In our view, the application for leave to rely upon the sole ground of appeal now raised should be refused. Leave to argue a ground of appeal not raised before the primary judge should only be granted if it is expedient in the interests of justice to do so: O'Brien v Komesaroff (1982) 150 CLR 310; H v Minister for Immigration & Multicultural Affairs; and Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at [20]-[24] and [38].
In Coulton v Holcombe (1986) 162 CLR 1, Gibbs CJ, Wilson, Brennan and Dawson JJ observed, in their joint judgment, at 7:
"It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so the main arena for the settlement of disputes would move from the court of first instance to the appellate court, tending to reduce the proceedings in the former court to little more than a preliminary skirmish."
The practice of raising arguments for the first time before the Full Court has been particularly prevalent in appeals relating to migration matters. The Court may grant leave if some point that was not taken below, but which clearly has merit, is advanced, and there is no real prejudice to the respondent in permitting it to be agitated. Where, however, there is no adequate explanation for the failure to take the point, and it seems to be of doubtful merit, leave should generally be refused. In our view, the proposed ground of appeal has no merit. There is no justification, therefore, for permitting it to be raised for the first time before this Court.
86 The Minister submitted that while it would not be prejudiced by leave being granted, the proposed grounds did not enjoy sufficient prospects of success to warrant leave being granted. For reasons given below, I accept that submission. Further, no persuasive reason was given as to why the arguments could not have been advanced below: counsel for the appellant submitted only that it was a "fluid area of law." Although that is true, it does not explain why the grounds could not have been advanced before the primary judge. Further, the "proportionality" argument was not contemplated by ground 6 before me and was advanced only informally, in written and oral submissions. No explanation was given for why that course was adopted. Altogether, I do not consider it is expedient in the interests of justice to permit the appellant to advance the new grounds. That decision rests in part (as noted above) on my view that the grounds enjoy little prospects of success and so I will now explain why that is my view.
The conflation and irrelevancy argument
87 The Tribunal did give separate consideration to s 36(2)(a) and s 36(2)(aa). At [67], the Tribunal set out the complementary protection test. At [68] it set out what was meant by "significant harm," and referred to s 36(2A). At [69] it referred to the appellant's submissions that dealt with the issue. At [70], the Tribunal restated previous findings that the appellant lacked an adverse profile and that he was not of interest to the authorities. It made findings as to what was likely to occur to the appellant should he be returned to Sri Lanka. It held that what would occur did not constitute significant harm as defined by s 36(2A). That is an orthodox approach. It was open to the Tribunal to rely on findings made for the purposes of s 36(2)(a) in dealing with s 36(2)(aa) (SZSGA v Minister for Immigration, Multicultural Affairs and Citizenship [2013] FCA 774 at [56] (Robertson J)). The "conflation" argument seems to me to enjoy very little prospect of success.
88 The second aspect of proposed ground 6 was that "the length of the detention / law of general application [were] irrelevant for the purposes of complementary protection." Assuming it to be correct, for the purpose of argument, that the general applicability of the Immigrants and Emigrants Act is irrelevant for the purposes of assessment against the complementary protection criterion, the Tribunal did not fall into error because its consideration of s 36(2)(aa) did not turn on that (or even address it); it turned on findings that the harm likely to be suffered by the appellant was not serious harm. As to that, the assertion that the length of detention is irrelevant in consideration of the complementary protection criterion cannot stand in the light of BZAFM, SZTEQ, and the High Court's judgment in WZAPN. In any event, even if the North J's judgment in WZAPN remained good law, that matter dealt with persecution and serious harm, s 91R, and s 36(2)(a); it did not deal with significant harm, s 36(2A) and s 36(2)(aa). This aspect of the ground, too, has very little prospect of success.
The proportionality argument
89 The appellant submitted as follows:
The Tribunal did not particularly address the Immigrants and Emigrants Act (Sri Lanka) as law of general application [and] it did not go on to find that the detention was lawful. The Tribunal did not address proportionality.
In WZAPN at [51], North J found that the Tribunal was also required to address whether the detention was proportionate to the object. The Tribunal not carried out this task [sic]. North J was not overruled on the issue.
90 It is necessary, for context, to set out paragraph [51] of WZAPN:
[51] When assessing a law of general application, the essence of the international human rights approach and of the appropriate and adapted test is similar. Both ask whether the detention was lawful, in the sense of being pursuant to a domestic law, but also by reference to the object of that law and whether the detention was proportionate to that object. The human rights approach asks whether the detention, whilst perhaps lawful, was arbitrary, whilst the question of whether the law was applied arbitrarily is implicit in the appropriate and adapted test. If applied arbitrarily, the law may not be appropriate and adapted in the sense of proportionate in the means used to achieve its object: Applicant S at [48]. β¦ .
91 The appellant's submissions seem to me to be bound to fail. There are a number of reasons:
(1) the Tribunal found that the kind of harm that would be suffered by the appellant was not "significant harm" (at [70]). That is fatal to a complementary protection claim irrespective of proportionality: s 36(2)(aa) only applies where "there is a real risk that the non-citizen will suffer significant harm."
(2) it is not clear that any assistance can be derived from WZAPN, for these reasons: first, unlike in WZAPN, there was no finding of arbitrariness and indeed contradictory findings were made at [61] of the Tribunal's reasons. As the High Court said in WZAPN (at [77]), "β¦ an inquiry into whether a law or policy is 'appropriate' to some legitimate object of the country concerned is relevant only once it is concluded that the law or policy results in discriminatory treatment for a reason specified by the Convention." Second, and relatedly, in WZAPN North J was addressing "the proper approach to persecution in the circumstance where an applicant is detained pursuant to a law of general application," but persecution arises in regard to s 91R and s 36(2)(a), not in regard to s 36(2)(aa). Third, alternatively, if WZAPN is not distinguishable on that count it seems distinguishable on the same basis as the cases listed at [20] of SZTBW v Minister for Immigration and Border Protection [2014] FCA 1277 (Perry J), namely that the Tribunal had held that the illegal departure laws were laws of general application and were not discriminatory on their face, nor in their application
(3) contra the first sentence of the appellant's submission, the Tribunal in holding (as it did at [61]) that the appellant's arrest, detention, and fines would be in the "implementation of a law of general application relating to illegal departure from Sri Lanka," could only have been referring to the Immigrants and Emigrants Act.
92 The proportionality argument seems to me to enjoy very little prospect of success.
Disposition
93 Because I have found that the Tribunal failed to afford the appellant procedural fairness, and that there is no basis for declining to give relief, I will make appropriate orders allowing the appeal and remitting the matter to the Tribunal.
94 The appellant sought an order that the primary judge's costs order be set aside, and that he be awarded his costs of the appeal and of the proceeding below. While the Minister did not specifically traverse the question of what should happen in relation to the costs below if the appeal was allowed, the parties were agreed that costs ought to follow the event. I think it was fairly clear that the question of costs, as raised during the hearing, extended to the costs of the proceeding below. Since it had been raised by the appellant's notice of appeal, that was known to be a live issue. I assume that the Minister's agreement that costs ought to follow the event constituted agreement that, if the appellant was successful, he ought to have his costs below as well.
95 However, it may be that that was not the Minister's intent in submitting as he did. So, I will not at this time make orders that the primary judge's order as to costs be set aside or that the appellant have his costs of the proceeding below. However, I indicate that, unless the Minister makes a written submission within seven days after the date of this judgment that a different result ought to obtain, I will make orders to that effect. If the Minister does so submit, the appellant may make responsive written submissions within a further seven days. Unless I otherwise direct, that question will then be dealt with on the papers.
I certify that the preceding ninety-five (95) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bromberg.
Associate:
Dated: 10 September 2015
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NAIP v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCA 451
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2003/2003fca0451
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2024-09-13T22:46:09.737818+10:00
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FEDERAL COURT OF AUSTRALIA
NAIP v Minister for Immigration & Multicultural & Indigenous Affairs
[2003] FCA 451
NAIP v MINISTER FOR IMMIGRATION & MULTICULTURAL & INDIGENOUS AFFAIRS
N87 of 2003
MADGWICK J
17 APRIL 2003
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY N87 OF 2003
BETWEEN: NAIP
APPLICANT
AND: MINISTER FOR IMMIGRATION & MULTICULTURAL & INDIGENOUS AFFAIRS
RESPONDENT
JUDGE: MADGWICK J
DATE OF ORDER: 17 APRIL 2003
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The application is dismissed.
2. The applicant is to pay the respondent's costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY N87 OF 2003
BETWEEN: NAIP
APPLICANT
AND: MINISTER FOR IMMIGRATION & MULTICULTURAL & INDIGENOUS AFFAIRS
RESPONDENT
JUDGE: MADGWICK J
DATE: 17 APRIL 2003
PLACE: SYDNEY
REASONS FOR JUDGMENT
(revised from transcript)
MADGWICK J:
1 This is an application for judicial review, pursuant to s 39B of the Judiciary Act 1903 (Cth), of a decision of the Refugee Review Tribunal ("the Tribunal") handed down on 16 January 2003. The decision affirmed a decision of a delegate of the respondent Minister refusing to grant the applicant a protection visa.
2 The applicant is a citizen of India who hails from Kerala State. He represented himself to be a devout Hindu and he sought refugee status in Australia following his arrival here on 28 August 2001.
3 In his application for a protection visa, the applicant claimed that he had a well-founded fear of persecution for reasons of political opinion. The basis of his claim, as was put to the Tribunal, was that he became a member of an organisation known as Rastriya Soyaum Sange ("RSS"), which was banned by the Government led by Ms Indira Ghandi as an alleged terrorist organisation and he said that he had been placed under house arrest. Later, the RSS split and the Bharateeya Janata Party ("BJP") was formed. The applicant says he joined that party and worked for it, but was harassed by members of the Marxist and Congress parties. He claimed that in 1995 the Government changed and the BJP was in opposition. Its members were harassed and the applicant said that he was a particular target because of his prominence in politics. He claimed that his business was destroyed and he was severely injured in an attack upon him, as a result of which he was almost killed. The applicant said that he left India because of this persecution. He claimed that he sought refugee status in Japan unsuccessfully but finally obtained a visa to travel to Australia.
4 The Tribunal Member, for reasons ably expressed, if I may say so, disbelieved the applicant in all material particulars. The Tribunal said that the applicant's evidence was quite "vague, generalised, lacked specific detail and was inconsistent and unconvincing". The Tribunal Member continued:
"I do not consider the applicant was a reliable or credible witness. This is especially so with regard to the evidence that the applicant gave at the hearing on 11 December 2002, when the applicant was unable or unwilling to provide any details or provide any substance of his claims.
The applicant's claims of his political activity were completely lacking in detail. His claims were general in nature, avoiding any of the where, how, what, why and when... He made the claim at the hearing that friends told him that he was not permitted to take any documents out of his country or [to have] any sent to him from his country. His explanation was implausible and a nonsense. He did not provide any detail at all of any of his activities or of the violence and attack he claimed to have suffered, except to make the general assertion he was stabbed, hit in the head and suffered in hospital of a coma for nine days. He was unable or unwilling to say when, where, how and under what conditions the attack occurred."
5 The Tribunal also noted that, despite the close surveillance of the authorities of travel by Indian nationals on account of fears of terrorism, the applicant had been able to obtain a passport in 1995 and to travel to Thailand, Hong Kong and Japan sometime in 1996 or 1997. Then he returned to India and remained there without any problems until obtaining a visa to travel to Australia in August 2001, at which time he was able to leave India without difficulties or incident.
6 The Tribunal Member observed:
"These are not the travel details of a person who claimed to have a genuine fear of persecution in his country."
7 Further, there was no evidence, as the Tribunal Member found, in the independent information which would suggest that members of the BJP, currently forming the Government in India, had been persecuted by members of other parties there. Accordingly, the Tribunal was not satisfied that the applicant had a well-founded fear of persecution by reason of his political opinion or for any other Convention reason. The Tribunal detailed a good many matters that appeared to support these quite firm conclusions.
8 The applicant appears unrepresented, assisted by an interpreter. His application to the Court is remarkably inadequate even by the standards of unrepresented litigants. Doing the best one can with it, he appears to be making an application for whatever form of judicial intervention that might commend itself to the court, pursuant to s 39B of the Judiciary Act 1903 (Cth). The accompanying affidavit does not suggest any error of any kind by the Tribunal. When invited by me today to say what errors the Tribunal might have made, the applicant indicated that his complaint was that he had told the truth to the Tribunal, which had not believed him.
9 Because of the seriousness of his claims and the fact that he was unrepresented, I have looked through the materials to see whether any basis for judicial review might be capable of argument, but I can find none. A judge is of course not best placed to do this but nevertheless I have tried. As far as I can see there is no basis at all for the court to intervene and no reason to think that the Tribunal made any error of law at all, let alone any jurisdictional error.
10 The application to this Court must be dismissed. The applicant is ordered to pay the respondent's costs.
I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Madgwick.
Associate:
Dated: 13 May 2003
Applicant appeared in person.
Counsel for the Respondent: Ms Allars
Solicitor for the Respondent: Blake Dawson Waldron
Date of Hearing: 17 April 2003
Date of Judgment: 17 April 2003
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BGS15 v Minister for Immigration and Border Protection [2016] FCA 1306
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2016/2016fca1306
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2024-09-13T22:46:09.777671+10:00
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FEDERAL COURT OF AUSTRALIA
BGS15 v Minister for Immigration and Border Protection [2016] FCA 1306
Appeal from: Application for extension of time and leave to appeal: BGS15 v Minister for Immigration & Anor [2016] FCCA 1416
File number: NSD 1069 of 2016
Judge: NICHOLAS J
Date of judgment: 1 November 2016
Legislation: Migration Act 1958 (Cth) ss 36, 65
Federal Circuit Court Rules 2001 (Cth) r 44.12
Date of hearing: 1 November 2016
Registry: New South Wales
Division: General Division
National Practice Area: Administrative and Constitutional Law and Human Rights
Category: No Catchwords
Number of paragraphs: 16
Counsel for the Applicant: The applicant appeared in person with the assistance of an interpreter
Solicitor for the First Respondent: Mr M Wiese of Clayton Utz
Counsel for the Second Respondent: The second respondent submitted save as to costs
ORDERS
NSD 1069 of 2016
BETWEEN: BGS15
Applicant
AND: MINISTER FOR IMMIGRATION AND BORDER PROTECTION
First Respondent
ADMINISTRATIVE APPEALS TRIBUNAL
Second Respondent
JUDGE: NICHOLAS J
DATE OF ORDER: 1 November 2016
THE COURT ORDERS THAT:
1. The application for an extension of time and leave to appeal be dismissed.
2. The applicant pay the first respondent's costs of the application fixed in the amount of $3,000.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(Revised from Transcript)
NICHOLAS J:
1 This is an application for an extension of time and leave to appeal against a judgment of a Judge of the Federal Circuit Court of Australia (Judge Street) given on 10 June 2016 dismissing the applicant's application for review of a decision of the Refugee Review Tribunal (as it then was) ("the Tribunal") dated 15 June 2015 affirming a decision of a delegate of the first respondent ("the Minister") not to grant the applicant a protection (Class XA) visa pursuant to s 65 of the Migration Act 1958 (Cth) ("the Act"). His Honour dismissed the applicant's application for judicial review pursuant to r 44.12 of the Federal Circuit Court Rules 2001 (Cth) ("the FCC Rules") on the basis that it did not raise an arguable case for the relief sought.
2 The applicant is a citizen of Sri Lanka who arrived in Australia as an irregular maritime arrival on 20 June 2012. The applicant applied for a protection (Class XA) visa on 1 March 2013. He claimed to fear harm by reason of his ethnicity, being Tamil, and his imputed political opinion, due to a perceived association (through his involvement in a local fishermens' association) with the Liberation Tigers of Tamil Eelam ("LTTE") and also by reason of being a member of a particular social group, that of a failed asylum seeker who left Sri Lanka illegally.
3 The Minister's delegate refused to grant the applicant a protection visa on 30 September 2013. On 3 October 2013, the applicant applied to the Tribunal for review of the delegate's decision. He appeared before the Tribunal on 14 January 2015 to give evidence and present arguments with the assistance of an interpreter and a registered migration agent.
4 On 15 June 2015, the Tribunal affirmed the decision not to grant the applicant a protection visa. It found that the applicant did not satisfy the criteria for grant of the visa under either s 36(2)(a) or s 36(2)(aa) of the Act.
5 The Tribunal found that the applicant had not been truthful in relation to a number of aspects of his claims. The particular matters relied upon by the Tribunal in finding that the applicant was not a witness of truth in relation to aspects of his claims are set out in paragraphs [41]-[46] of the Tribunal's Statement of Decision and Reasons. Some of these matters, the Tribunal found, were inherently implausible. In particular, the Tribunal did not accept the applicant's account of an alleged incident which he said occurred in 2012 involving his interrogation and beating by the army which the applicant attributed to his membership of the fishermens' association, which he said the army understood to be involved with, or to be supporters of, the LTTE.
6 The Tribunal did not reject all of the applicant's evidence. In particular, it appears to have accepted his account of an incident in 2009 in which the applicant was detained and interrogated by Sri Lankan authorities. The Tribunal accepted that he was detained, interrogated and mistreated at that time. However, the Tribunal was not satisfied that there was a real chance that the applicant would be harmed as a result of his detention in 2009 if he was to return to Sri Lanka now or in the reasonably foreseeable future.
7 The Tribunal also considered the matter of the applicant's Tamil ethnicity. The Tribunal accepted that Tamils "continue to face a level of societal discrimination in Sri Lanka" but was not satisfied that any discrimination that the applicant may experience on return to Sri Lanka would involve serious or significant harm. In support of this conclusion the Tribunal referred to country information which indicated that whether a person was at risk of harm depended upon the nature of his or her links with the LTTE or the diaspora that provided funding and support to the LTTE. The Tribunal was satisfied that the applicant did not have an actual or imputed profile as an LTTE supporter of any sort. Nor was the Tribunal satisfied that the applicant was at risk due to his Tamil ethnicity or his detention in 2009.
8 The Tribunal also considered the possibility that the applicant may suffer harm upon return to Sri Lanka due to his illegal departure and his claim to asylum in a Western country. The Tribunal referred to the possibility of the applicant having to pay a fine, but was not satisfied that the size of it could reasonably be seen as constituting serious or significant harm. In relation to the risk of detention, the Tribunal said at [67]-[68]:
[67] Based on the available information, I find that upon return the applicant is likely to be charged, detained for a short period and then released on bail with a family member to provide surety. The evidence suggests that he may be visited by authorities when returned to his village but there is no evidence before the Tribunal that the applicant faces harm as a result of such a visit or visits. The Tribunal is not satisfied that he will be imputed with a political opinion because of his illegal departure or treated differently because he is a member of a particular social group of failed asylum seekers or for any other reason and thus detained for a longer period. I have considered whether the fact that the applicant will be detained for a short period constitutes persecution.
[68] The Tribunal accepts that prison conditions in Sri Lanka may be poor due to overcrowding and unsanitary conditions. However a variety of sources indicate that the treatment the applicant might face upon his return applies to all persons, regardless of race or religion. Tamils are not singled out. The Tribunal is not satisfied, therefore, that being questioned, arrested, charged and detained for a short period in poor conditions amount to systematic and discriminatory conduct as required by s.91R(1)(c). The Tribunal finds that the processing of returnees and any penalties that may be imposed on the applicant are the result of the non-discriminatory enforcement of a law of general application.
9 In the result, the Tribunal was not satisfied that the applicant was a person who satisfied the protection criteria under either s 36(2)(a) or s 36(2)(aa) of the Act.
10 The applicant sought judicial review of the Tribunal's decision. In his application, the applicant relied on the following ground:
If I return to Sri Lanka I will be persecuted as I am a Tamil. RRT did not look at this in great detail.
11 The primary judge ordered that the application be dismissed, pursuant to r 44.12 of the FCC Rules. His Honour concluded that there was no arguable case for the relief sought by the applicant. In particular, his Honour concluded that the applicant had failed to identify any arguable jurisdictional error.
12 The applicant now seeks an extension of time and leave to appeal from the primary judge's judgment. The proposed ground of appeal is not at all informative and merely takes issue with the primary judge's dismissal of the application pursuant to r 44.12 of the FCC Rules.
13 The applicant commenced the present proceeding 11 days outside the time within which he was require to file his application for leave to appeal. Given the modest delay, I would be minded to grant the applicant the extension of time he seeks and to grant leave to appeal were I satisfied that his proposed appeal raises some arguable ground of appeal. In this case, however, it is apparent that the proposed appeal has no prospect of success.
14 The applicant filed a statutory declaration in support of his application for an extension of time and leave to appeal which I have read and taken into account. The matters raised in it concern the Tribunal's findings of fact and include arguments as to why the Tribunal should have accepted that the applicant would suffer torture or other cruel or inhumane treatment if he were to return to Sri Lanka. Nothing in the statutory declaration, when read in conjunction with the Tribunal's reasons, suggests that the Tribunal committed any jurisdictional error.
15 With the assistance of the interpreter the applicant was invited this morning to identify any errors in the Tribunal's decision or the reasons of the primary judge upon which he might wish to rely. There was nothing to which he could point. Having read the Tribunal's decision closely, I do not think that there is any arguable case for holding that its decision was affected by any jurisdictional error.
16 I am satisfied that the primary judge was right to conclude that there was no arguable case of jurisdictional error raised by the applicant's application for judicial review. The application for an extension of time and leave to appeal is refused on that basis. The applicant must pay the Minister's costs of the application.
I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholas.
Associate:
Dated: 18 November 2016
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Kim v Minister for Immigration and Border Protection [2017] FCA 372
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2017/2017fca0372
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2024-09-13T22:46:10.675116+10:00
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FEDERAL COURT OF AUSTRALIA
Kim v Minister for Immigration and Border Protection [2017] FCA 372
File number: NSD 1527 of 2016
Judge: MARKOVIC J
Date of judgment: 13 April 2017
Catchwords: MIGRATION β application for judicial review of decision of the Minister not to revoke a decision of the Minister's delegate to cancel applicant's visa β whether the Minister fell into jurisdictional error β application dismissed
Legislation: Migration Act 1958 (Cth) ss 501, 501CA
Cases cited: Tesic v Minister for Immigration and Border Protection [2016] FCA 1465
Tupkovic v Minister for Immigration and Border Protection [2017] FCA 73
Wozniak v Minister for Immigration and Border Protection [2017] FCA 44
Date of hearing: 27 March 2017
Registry: New South Wales
Division: General Division
National Practice Area: Administrative and Constitutional Law and Human Rights
Category: Catchwords
Number of paragraphs: 48
Counsel for the Applicant: The applicant appeared in person
Counsel for the Respondent: Ms C Tipene
Solicitor for the Respondent: Sparke Helmore
ORDERS
NSD 1527 of 2016
BETWEEN: HEO KWAN KIM
Applicant
AND: MINISTER FOR IMMIGRATION AND BORDER PROTECTION
Respondent
JUDGE: MARKOVIC J
DATE OF ORDER: 13 APRIL 2017
THE COURT ORDERS THAT:
1. The application be dismissed.
2. The applicant pay the respondent's costs as agreed or taxed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
MARKOVIC J:
introduction
1 On 24 August 2016 the applicant, Mr Kim, commenced a proceeding in the Federal Circuit Court of Australia (Federal Circuit Court) seeking judicial review of a decision made by the respondent (Minister) not to revoke the decision made by the Minister's delegate to cancel Mr Kim's Class BU Subclass 836 Carer (Permanent) visa (Visa) under s 501(3A) of the Migration Act 1958 (Cth) (Act).
2 On 9 September 2016, by consent, the Federal Circuit Court made an order transferring Mr Kim's application for judicial review of the Minister's decision to this Court.
Legislative scheme
3 Sections 501 and 501CA of the Act are relevant to the decision which is the subject of this proceeding. Subsection 501(3A) relevantly provides:
(3A) The Minister must cancel a visa that has been granted to a person if:
(a) the Minister is satisfied that the person does not pass the character test because of the operation of:
(i) paragraph (6)(a) (substantial criminal record), on the basis of paragraph (7)(a), (b) or (c); or
β¦ and
(b) the person is serving a sentence of imprisonment, on a full-time basis in a custodial institution, for an offence against a law of the Commonwealth, a State or a Territory.
4 Subsections 501(6)(a) and (7) of the Act relevantly provide:
(6) For the purposes of this section, a person does not pass the character test if:
(a) the person has a substantial criminal record (as defined by subsection (7)); or
β¦
(7) For the purposes of the character test, a person has a substantial criminal record if:
β¦
(c) the person has been sentenced to a term of imprisonment of 12 months or more; or
β¦
5 Section 501CA concerns the Minister's power to revoke a decision to cancel a visa made under subs 501(3A). It relevantly provides:
Cancellation of visaβrevocation of decision under subsection 501(3A) (person serving sentence of imprisonment)
(1) This section applies if the Minister makes a decision (the original decision) under subsection 501(3A) (person serving sentence of imprisonment) to cancel a visa that has been granted to a person.
(2) For the purposes of this section, relevant information is information (other than nonβdisclosable information) that the Minister considers:
(a) would be the reason, or a part of the reason, for making the original decision; and
(b) is specifically about the person or another person and is not just about a class of persons of which the person or other person is a member.
(3) As soon as practicable after making the original decision, the Minister must:
(a) give the person, in the way that the Minister considers appropriate in the circumstances:
(i) a written notice that sets out the original decision; and
(ii) particulars of the relevant information; and
(b) invite the person to make representations to the Minister, within the period and in the manner ascertained in accordance with the regulations, about revocation of the original decision.
(4) The Minister may revoke the original decision if:
(a) the person makes representations in accordance with the invitation; and
(b) the Minister is satisfied:
(i) that the person passes the character test (as defined by section 501); or
(ii) that there is another reason why the original decision should be revoked.
β¦
background facts
6 Mr Kim first entered Australia in February 1996 on a visitor visa, staying until December that year. On 4 August 2008, aged 46, Mr Kim returned to Australia. On 3 November 2008 Mr Kim applied for the Visa so that he could remain in Australia to care for his mother, an Australian citizen. On 24 April 2012 Mr Kim was granted the Visa.
7 On 12 March 2015 Mr Kim was convicted of two counts of the offence "Stalk/Intimidate Intend fear physical etc harm (domestic)" in the Local Court of New South Wales (Local Court) at Burwood. He was sentenced to 12 months' imprisonment for each conviction, to be served concurrently, with a non-parole period of 3 months in each case.
8 On 28 May 2015 the Visa was cancelled under s 501(3A) of the Act (Original Decision). This was because, based on the evidence, the Minister's delegate was satisfied that Mr Kim did not pass the character test as set out in s 501 of the Act. The letter notifying Mr Kim of the Original Decision (May 2015 Letter) provided that the Minister's delegate was satisfied that Mr Kim did not pass the character test on the following ground:
You have a substantial criminal record within the meaning of s 501(6)(a) on the basis of s 501(7)(a), (b) or (c) of the Act. Under s 501(7)(c) a person has a substantial criminal record if the person has been sentenced to a term of imprisonment of 12 months or more. On 12 March 2015 you were convicted of Stalk/Intimidate Intend Fear Physical Etc Harm (Domestic) and sentenced to 12 months imprisonment.
9 The May 2015 Letter also informed Mr Kim:
(1) that he had an opportunity to request that the Original Decision be revoked;
(2) that the Original Decision may be revoked by the Minister under s 501CA(4) of the Act if:
(a) Mr Kim made representations about the possible revocation of the Original Decision; and
(b) the Minister was satisfied that Mr Kim passed the character test (as defined in s 501 of the Act) or there was another reason why the Original Decision should be revoked;
(3) how he should proceed should he wish to request revocation of the Original Decision. The letter enclosed a Revocation Request Form and a copy of Direction 65 titled "Visa refusal and cancellation under s 501 and revocation of a mandatory cancellation of a visa under s 501CA" (Direction);
(4) in relation to the Direction, that if the decision-maker were a delegate of the Minister then he or she must follow the Direction. But that if the Minister made a revocation decision personally then he would not be bound by the Direction, although the Direction provided a broad indication of the types of issues the Minister was likely to take into account in making his decision; and
(5) of the timeframe within which he needed to make any representations for revocation of the Original Decision.
10 Finally, the May 2015 Letter enclosed:
(a) a National Police Certificate dated 7 May 2015; and
(b) a Conviction, Sentences and Appeals report from the New South Wales Department of Corrective Services dated 17 March 2015.
11 Mr Kim submitted the Revocation Request Form under cover of a letter dated 18 June 2015 from his solicitors to the Department of Immigration and Border Protection (Department). In the completed form Mr Kim requested that the Minister revoke the Original Decision and included in Part A of the form, titled "Reasons for requesting revocation", the following:
1. Our client's criminal record is at the low end of the scale. His assault conviction resulted in a one month jail sentence.
2. He has reunited with his wife following this incident. His wife is now supporting him and visiting him in detention.
3. Mr Kim is addressing his alcohol problems and is willing to undertake counselling and alcohol education with rehabilitation officers.
4. Mr Kim is the sole carer for his elderly mother. Please refer to the report of Dr Won Hyun Baik attached.
Further detailed submissions will be made on Mr Kim's behalf.
12 On 26 June 2015 Mr Kim's solicitors provided a reference dated 10 January 2014 from Rev Dr Beom Seok Kim of the Sydney Full Gospel Church in support of Mr Kim's application for revocation. On 7 August 2015 Mr Kim's solicitors wrote a further letter to the Department making representations about Mr Kim's carer relationship to his mother and requesting that his mother's circumstances be considered.
13 On 28 October 2015 Mr Kim's solicitors sent an email to the Department noting, among other things, that:
2. Our client served one month in prison for assault and stalking charges.
3. This is considerably less than the 12 months jail sentence that your office has been using to cancel visas on character grounds.
4. Our client does not meet the criteria of having spent 12 months in jail nor having a substantial criminal record.
14 On 28 October 2015 the Department responded by email to Mr Kim's solicitors. In its email the Department referred to the National Police Certificate provided to Mr Kim with the May 2015 Letter, noting that it disclosed convictions resulting in a sentence of imprisonment of 12 months such that Mr Kim "fails the character test as specified in s 501". The email queried whether there was any information about changes to sentences noted in the National Police Certificate, particularly as a result of an appeal.
15 On 3 November 2015 Mr Kim's solicitors again wrote to the Department saying, among other things, the following:
1. Mr Kim was sentenced to 12 months imprisonment on 12.03.15.
2. The sentence states he was to be paroled after 3 months expiring 01.06.15
3. The Fixed sentence was one month only β to be released on 01.04.15. Mr Kim was paroled on 1st June 2015 serving 3 months in jail as per the Magistrates (sic) Order.
4. Mr Kim does not have a substantial criminal record. He has only served 3 months jail as per the Magistrate Order.
We submit Mr Kim does not meet the mandatory conditions for cancellation of his visa under s 501(3A). Please review this matter and advise.
(original emphasis)
16 Mr Kim's solicitors provided a submission dated 26 February 2016 to the Department in support of the request for revocation of the Original Decision.
17 On 8 March 2016 the Department wrote to Mr Kim care of his solicitors enclosing further information, namely the sentencing remarks in the Local Court at Burwood made on 21 March 2015, noting that those remarks may be taken into account when making the decision whether to revoke the Original Decision under s 501CA of the Act. Mr Kim was invited to provide any response to that information.
18 On 17 March 2016 Mr Kim's solicitors responded to the Department's letter dated 8 March 2016.
19 On 21 June 2016 the Minister decided under s 501CA(4) of the Act not to revoke the Original Decision. Mr Kim was notified of the Minister's decision by letter dated 26 July 2016 addressed to his solicitors.
20 The Court book tendered by the Minister at hearing, which became exhibit A in the proceeding, did not make clear what was provided to Mr Kim with the letter dated 26 July 2016. In order to clarify what was provided with that letter I ordered the Minister to file and serve a copy of the letter and its enclosures. As a result of the material filed in compliance with that order it was evident that the decision not to revoke the Original Decision comprised only the decision record and the Minister's statement of reasons for decision under s 501CA of the Act not to exercise his discretion to revoke a mandatory cancellation visa decision under s 501(3A) (Statement of Reasons).
21 At the hearing I also ordered the Minister to file and serve any issues paper provided to him which was not included in exhibit A. In compliance with that order a document titled "Submission for Decision" with attachments was filed.
the Minister's decision
22 The Minister's Statement of Reasons was before the Court. In it the Minister first found that he was not satisfied that Mr Kim passed the character test as defined in s 501 of the Act. Accordingly, s 501CA(4)(b)(i) of the Act was not met.
23 The Minister then turned to consider whether he was satisfied that there was another reason why the Original Decision should be revoked as set out in s 501CA(4)(b)(ii) of the Act. In undertaking this task, the Minister assessed all of the information set out in the attachments to the Statement of Reasons and, in particular, considered Mr Kim's representations and the documents he submitted in support of his representations. The Minister noted that, in summary, Mr Kim said that he was sponsored to come to Australia by his elderly mother as her sole carer; he had no family or support in the Republic of Korea; he suffered from alcohol abuse issues which he was continuing to address; both he and his mother would experience undue hardship if he were removed from Australia; the parole board granted him parole; and Mr Kim had stated his intention not to reoffend.
24 The Minister considered the strength, nature and duration of Mr Kim's ties to Australia, noting that Mr Kim commenced residing in Australia on 4 August 2008 as an adult aged 46; that Mr Kim's mother, former spouse and step-daughter resided in Australia; that he was the sole carer of his mother, a then 79 year old Australian citizen who had no other family members in Australia; that non-revocation would cause Mr Kim's elderly mother to "suffer greatly" and her "quality of life" to diminish upon her son's removal, causing her emotional and practical hardship; and that his relationship with his spouse of one year and his adult step-daughter with whom he did not live and who were not dependent on Mr Kim would be affected. The Minister also noted that Mr Kim's former spouse and step-daughter had not provided letters to the Department. The Minister concluded that Mr Kim's familial ties in Australia were particularly strong and that he has social ties to the Australian community.
25 The Minister also considered the impediments that Mr Kim would face if removed from Australia to his home country, the Republic of South Korea (South Korea), in establishing himself and maintaining basic living standards. The Minister considered that Mr Kim was then a 54 year old man who had resided in Australia for nearly eight years; that Mr Kim suffered from alcohol abuse issues; that he required dental treatment; that he had no family in South Korea; that a return to South Korea would aggravate his alcoholism; and that his removal from his mother in Australia and lack of support in South Korea may cause him to experience some emotional and practical hardship, particularly in relation to accommodation and employment. The Minister concluded that if Mr Kim was removed from Australia he would not face significant cultural or language barriers in South Korea, but that he was likely to suffer hardship and that his psychological health may deteriorate in view of his alcoholism and lack of family support.
26 Finally, the Minister considered the protection of the Australian community. After reviewing the nature of his criminal offending, the sentence that was imposed and Mr Kim's prior criminal history in Australia, the Minister found that Mr Kim's offending relating to domestic violence was very serious and that the cumulative effect of his drink driving offending was serious.
27 In the context of considering risk to the Australian community, the Minister had regard to the remarks of the sentencing magistrate concerning Mr Kim's alcoholism and the submissions of Mr Kim's representatives that he had undertaken alcohol rehabilitation; that Mr Kim had "learnt his lesson"; that there was "little likelihood" of Mr Kim reoffending; that the offending was situational; and that, as he was now separated from his spouse, he does not pose a threat to any Australian citizen or the community. The Minister also had regard to Mr Kim's early guilty plea as an expression of remorse for his offending behaviour and to the fact that he had not sought to excuse his conduct or to appeal the severity of the sentence. The Minister took into account that Mr Kim had one recorded breach of a judicial order, namely, contravening an apprehended domestic violence order, which the Minister found constituted a disregard for Australian laws.
28 The Minister noted that, while Mr Kim had clearly indicated his intention to lead a law abiding lifestyle, his ability to refrain from alcohol use, which was linked to his offending, was untested in the community. The Minister found that if that risk were to eventuate then "great harm could flow to a member or members of the Australian community" and that any reoffending by Mr Kim could result in psychological, mental or physical harm to a member or members of the Australian community.
29 The Minister concluded that he was not satisfied for the purposes of s 501CA(4)(b)(ii) that there was another reason why the Original Decision should be revoked. Although the Minister considered Mr Kim's eight year period of residence in Australia, his positive contribution to the Australian community in the form of providing care for his mother and the consequences of the decision for Mr Kim and his elderly mother, the Minister gave significant weight to the very serious nature of the crimes committed by Mr Kim. In that regard the Minister found that the Australian community could be exposed to harm should Mr Kim reoffend in a similar fashion and that he could not exclude the possibility of further offending by Mr Kim.
the applicant's grounds of review
30 In his application filed in the Federal Circuit Court, which is before this Court for consideration, Mr Kim advances the following grounds, as written:
1. Decision made on assumptions.
2. No consideration given to 15 months in detention as rehabilitation successfully achieved.
3. No consideration to the remorse felt by applicant and the effect of the decision to other Australian citizens (mum, wife) who would like to project support and forgiveness for the past.
4. Already spent time in jail & then detention is like having two sentences.
5. Section 501 states 12 months imprisonment but spent less than that. An error in judgement as per law.
31 Mr Kim relied on an affidavit sworn or affirmed (it is not clear which) on 23 August 2016 in support of his application for judicial review. The affidavit annexes a copy of the Minister's decision not to revoke the Original Decision as well as letters dated 16 August 2016 from Mr Kim's mother and wife and a letter from his step daughter dated 17 August 2016.
32 Mr Kim did not file any written submissions in support of his application but made oral submissions at the hearing which broadly fell into two categories. The first related to ground 5 in Mr Kim's application and an alleged error in the Minister's finding as to "substantial criminal record" and the second related to what I will broadly describe as Mr Kim's remorse and his mother's situation. Those submissions are considered below.
consideration
Ground 1
33 In ground 1 Mr Kim claims that the Minister made his decision on the basis of "assumptions". The ground is not particularised and it is not clear to what assumptions Mr Kim refers. As framed ground 1 does not raise a proper ground of review. However, the Minister submitted that ground 1 could be understood as a complaint that the Minister made his decision in the absence of evidence. Even on that basis ground 1 cannot succeed.
34 It is clear that the Minister had regard to the submissions made on behalf of Mr Kim, including material provided by his representative to the Department and evidence in relation to Mr Kim's time residing in Australia and in relation to his criminal history. The Minister referred throughout the Statement of Reasons to the submissions that were made and the evidence provided. As submitted by the Minister, he made findings in relation to that material and in relation to the evidence that was before him. Those findings were open to the Minister for the reasons he gave.
Grounds 2 and 3
35 In grounds 2 and 3 Mr Kim alleges that the Minister failed to consider a number of factors, namely:
his time spent in detention;
his rehabilitation;
his remorse; and
the effect of the decision on other Australian citizens: his mother and his wife.
36 A review of the Minister's decision demonstrates that it is not the case that the Minister failed to consider these matters:
at [58] and [63] of the Statement of Reasons the Minister considered Mr Kim's time spent in detention;
at [50]-[52] of the Statement of Reasons the Minister considered Mr Kim's undertaking an alcohol rehabilitation program;
at [53] and [63]-[64] of the Statement of Reasons the Minister considered Mr Kim's remorse; and
at [21]-[23] of the Statement of Reasons the Minister considered the effect of the decision on Mr Kim's mother, wife and step-daughter.
37 Grounds 2 and 3 cannot succeed. They are an invitation to engage in merits review and should be dismissed.
Ground 4
38 In ground 4 Mr Kim says that he has spent time in jail and in detention and that is "like having two sentences". As framed, this ground is no more than a statement by Mr Kim of his sense of the effect of his time in immigration detention. It does not raise a proper ground of review capable of establishing any legal error on the part of the Minister.
Ground 5
39 By ground 5 Mr Kim asserts that s 501 of the Act requires 12 months "imprisonment" but that he was imprisoned for "less than that" and that there is "[a]n error in judgment as per law". In his oral submissions Mr Kim contended that he only served three months of a one year sentence. He said that the reason for the cancellation of the Visa was because he was in prison for 12 months, which was not the case, an extra nine months having been added.
40 This ground amounts to a claim that the Minister made an error in finding that Mr Kim did not pass the character test as set out in s 501 of the Act in circumstances where, as a matter of fact, Mr Kim had spent less than 12 months in jail. But Mr Kim has misconstrued s 501 of the Act. Section 501(3A) of the Act requires the Minister to cancel a visa where the visa holder is found not to pass the character test because, relevantly, he or she has a substantial criminal record as set out in ss 501(6)(a) and (7)(c) of the Act. Section 501(6)(a) of the Act provides that a person does not pass the character test if that person has a substantial criminal record. In turn, the term substantial criminal record is defined in s 501(7)(c) as including where a person has been "sentenced to a term of imprisonment of 12 months or more" (emphasis added). That is, the section speaks in terms of the duration of the sentence, not in terms of the time spent in jail or the time actually served.
41 In this case, the evidence before the Minister, as recorded in the National Police Certificate and the sentencing remarks of the magistrate, neither of which was disputed by Mr Kim, showed that Mr Kim was sentenced to a term of imprisonment of 12 months for each of two offences of "Stalk/Intimidate Intend fear physical etc harm (domestic)" to be served concurrently. Accordingly, there was no error in the Minister's consideration of the sentence imposed on Mr Kim and his application of the facts to s 501(3A) of the Act. On the basis of the sentence imposed, the only finding open to the Minister was that Mr Kim had a substantial criminal record for the purposes of s 501(6)(a) of the Act. Accordingly, this ground fails.
Other grounds
42 As noted above, Mr Kim made submissions at the hearing which concerned his mother's health, her lack of mobility and her reliance on him to live her life day to day. Mr Kim reiterated his remorse for what he has done and sought the Court's forgiveness. These submissions did not identify any jurisdictional error in the Minister's decision not to revoke the Original Decision. In making them Mr Kim sought merits review, which this Court cannot undertake. Similarly, the letters annexed to Mr Kim's affidavit, which post-date the Minister's decision and thus were clearly not before the Minister at the time he made his decision, can have no bearing on that decision. They are not relevant to the identification of any error in the Minister's decision the subject of Mr Kim's application for judicial review and once again are an attempt at impermissible merits review.
43 The final issue to consider is whether there is an error of the type identified in Tesic v Minister for Immigration and Border Protection [2016] FCA 1465 (Tesic). The Minister, having raised the issue, submitted that there was no such error. I accept that submission.
44 In Tesic Collier J observed that in the statement of reasons before her the Minister referred to the "principle" that persons who commit serious crimes should expect to forfeit the "privilege" of remaining in Australia a number of times. Her Honour said at [55]-[56]:
55 I do not accept that the statements of the Minister in respect of "privilege" in this case could properly be confined to rhetoric expounding the relevant considerations concerning Mr Tesic's criminal history and the importance of protecting the Australian community.
56 The fact that the Minister "took into consideration" that remaining in Australia is a privilege that Australia confers on non-citizens indicates that the decision-making process was distorted. The "principle" coloured the Minister's reasoning process. The Minister approached the decision from that perspective. As was explained by the Full Courts in both Stretton [2016] FCAFC 11 and AZAFQ [2016] FCAFC 105, that perspective was not correct. The fact that the Minister subsequently repeated the statement concerning privilege in paragraph 55, elevating it to a "principle", reinforces the point that the Minister attributed importance to this irrelevant consideration in reaching his decision.
(original emphasis)
45 In this case the Minister only referred to the "privilege" of remaining in Australia once in the Statement of Reasons where at [33] he said:
In coming to my decision about whether or not there is another reason why the original decision should be revoked I have had regard to the consideration of the protection of the Australian community, noting in particular Mr KIM's claim that he does not pose an unacceptable risk of reoffending, will not re-offend and has made progress towards rehabilitation. I considered the Government's commitment to protecting the Australian community from harm as a result of criminal activity by non-citizens. I also took into consideration that remaining in Australia is a privilege that Australia confers on non-citizens in the expectation they are law abiding.
(emphasis added)
46 In doing so the Minister did not elevate the "privilege" to a principle of law or attribute importance to it in the manner found by the Court in Tesic. Rather the Minister did no more than identify a statement of policy or a statement of what someone in Mr Kim's shoes might expect: see Tupkovic v Minister for Immigration and Border Protection [2017] FCA 73 at [33] (per Robertson J) and Wozniak v Minister for Immigration and Border Protection [2017] FCA 44 at [110] (per Burley J).
47 As a result of the orders I made requiring the Minister to file and serve further evidence I also reserved to the parties the right to apply to relist the matter for further argument should that be required because of that material. Neither party applied to have the matter relisted. For completeness I note that nothing in that material causes me to change the views I have expressed above.
conclusion
48 For the reasons set out above, Mr Kim has failed to make out any of the grounds in his application for review or to identify any error in the Minister's decision not to revoke the Original Decision. It follows that the application should be dismissed and Mr Kim ordered to pay the Minister's costs as agreed or taxed. I will make orders accordingly.
I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic.
Associate:
Dated: 13 April 2017
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federal_court_of_australia:fca/single/1985/1985FCA0085
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decision
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commonwealth
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federal_court_of_australia
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application/pdf
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1985-03-15 00:00:00
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Obacelo Pty Ltd & Anor v. Traveraft Pty Ltd & Ors [1985] FCA 85
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/1985/1985FCA0085.pdf
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2024-09-13T22:46:11.166035+10:00
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TRADE PRACTICES - Fendent juriscictien - Clain under Part V sf
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worth $50,900
$25,009, this agreement being collat
1D
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the completion of, the agreement for the sale of the land. The
various sales were completed so that, acccrding to tne
applicants, they pari - aither in cash or by concession cn tne
acquirirg from the local council land within a punlic roac 'inte:
was proosed to be closed. These varisus rapresentations ace far
to be antrue.
The applicants allege that th
a
CSR SRSSS1TAvLlIie wert "aas
in veage or commerce and rely UrOn VarlGus Orovis
td
difference between the value of what ther obtained and the:
ity
w
oO
purch price, together with certain expenses said tc have
Dorne and profits said to have been lost.
The respondents admit the making of the various
T
ts but ny the making of the representations and th
a
ct
n.3
ra
a
co
(3
il
a
ged Draach of contract. Thev also brirg a cross-clair
against the solicitors whe acted on their behalf in connecticn
with the matter, Messrs P R Whitehead and FP J Baxtec, the
fu
a ican
bral
ic)
c
P
t
hav
(D0
a
aq
ib
ad alss on behalf of the applicants anc, 1n that
ecconnection, were initially named by the applicants 4s resro
e
S in the oresent motion. The salicitscrys were said +
to the principal proceeding. However, pursuant to leave, Lhe
applicants amended their statement of claim so a5 to omit
Β£
"Whilst the First an@ Secone Cross Clai
deny making the representations or any
them contained in the Statement cf Clain, and
deny that they are liable to the aprlicants
as alleged or at all, the Cecess Tlaimants
seek fuil andemnity from the Crass
ib
Resoondents in the event they or either of
them aro Llianle to the Applicants or ezther
oz them on the following bases -
(a) the Crass Respangents faiied to include
in any relevant agreement a srevision
wheraby the First Applicant acknovledged
that no warranties or representations had
been diver or made in respect of the
rem1lses, Dusiness, Income, taxings and
or occupancy
(b, alternatively the Cross Respondents did
not include in any relevant agreement
provision wnereby the first applicant
acknowledged chat 1c dic not rely usoon
any warranties of representations
referred to in paragraph 'a) apcve;
(c) alternatively 1Β£ there were any
wacrantles or revresentations upon which
the First Applicant reitecΓ© the Crass
Resooncents farled to include 4 provision
in any relevant agreement ssitting out the
warranties and represen tatzrons;
(d) failure to make any or any proper enquiry
of the parties in relation coo the subject
matter of the sale, the businesΒ’ and any
term upon whicn elther party intendad the
sales to be subject inclucing varrant163
cr representations in relation to the
business occuvancy of tne prenises,
income and taxings;
(e) fallure to make any or any avopropriate
provisior fcr the Plaztntiff 'sic, nok
ceceiving the land, or any part thereor,
referred to in special conaition 27 of
the Contract for Saie;
(f) faziure ts ensure that if there aad been
pre-contractual negotiations any term of
those negotiaticns upon which the voarties
tended (sic) to cealy was itnctluded in any
relevant agreement;
(g) faliure to make any or any apprcpriate
enauiry of Obacelo Pty Limitea concernins
the basis upon which it had agreed ta
purchase the premises and busiress,
Q
(h)
(1)
ul
fatlure to make any or any appropriate
enquiries of Taveraft Pty Limited
concerning the basis upon which it had
agreed to sell the oremises anc busine
a
Β«
fa)
a0
ns
wity Oo
arto o0a
the Cross Respordents
in any relevant agreen
provision whereby che Fi
confirmed and acknowledcec tha
entering into the relevant agreem
relied entirely upon investigati
enquiries made other than oat
purchaser 1ts zervants and
concerning the business and
P fh
Pb FF
(om emame]
mo
i)
ied
+ U1
ct wo
~ oa
PHA
por
ct
+
uw
i
c
pe]
ct
D
fu
ch aQ
#
pe
wo
"a ue
et
mH
uw
the Cross Resrendents did not include
any relevant agreement between the
parties a orovision or condition where
the pucchaser in acknowledeing that 1t
relied upon 1ts own investigations and
enquiries acknowledged that the vendor
would not be responsible for cr liable
t
the sourchaser for any financial ioss oΒ’
consequential aamage caused directiy o
andirect
or inv
sticaticns being incorrect.
Sc;
co
fur
in
oF
one)
+
c
ly as a result of the enquirzres
Noa allegatisn 1s made of any insteuctian tc the
soliciters to taxe any of the steps the cmission of +hicth is
complainea of in para 6. There may =x1st questiors, firstly,
whether - especially in the absence of Such an allegation - un
varagΒ’eapn discloses a gocd caus 3f action anc, seccndiy, whetner
contractual pravisions such as those rcerterred to would aave bo
effective to save the respondents from any liability vhich the
might otherwise nave incurred in respect of contravenctians of
Trag= Practices Act. Nezrther of tncose matters has been arqued
and I express mo view about them.
Tne cross-claim contains no allegation of breach of
contract or of the existence, cc breach, cf a duty of care but
counsel agreed that these were matters tyhich right ne caced ay
appropriate amendments. The present applicatior is based on mere
fundamental matters, the applicant cross-ressonΓ©cents arquing tnrat
the Court has 19 jurisdiction to entertain the claim or,
alternatively, that in the exercise of its discretion it sheu
not do 50.
The claim made hy Taveraft against the sol-citor3 _=
ced in contract and, alternatively, in tore. It 15 mot 2
"Gi
a
o
rH)
claim which, in the absence of the principal proceeding, vould he
1s mul otnerwise a party to the peinciral procseaing in one
Court; whether or nct the cross-claim relates to the sane
"Mattec" as the principal preceeding, whether or not it relates
to a claim which, 1f brought by way of principal oraceedint,
would be within the jurisdiction cf the Court and 'ynetners of nat
the cross-respondent was party when tne cross-claim was frled.
fu
Counsel points out that the Court 15 a court of
statutory Jurisdiction, in the sense that 1t5 jurisdictictn _Β’
cecs committed to it by statute. in
et
confined te thos
Oo
a
relation to crose-claims, he says, there 1s no relevant provirion
other than s.22 of the Federal Court of Australia Act 1976 whictn
1s corftined to a proceecing hetween existing cartiss. Section 22
reads:
"22. The Courc shall, in every matter Lefore
the Court, grant, either absolutely or cn
Buch terms and condicions as the Court things
Just, all remedies to which anv cf the
parties appears to be anticzled in cespect of
a legal or equitable claim preperiy beought
Torward by him in the matter, so that, as far
as possiole, all matters in controversy
between the parties may bs rtomoletely and
fonally determined and all multiplicity of
proceedings concerning any of those matters
avoicsd."
+a le
In my opinion it is fallacious toa look at Β’.22 and te
conclude that cases not falling within 1ts terms ace curserde
jJucisadiction. Whe Functien of 5.22 was discussed fy saveral
Adam > Prowr Males Fasnions Pt
J av pe 489-490 referred to the antcsedents of the tectiar, and
aecisicns uvon those antecedents, ard contrasted 3.22 with =.37
of the Feceral Court of Sus
8.
secticn deals with power and not with jurisdiction. Ke commented
that the section "has nothing to Mason
uy
for
H
qa
fa
fs)
oy
Ur
ay as to jur
Jd, with whom Stephen J agreec,
m
'SG
a
ke to Similac effect at rp
505-506; as did Azckin J at
ny
529, Currsdcictior must be Β’cucher
elsewhere than in 35.22.
"19(1) The Court has such criginal
Jurisdiction as is vested in it cy laws rade
by the Parliament.
(2) The qriginal jurisdiction cf the Tourt
ancludes any jucisdicticn vested in it <9
hears and cevermine ais from decisions if
persons, authorities or triounals otner than
courts".
fn relation to Part V of the Trage Fractiss? act
There? 1s nothing in the Federal Gourt of Austraiia Art
relating to the juriscict
cross-claim; whether against a party to the crincipal proacesding
or otherwise. Nor wor.lΓ© this be exoected. In relation cc any
claim antended to be beougnt by tay of cross-claim, ani in
rescect of whitch jJurtscictien nas been conferced upon tne Court
ive)
regulate, either generally by its Rules or by order in the
particulars case, Β’
seeks to establish that clain, whether it be made against an
existing party or not. In fact the Rules <f the Court do sc
prcovide. Orde
nh
an
ns
ran'dd
m
%
=
Pp
t+
ta)
a respordcent to cross-claim
against an arplicant "for any rselier to which the respordent
would be entitled against the applicant if the applicant vere
cespondent in & separate proceeding commenced in the Court Dy
respondent for that purpose". Rule 1(2) deais with the case
where the cross-responaent 15 net alreacy a party. Ic provide
"1(2) A respondent may cross-claip against
any Serson whether anotner party or a third
party for anv relief which is related to cr
cennected with the subject of the
peoceseding".
'
Sub-sfule (Β’
i
) makes clears that the cross-claim may be
AtT1on cr indemnity.
The cemaining vrovisions cf Ordec 5 deal with natters
aszainst a person not a varty. {As it happens, in the oresent
case, leave was nov necessary because, at the time
cross~-cla:m was filed, the cross-c
D
spondents were still
oi
resvondcents in the principal proceeding
th
ts
ty
nature? of the cross-claim - simply because the cruss-reepe
are not otherwise now pasties to the frincipali peoceeding,
ndents
be rejected. The submission is toa broad. It ignores the
necessity to ccensider the nature of the crass-claim and the
Guesticn whether tne Court has jurisdiction to ronsiceas that
particular claim.
It is, in my view, clear that the Court has jJurisdicciorn
TO Ssntertain a cross-claln
ie)
a
within che usual jucisdicticn of the Ccurt; that 1s, which might
have bee
"I
ia
the subject of a Separate princioal ereceseding 2
court. That 25 a narrover ctcrcpasition than the cne adore
held that tne Court hac juris
ion
Pp
a
cl
H
is)
Β°3
Li
fe)
ray
i)
Ur
a
ryre
a
rt
he
vi)
Ie
F]
way of cross-claim "whicnr was essentraliy federal in it nature"
although not, in the absence of the principal vorocteeding,
the jurisdiction of the Federal Court. Whether the Tourct
exercise the turisdicticn to which I have veferced, in any
of the discretion, including the question whether the cros
w
Y
Q
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bE
fu.
ty
a
co
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it)
tu
8]
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>
ry
fh
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ry
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aM
princioal proceeding, 15 4
matter for consideration in the circurstanzes of each tase. But
there is no question of the existence of the necessary
Jurisdiction.
A jyurisdictional guestion does, however, arise 7
ta a oroceeding by way ef cross-claim Β«hich, havane
regaca to 10s nature and the rvelieZ? sought, could not have Leon
lacks jurisdicticn to hear such a cross-claim except, vΓ©rtavs, in
counsel refers to certain Cecisiors in relation to $.32 cf the
"22.(1) Te the extent tnat the Constibtucion
permits, jurisdiction is cenferred on th
Court in respect of mattecs not ovnerwise
within 165 jJurisdicticn that are associated
with matters in which the jurisdiction of the
Court 25 invoked.
(2) The jurisdacticn conferred ny
sub-section (1) extencΓ©= to jJurisaiction cts
hear and deteraine an appeal [ecm a jidgrent
of a coust so far as it relates to a matter
that 1s asscciated with a matter in respect
of whicr an aopeal from that judgment, or
another judgment of that court, 1s Brought."
12.
System of Australia", published in 1984, Mr H HE Raeni.ee collected
d
a
i)
foe
a
mh
c
b
id
m
am
a
and analysed the varicu cisions of this Court a
ua
i)
f
tr
han
Court - up to the date ation - relatin
a
'O
UW
the principal decisicens being Phiilin Morsis Ine v Adan = Priwn
Male Fashions Ptv Limited (surra) and Fencott 7 Muizle. (12982) +6
fag
ALR 41. It is necessary now to add a ceference to Stack 7 Coast
Securities (No. 3) Pty Limited (19383) 49 ALR 193.
Phillip More:s established that, whether uncer Β’.25 cr
under ss.78 cr 76 of the Constitution, this Court, in the
exercise of i485 jurisdiction ct
it by statute, might determine
within its Jurisdiction - even a claim wnich others so involved
mo Zeaderal element - sroviaed that the clair vas part of tns same
h
cencedad that an associated clair fell outside the jurusdicctiin
Mesor,
of determining the
In their joint jJuagement ion Fencets v Muller at
Mursoh7, Brennan and Deane Jd offered guidarce for
Q
Cc
wv
mH
ct
HH
oO
a
Q
Fh
fam
vp
wu
yal
ol
ts
@
at
ru)a
ul
o
"Perchaos 1t 1s not possible to devise so
precise a fornuia tnat its aoplication ts the
facts of any controversy would determine
accurately what claims are C2sparatec and what
claims are not. Whatever formula 32 adscriec
as & guide - and the formula of 'common
transactions ard facts' 1s a sound guice for
the purnose - 16 must result in leaving
outside the ambit of a matter a 'comeletely
dissarate claim constituting in substance 3
sΓ©parate proceeding .. . a non-feceral
matter which 2s completel, separate ard
Gistinct from the matter which attracted
federal jurzsdicticn* . . . of 'toma distinct
anc unrelated non-federal claim'.
Claims which ace descrited by tnese or
similar pnrases cannot be catermined by
exercise of the judicial vscower rveferced to un
s.71 of the Constitution, for tnat power can
be exercised only to detervine those matters
in wnich feceral jJurisciction 1s of can Ee
conterred under Ch ITI of the Constitution.
For precisely this reason, however, it is
necessary to attrinute to 'matter' in Β’5 75
and 76 cf the Censtitution a connmotat won
which coes net deny to Zederai judicial power
1ts primary character: that 18, the oawer oar
@ sovereigr autnority 'to decide
controversiss between 12s subsects, of
between self and .ts subjects, whether the
rignts relate to life, Liberty or orcoserty''.
Β» . . The unique and <ssentiali function of
the judicial pewer is the quelling af such
controversies oy ascertainment of tne facts,
Dy application of the iaw ane by excercise,
where appropriate, of juΓ©icisl disceeticn.
In identifying a s 75(22) mattec, 1Β’ would se
erronecus te exclude a substantial part of
what 18 in truth a single justiciable
controversy and thereby toa ereciuce the
exercise of judicial power ta deresmins the
whole of the cantrovarsy. What 135 anΓ© what
zs not part cf tre sone controversy depencs cn
wnat the parties have dons, the relationenirs
between or among them and tne lawe which
controversy which constitutes watter is not
ascertained merely by reference to the
oroceedings which & party may institute, but
may De illuminatca Ey the conduct of those
proceedings anc especially by the pleadings
in which the issues in contreversy 4
+
defined and the claims for relief are
set
cut. But in the end, 1t 1s a matter sf
ampression and of oractical judgment whsther
a non-feceral claim anc a federal clain
joined in the orcceedirng are within thie scove
of cneΓ© controversy and thus within tne aubit
cf a matter."
in Stack, a queΓ©sticn arose as
discretion of the Feceral
It appears that in none of the high Court csecisiors in
discussed was thers, at leasz at the time oF that drscussian,
That ciccumstance did not prevent the majority cf the Court
dezerminine that tne torality of the issues constituted a sing
wratterc orn Aristotize v Gladstore Parx Shopoing Cart
ty
1D
hu
ati
my
a
2)
Pm
v
el
un
a
a]
G4
on
a)
Et
a
Tt
or
ith
cr
my
aay
ul|
qo
i
wu
ran
oi
n
x
ro
a
"
wD
%
hn
fu
be
a
(oH)
Q
Ww
co
ia
as
nm
Le
15.
the costs of the cross-claim. In wy cpinican these decisicins
nnaicate that, in the present case, 1t 18 net a conclusivea
consideration that the claim in relacion ta which jurisdict_omn
1s challenged 15 pleaded by way 2f cross-claim rather thar, as in
Fencctt v Muiler, in the Statement of Claim in the orincizpal
oroce
a
ding. That view accords with the approach of Toone, C _n
Gural linsuran
ie)
iD
tw
tL
Ba
KD
an
wel
ed
hy
i
fa
es
fm
ct
iD
a
Pa
a
ia
faIF
U
cr
si
La
ininhe
ch
o
ir
%
py
a
1985. not reported) in which his Honour neld that the Daderal
under tne Frade Practices Act, by a lessee of previses and alsa a
a)
cross-cla:rr by tn
a
BH
essor for renz and for money due under a
a
fc)
fa)
guarantee in relation to the lease.
1t matter caat the :elevan
at
assaciatec clain is brought against a cerson whoa was now involvec
in the conduct giving rise ts the orimarcy cemplairt: 72 the
mink that this 1s one of them. ZU seems to m2 ts pe clear tast
the macter sought to ke litigated by the respondents in tneLs
cross-Claim 1s sΓ©parate and distinct from that voice arises out
of the claim in the principal sroceedings. All issues in
contertion between the anplicants and the vespercerte may be
fully determined without reference to the issues raised tr the
cross-claim. All yelieaf to which the applicants way te erntβeclec
may be gqeanted in the absence of the cross-clazm. It appears
Chat th
cr
oO
We}
Lay
t
o
n
P
'S
pi
an
ufe)
a
a
Q
fay
Pp
a
yy
my
P
Ch
co
'
F
iD
a
Lay
is)
uw
wm
J
aia)
v
a
a
rl
ra
rw7
a
ip)
bo
"4
a
some mutually relevant evi
Q
(boO
oF
c
ot
cat
D
oO
a
a
w
tS
fa
Ww
fat
Ny
Et
fa
Bb
we}
ty
oO
by
yu
it
5 '
u
m
common transactions and facts". The principal proceecing will
depenΓ© upon evidence as to the making by thea respondents of the
alleged recresentatiors, as to tne falsity of trese
reorecentations and as to the canage theceby sufisred cy tne
apoiicarts. The matters alleced in the cross-claim have nc
relevance ta that matter. Ac the most, che cespondants may ceed
cc prove, in connection with their cross-clair, some cf the
an which a claim in contract and in negligence mais Fy tne
applicants against the salicitor who acted on thetr oenalt in a
17.
Counsel for the respondents emphasises the desirarility,
from the viewpoint of his clients, in havine all matters Gisposed
of simultanscusly. He sukmits that this would save costs anc
ceauce the likelihood of execution against his cliente: for
damages against "snich trey might ultimately be held enti
indemnity, in ezfecst if mot in form, at the hands of tre
eross-resoonasnts: ci Myers v N & Β’ Sherick Limezzed Β£13747 1 WIA
3l ato 26. Whatever the weight of these arqumencs if
convenience - and there are s0mΓ© matters of convenienrte "hich
P|
D>
a
re)
Ty
[3]
cer]
u
I
a
1-
a
B3
c
nm
ct
bn
fa)
Pp.
P
hkie
mM
tu
ml
fu
Hy
is)
Lay
Β₯
py
i)
it
rt
wu
c
tym
ani
el
i!
tal
j
Me
a
yresvect oF t
Dpfe]
osts incurced on 25 September 1998:, the cate upon
which the Notice oF Motion was sriginal
day I granted an adtournment of the motion becauss the appicicarts
indicated a desirs to amend the Staterent of Claim; they havinz
farled to do 50 within the time oreviously limited by Lacknart Cc.
CeunsΓ©i submitted that Β© should not orcer his clients to pay the
es because the smendments in Fact made oursuant to tho leave
granted by me would not have affected the scesulc of the oresert
may be the position between the applicants and their s2.icritars
the owner parties are entitled to an order against thse a
I certify that
preceding pag
Reasons for Cudgemer
Mr custice jilcox.
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2019-12-23 00:00:00
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Newton v Australian Postal Corporation (No 2) [2019] FCA 2192
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2019/2019fca2192
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2024-09-13T22:46:11.317697+10:00
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FEDERAL COURT OF AUSTRALIA
Newton v Australian Postal Corporation (No 2) [2019] FCA 2192
File number: VID 876 of 2017
Judge: BROMBERG J
Date of judgment: 23 December 2019
Catchwords: INDUSTRIAL LAW β Fair Work Act 2009 (Cth) ("FW Act"), ss 340, 348 and 355 β where in reliance upon s 348 union representative alleged to have made threats to take action against employer with intent to coerce employer to engage in industrial activity, being removal of employee from position and cessation of a project ("project") β where in reliance upon s 355 union representative also alleged to have made threats to take action against employer with intent to coerce employer not to allocate employee duties of his position β where employee removed from his position and duties by his employer and project cancelled β discussion as to what constitutes a "threat" for purposes of ss 348 and 355 of FW Act β discussion of meaning of "intent to coerce" in ss 348 and 355 β discussion of 361(1) of FW Act: presumption that action taken for a particular reason or intent unless proven otherwise β to which elements or ingredients of a cause of action under ss 348 and 355 is s 361(1) applicable β the pre-conditions to the engagement of s 361(1) β whether s 361(1) can apply to a threat β discussion of standard of proof necessary for contravention of FW Act β whether pleading admissions made by one party can be used against another party in a joint trial β whether threats, as alleged, made by union representative β whether applicant engaged s 361(1) by making requisite allegation regarding union representative's intent β whether threat made with intent to coerce β discussion of pleadings deficiencies β whether applicant discharged his onus to establish use of unlawful, illegitimate or unconscionable means by union representative β whether employer and manager accessorily liable under s 550 of FW Act β adverse action β FW Act s 340: where alleged that employee removed from position for reasons that include that employee had a workplace right β applicable legal principles discussed β whether adverse actions (removal of employee from his position and exclusion of employee from work) taken including because of employee's workplace right to a safe working environment
CONTRACTS β where employee contracted to be employed in specific position β where contract provided that employer may require employee to occupy alternative "suitable" position β where removed from contracted position β whether employer removing employee from contracted position without placing employee into a suitable alternative position was a breach of contract β discussion of meaning of suitable alternative position β whether suitable alternative position offered to employee β where direction that employee excluded from work pending medical clearance β whether direction in breach of contract
DAMAGES β contractual claim: principles regarding damages for breach of contract β principles of causation β whether loss should be characterised as a loss of chance or loss of bargain β whether loss of remuneration claimed flowed from breach of contract found β whether intervening events broke chain of causation β principles of remoteness β whether "least burdensome principle" invoked by employer's contractual capacity to terminate contract on giving notice β discussion of contingencies β whether employer would have terminated contract by giving notice had it not been for breach β discussion of principles of mitigation β whether employee's attempts to gain employment following termination involved a failure to mitigate loss β whether failure to accept position from former employer was a failure to mitigate loss β whether employee entitled to general damages
Legislation: Evidence Act 1995 (Cth), ss 83, 140(2)(c)
Fair Work Act 2009 (Cth), ss 12, 340(1), 342, 343, 347, 348, 550, 355, 361, 363, 550, 793
Work Health and Safety Act 2011 (Cth), s 19, s 28
Cases cited: Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310
Auimatagi v Australian Building and Construction Commissioner [2018] FCAFC 191
Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (The Bay Street Case) (2018) 260 FCR 564
Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (The Quest Apartments Case) [2017] FCA 1398
Australian Building and Construction Commissioner v Hall [2017] FCA 274
Australian Building and Construction Commissioner v Hall (2018) 261 FCR 347
Australian Building and Construction Commissioner v McDermott (No 2) [2018] FCA 1611
Australian Building and Construction Commissioner v Molina (No 2) [2019] FCA 1014
Australian Building and Construction Commissioner v O'Connor (No 3) [2018] FCA 43
Australian Building and Construction Commissioner v Parker [2017] FCA 564
Australian Building and Construction Commissioner v Upton (The Gorgon Project Case) [2017] FCA 847
Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (2007) 160 FCR 321
Australian Red Cross Society v Queensland Nurses' Union of Employees [2019] FCAFC 215
Baltic Shipping Co v Dillon (1993) 176 CLR 344
Banque Commerciale SA En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279
Bragdon v Director of the Fair Work Building Industry Inspectorate (2016) 242 FCR 46
Briginshaw v Briginshaw (1938) 60 CLR 336
C. Czarnikow Ltd v Koufos [1969] 1 AC 350
Caterson v Commissioner for Railways (1973) 128 CLR 99
Celand v Sky City Adelaide Pty Ltd (2017) 256 FCR 306
Chappel v Hart (1998) 195 CLR 232
Clark v Macourt (2013) 253 CLR 1
CMP Manufacturing Pty Ltd v Barbieri [2018] FCA 622
Commonwealth Bank of Australia v Barker (2013) 214 FCR 450
Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64
Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466
Construction, Forestry, Mining and Energy Union v Anglo Coal (Dawson Services) Pty Ltd (2015) 238 FCR 273
Construction, Forestry, Mining and Energy Union v De Martin and Gasparini Pty Ltd (No 2) [2017] FCA 1046
Construction, Forestry, Maritime, Mining and Energy Union v Hay Point Services Pty Ltd [2018] FCAFC 182
Construction, Forestry, Mining and Energy Union v McCorkell Constructions Pty Ltd (No 2) [2013] FCA 446
Director of Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union (The Red and Blue Case) [2015] FCA 1125
Director of the Fair Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCA 1293
Director of the Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCA 225
Director of the Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union (No 2) [2015] FCA 199
Esso Australia Pty Ltd v Australian Workers' Union (2017) 263 CLR 551
Esso Australia Pty Ltd v The Australian Workers' Union (2016) 245 FCR 39
Esso Australia Pty Ltd v Australian Workers' Union [2015] FCA 758
Ezy Accounting 123 Pty Ltd v Fair Work Ombudsman [2018] FCAFC 134
Fair Work Ombudsman v Australian Workers' Union [2017] FCA 528
Fair Work Ombudsman v Maritime Union of Australia [2017] FCA 1363
Fair Work Ombudsman v Priority Matters Pty Ltd [2017] FCA 833
Gamboni v Bendigo and Adelaide Bank Ltd (2013) 39 VR 578
General Motors-Holdens Pty Ltd v Bowling (1976) 51 ALJR 235
Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237
Henville v Walker (2001) 206 CLR 459
Jones v Dunkel (1959) 101 CLR 298
Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70
Maritime Union of Australia v Fair Work Ombudsman [2015] FCAFC 120
Maritime Union of Australia v Fair Work Ombudsman (2016) 247 FCR 154
Mann v Capital Territory Health Commission (1982) 148 CLR 97
March v E and M H Stramare Pty Ltd (1991) 171 CLR 506
Medlin v The State Government Insurance Commission (1995) 182 CLR 1
National Tertiary Education Union v Royal Melbourne Institute of Technology [2013] FCA 451
Norwest Holst Group Administration Ltd v Harrison [1985] ICR 668
Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
Regional Development Australia Murraylands and Riverlands Inc v Smith [2015] SASCFC 160
Romero v Farstad Shipping (Indian Pacific) Pty Ltd (No 3) [2016] FCA 1453
R v Cornelissen [2004] NSWCCA 449
Robinson v Harman (1848) 1 Ex 850
Rush v Nationwide News Pty Ltd (No 7) [2019] FCA 496
Short v Ambulance Victoria [2015] FCAFC 55
Silverbrook Research Pty Ltd v Lindley [2010] NSWCA 357
State of Victoria v Construction, Forestry, Mining and Energy Union (2013) 218 FCR 172
Tabet v Gett (2010) 240 CLR 537
Trampoline Enterprises Pty Ltd v Fresh Retailing Pty Ltd [2019] VSCA 74
Trustees of the Property of Cummins (a bankrupt) v Cummins (2006) 227 CLR 278
Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603
Walker v Citigroup Global Markets Australia Pty Ltd [2006] FCAFC 101
Wenham v Ella (1972) 127 CLR 454
Whittaker v Unisys Australia Pty Ltd (2010) 26 VR 668
Willis Australia Group Services Pty Ltd v Mitchell-Innes [2015] NSWCA 381
Date of hearing: 3-7 December 2018, 10-12, 20-21 December 2018
Registry: Victoria
Division: Fair Work Division
National Practice Area: Employment & Industrial Relations
Category: Catchwords
Number of paragraphs: 371
Counsel for the Applicant: Mr P Rozen QC
Solicitor for the Applicant: Kennedys Law
Counsel for the First and Second Respondents: Ms R Doyle SC with Mr M Follett
Solicitor for the First and Second Respondents: Allens
Counsel for the Third Respondent: Ms C Howell with Mr T Borgeest
Solicitor for the Third Respondent: Slater & Gordon
Counsel for the Fourth Respondent: Mr J Pearce
Solicitor for the Fourth Respondent: Carroll & O'Dea Lawyers
ORDERS
VID 876 of 2017
BETWEEN: MICHAEL NEWTON
Applicant
AND: AUSTRALIAN POSTAL CORPORATION
First Respondent
AHMED FAHOUR
Second Respondent
COMMUNICATIONS, ELECTRICAL, ELECTRONIC, ENERGY, INFORMATION, POSTAL, PLUMBING AND ALLIED SERVICES UNION OF AUSTRALIA (and another named in the Schedule)
Third Respondent
JUDGE: BROMBERG J
DATE OF ORDER: 23 December 2019
THE COURT ORDERS THAT:
1. On or before 24 January 2020, the applicant and the first respondent:
(i) file and serve an outline of any witness evidence dealing with the applicant's earnings and employment circumstances post-November 2018 that the party seeks to rely upon; or in the alternative
(ii) file a statement of agreed facts dealing with those matters; or in the further alternative
(iii) should there be agreement on the quantum of damages and interest payable reflective of the findings made by the Court, file a minute of the orders those parties propose should be made.
2. Subject to any further order, the proceeding be listed for further hearing on a date to be fixed in the week of 3 February 2020.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
sections 348 and 355 claims β removal decision and cancellation of Project Dove [12]
Relevant Legislation and Legal Principles [18]
Elements of ss 348 and 355 [25]
That "action" was threatened [25]
Use of unlawful, illegitimate or unconscionable conduct [27]
The actual existence of the circumstance said to be the subject of the coercive "action" organised, taken or threatened [31]
State of mind elements [32]
Engaging s 361(1) [36]
When the rebuttal of the presumption falls to be determined [41]
Can s 361(1) apply to a threat? [42]
Standard of proof [53]
Admitted Allegations [56]
The Pleadings and the Admitted Allegations [60]
The Facts [65]
Consideration [113]
Were threats/demands made by Metcher? [113]
Intent to coerce [168]
Removal of Michael Newton [168]
Cancellation of Project Dove [178]
Availability of a Jones v Dunkel inference [181]
Accessorial Liability of Fahour and APC [182]
section 340 claim β removal decision [191]
Relevant Legislation and Legal Principles [191]
Whether the Removal Decision Constituted Adverse Action [197]
Workplace Right [198]
State of Mind Element [199]
contractual claims [205]
Alleged Contractual Breach Relating to the Removal Decision [215]
First Period [235]
Second Period [239]
Third Period [245]
Suitability of alternative positions proposed/offered [265]
Suitability of the MBII position [280]
Suitability of the MPFS and MFWPA positions [290]
Alleged Contractual Breach Relating to the Garden Leave Decision [294]
section 340 claim β garden leave decision [302]
relief [309]
Loss of Remuneration Damages [311]
Causation [313]
Did an intervening event break the chain of causation? [328]
Remoteness of damage [334]
The Measure of Damages [340]
The counter-factual [342]
The factual [354]
Mitigation [357]
The need for updating [361]
General Damages [364]
conclusion [368]
BROMBERG J:
1 In this proceeding the applicant ("Michael Newton") seeks various remedies against four respondents in relation to alleged contraventions of ss 340(1), 348 and 355 of the Fair Work Act 2009 (Cth) ("FW Act"). He also seeks damages with respect to alleged breaches of his contract of employment by the first respondent ("APC").
2 The second respondent, Ahmed Fahour ("Fahour") was, at all material times, the Managing Director and Group Chief Executive Officer ("CEO") of APC. APC and Fahour filed a joint defence and were jointly represented. Where convenient (and appropriate) I will refer to them together as the "APC respondents". The third respondent is the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (the "CEPU"). The fourth respondent, James (Jim) Metcher ("Metcher"), was at all material times the Branch Secretary of the New South Wales Postal and Telecommunications Branch of the CEPU and an "officer" of the CEPU within the meaning of s 12 of the FW Act.
3 On 24 March 2014, Michael Newton commenced employment at APC as its National Compensation Manager pursuant to a contract of employment executed on 13 March 2014. In that role, Michael Newton reported to Emma Blee ("Blee"), Head of Enterprise Safety, who in turn reported to Catherine Walsh ("Walsh"), General Manager, Group Executive, Human Resources and Safety. Walsh reported to Chris Blake ("Blake"), Executive General Manager, Corporate Affairs and People. Blake reported to Fahour.
4 One of Michael Newton's key responsibilities was to drive "Project Dove" outcomes. This was weighted at 20% of his overall performance evaluation in the mid-year performance plan for the 2015/16 financial year. Project Dove was an internal project that assumed some significance in the proceedings, the status of the project and the level of executive oversight over it are matters in dispute. Broadly speaking, it was a project designed to change the way in which APC dealt with some 3,000 injured employees who were receiving workers' compensation and not performing full duties. Project Dove was worked on by a team with members from different areas within APC and its executive sponsors were Walsh and Peter Bass ("Bass"), the General Manager, Mail Network and Postal Safety.
5 Broadly stated, the alleged contraventions of the FW Act and the contractual breaches are said to arise from two events which occurred in 2016:
(1) when Michael Newton was removed from his position as National Compensation Manager at APC on 5 February 2016 (the "Removal decision") and Project Dove was cancelled; and
(2) when Michael Newton was prohibited from attending work and allegedly placed on "garden leave" on 27 April 2016 (the "Garden leave decision").
6 Michael Newton alleges that Metcher contravened ss 348 and 355 of the FW Act on 5 February 2016 during a telephone conversation with Fahour which led to the Removal decision and the cancellation of Project Dove. It is alleged that the CEPU is liable for those contraventions by operation of ss 363 and 793 of the FW Act. It is further alleged that Fahour was "involved in" the contraventions by Metcher within the meaning of s 550 of the FW Act, and that APC is liable for these contraventions under s 793 of the FW Act.
7 Michael Newton alleges that the Removal decision was a breach of s 340(1) of the FW Act by APC. Fahour is alleged to have been "involved in" the contravention by APC within the meaning of s 550 of the FW Act.
8 Michael Newton also alleges that by the Garden leave decision APC also contravened s 340(1) of the FW Act.
9 Finally, Michael Newton alleges that the Removal decision and the Garden leave decision were in breach of his contract of employment with APC. There is no dispute that on 11 August 2016, Michael Newton was terminated from his employment with APC. Michael Newton does not contend that APC's act of terminating his contract of employment was itself a breach of that contract. He maintains, however, that the termination of his employment contract was a "consequence" of APC's contractual breach in giving effect to the Removal decision.
10 By way of remedy for his statutory breach claims, Michael Newton seeks orders for reinstatement, and orders for compensation and penalties. Michael Newton seeks damages for his breach of contract claims.
11 These reasons are broadly divided into two sections β the first deals with the statutory claims made by Michael Newton (other than relating to the Garden leave decision) and the second deals with his contractual claims. Many of the facts are relevant, at least by way of background, to both the statutory and the contractual claims as well as the statutory claim made in respect of the Garden leave decision. Nevertheless, given the chronological order of the most significant events, it is convenient that I record those facts primarily of relevance to the statutory claims (other than the Garden leave decision) in the first section of these reasons and likewise deal with the facts of primary relevance to the remainder of the claims in the second section of these reasons. The overlapping relevance of many of the facts recorded should not, however, be overlooked.
sections 348 and 355 claims β removal decision and cancellation of Project Dove
12 Michael Newton alleges three separate contraventions of ss 348 and 355 of the FW Act by Metcher and the CEPU. What was communicated by Metcher to Fahour when they spoke by telephone on 5 February 2016 is critical to Michael Newton's success on these claims.
13 Michael Newton alleges that Metcher said that he would:
(1) leak documents about "Project Dove" to the media and politicians;
(2) arrange protest rallies about "Project Dove";
(3) take APC to the cleaners;
(4) take serious industrial action; and
(5) take legal action
unless Fahour cancelled Project Dove and removed Michael Newton from his role as National Compensation Manager.
14 The contraventions of ss 348 and 355 of the FW Act are alleged on the basis that Metcher said to Fahour that, unless Fahour cancelled Project Dove and removed Michael Newton from his position as National Compensation Manager, Metcher would carry out the threatened actions detailed above. The alleged contraventions are said to be as follows:
(1) A contravention of s 348 by reason of Metcher making threats to take action against APC with intent to coerce APC to engage in "industrial activity", namely, complying with a lawful request (s 347(b)(iv)) or, alternatively, an unlawful request (s 347(e)) made by the CEPU to APC for Michael Newton to be removed from his position as National Compensation Manager.
(2) A contravention of s 355 of the FW Act by reason of Metcher threatening to take action with intent to coerce APC not to allocate to Michael Newton the duties and responsibilities or not to designate Michael Newton as having the duties and responsibilities of the role of National Compensation Manager.
(3) A contravention of s 348 of the FW Act by reason of Metcher making threats to take action against APC with intent to coerce APC to engage in "industrial activity", namely, complying with a lawful request (s 347(b)(iv)) made by the CEPU to APC for Project Dove to be cancelled.
15 Insofar as the CEPU is concerned, and in reliance on ss 363(1)(b) and 793(1)(a) of the FW Act, Michael Newton alleges that the actions of Metcher were the actions of the CEPU and that therefore the CEPU contravened ss 348 and 355 on each occasion that those provisions were contravened by Metcher. Insofar as APC and Fahour are concerned, and in reliance on s 550 of the FW Act, Michael Newton alleges that they were "involved in" each of Metcher's contraventions set out above, such that they themselves are taken to have contravened those provisions.
16 Metcher and the CEPU resist any findings of any primary contraventions of ss 348 or 355 of the FW Act.
17 The APC respondents resist any findings of any contraventions of ss 348 or 355 of the FW Act on the following alternative bases:
(1) none of the primary contraventions are made out (for a number of reasons); and
(2) in the alternative, APC and Fahour were not "involved in" any contraventions.
Relevant Legislation and Legal Principles
18 Section 348 of the FW Act is in the following terms:
Coercion
A person must not organise or take, or threaten to organise or take, any action against another person with intent to coerce the other person, or a third person, to engage in industrial activity.
19 The phrase "engage in industrial activity" used in s 348 is defined in s 347 to include complying with a "lawful request made by, or requirement of, an industrial association" (s 347(b)(iv)) and complying with "an unlawful request made by, or requirement of, an industrial association" (s 347(e)).
20 Section 355 of the FW Act also deals with coercive conduct but is directed at protecting a person's capacity to employ or not employ a particular person and the allocation of duties and responsibilities to a particular person. Relevantly, s 355 provides:
A person must not organise or take, or threaten to organise or take, any action against another person with intent to coerce the other person, or a third person, to:
β¦
(c) allocate, or not allocate, particular duties or responsibilities to a particular employee or independent contractor; or
(d) designate a particular employee or independent contractor as having, or not having, particular duties or responsibilities.
21 Because ss 348 and 355 are found in Pt 3-1 of the FW Act, s 361(1) can have application if it is engaged. Section 361 of the FW Act is in the following terms:
(1) If:
(a) in an application in relation to a contravention of this Part, it is alleged that a person took, or is taking, action for a particular reason or with a particular intent; and
(b) taking that action for that reason or with that intent would constitute a contravention of this Part;
it is presumed that the action was, or is being, taken for that reason or with that intent, unless the person proves otherwise.
(2) Subsection (1) does not apply in relation to orders for an interim injunction.
22 Section 361(1) creates a rebuttable presumption. The operation of s 361 was described by Kiefel CJ, Keane, Nettle and Edelman JJ in Esso Australia Pty Ltd v Australian Workers' Union (2017) 263 CLR 551 ("Esso-HC") at [58] as follows:
Section 361 of the Fair Work Act relevantly provides that where it is alleged that a person took action for a particular reason or with a particular intent, and taking the action for that reason or with that intent would constitute a contravention of Pt 3-1 (which includes ss 343 and 348), it is presumed that the action was taken for that reason or with that intent unless the person proves otherwise. Thus the burden of proof was on the AWU to establish the absence of coercive intent in relation to ss 343 and 348.
23 Questions arise in this proceeding as to who it is that bears the onus of proof and whether the presumption in s 361(1) of the FW Act has application and if so to which elements or ingredients of the causes of action under ss 348 and 355 of the FW Act. Whether that provision was here engaged because the pre-conditions to its engagement were satisfied is also at issue, as is a question as to whether s 361(1) has any application to conduct constituted by a threat.
24 Both ss 348 and 355 are made up of a number of elements or ingredients that need to be proved, these include both "state of mind" elements and other elements which I will call "objective elements". In considering questions about onus of proof the starting point is that, ordinarily, the applicant bears the onus of proof for each and every element of a contravention. However, as I will explain, if s 361(1) applies and is engaged, then the onus of proof in relation to the "state of mind elements" in ss 348 and 355 is altered and it falls upon the respondent to rebut the presumption applied by s 361(1). In order to address these questions, I will first address the applicability of s 361(1) to each of the elements that make up ss 348 and 355 relevant to this proceeding. I will then separately discuss the question of the engagement of s 361(1) and its applicability to conduct constituted by a threat.
Elements of ss 348 and 355
That "action" was threatened
25 Each of ss 348 and 355 requires that it be proved that "action" was organised, taken or threatened. Relevant to this proceeding is the prohibition that a person must not "threaten toβ¦take, any action against another person". An issue arises as to what constitutes a threat of a kind capable of engaging ss 348 or 355 of the FW Act. The phrase "threatening to take action" appears in s 342(2) of the FW Act as part of the meaning of "adverse action". In Fair Work Ombudsman v Australian Workers' Union [2017] FCA 528 at [53]-[54], I surveyed the authorities on the meaning of that phrase. There is no reason, in my view, as to why the phrase "threaten toβ¦takeβ¦action" in ss 348 and 355 should bear a different meaning. At [54] of Fair Work Ombudsman I said this:
[54] A number of principles may be drawn from the authorities I have just outlined. First, 'threatening to take action' must involve the communication of a threat directed at an ascertainable person which is received or is likely to be received by that person. That a particular outcome is threatened by existing or prospective circumstances is not a threat of the requisite kind. Second, to threaten means to communicate an intent to inflict harm or, in other words, a warning of an intention to inflict harm. Third, the essence of a threat is that it is made for the purpose of intimidating a person. Accordingly, 'threatening to take action' must involve an expression of an intimidatory purpose. Fourth, it is not necessary that a subjective intent to carry out the threat be established. Fifth, the notion of a threat is not confined to an intent to inflict harm which was unlawful or unjustified. Sixth, the presence of malice or some other injurious motive is not a prerequisite. Lastly, a threat to take action may be conditional (in the sense that X will occur if Y does not).
26 Whether or not what was done constitutes a threat is to be determined objectively: Australian Building and Construction Commissioner v McDermott (No 2) [2018] FCA 1611 at [149] (Charlesworth J). This is an element that must be proved by the applicant and to which s 361(1) has no application.
Use of unlawful, illegitimate or unconscionable conduct
27 Both ss 348 and 355 prohibit a person from taking or threatening to take action against another person with "intent to coerce" that other person. Relevant principles as to the meaning of the phrase "intent to coerce" find their source in the legal meaning of the common law concepts of coercion and duress and are now "settled": State of Victoria v Construction, Forestry, Mining and Energy Union (2013) 218 FCR 172 at [70], [72] (Buchanan and Griffiths JJ). The expression "intent to coerce" has been held to comprise two discrete elements. First, a state of mind element, being, the negation of choice (which I will discuss in more detail below), and second an objective element β the use of unlawful, illegitimate or unconscionable conduct. This distinction was helpfully summarised by Tracey, Reeves and Bromwich JJ in relation to s 355 and s 343(1) (which also deals with coercive conduct), in Australian Building and Construction Commissioner v Hall (2018) 261 FCR 347 at [25]:
[25] It is well-established that the expression 'intent to coerce' in ss 343 and 355 carries within it a requirement to establish two discrete elements: the negation of choice; and the use of unlawful, illegitimate or unconscionable conduct to do so (see Esso Australia Pty Ltd v Australian Workers' Union (2016) 245 FCR 39 at [174] (Buchanan J, with whom Siopis J agreed at [1])). We interpose that this conclusion and the line of authorities relied upon to reach it do not appear to have been affected by the recent High Court judgment on appeal from that judgment (see Esso Australia Pty Ltd v Australian Workers' Union (2017) 92 ALJR 106; 350 ALR 404 at [61] (Kiefel CJ, Keane, Nettle and Edelman JJ)).
28 In relation to the objective element, the use of unlawful, illegitimate or unconscionable conduct, Allsop CJ, Collier and Rangiah JJ said the following in Auimatagi v Australian Building and Construction Commissioner [2018] FCAFC 191 at [157]-[159] (citations omitted):
[157] The notion of unconscionability, as imposing a standard of right behaviour formed around conscience, will take its content from the values and expected conduct in an industrial setting. It is a word best understood in its practical application to real life settings where there can be an articulation and expression of why, in an employment and industrial context, the pressure sought to be exerted should be ascribed such a description of departing from right behaviour.
[158] Although illegitimacy can be seen to be a similar conception to unconscionability as a word connoting a degree of right behaviour, illegitimacy has emerged (rightly or wrongly) as its own separate category of behaviour
β¦
[159] The notion of proportionality has been said to inform the concept of illegitimacy, in an assessment whether there is a reasonable or justifiable connection between the nature of the demand made and the nature of the pressure exerted.
29 This element is concerned with the nature of the "action" threatened, organised or taken and operates to require that that action be shown to have been unlawful, illegitimate or unconscionable. As I said in Fair Work Ombudsman at [63]-[68] and also in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (The Bay Street Case) (2018) 260 FCR 564 at [100]-[103], this is an objective factor that must be proved by the applicant. Section 361(1) therefore has no application to this element.
30 Although not an issue put in contest, it is worth noting that in Esso-HC at [62]-[63], Kiefel CJ, Keane, Nettle and Edelman JJ (Gageler J agreeing at [65]) left open whether this requirement also includes a subjective or state of mind consideration, namely, whether the respondent "had a subjective understanding of the factual circumstances that, viewed objectively, would be seen as rendering the ['action'] unlawful, illegitimate or unconscionable". Relevantly to the scope of s 361(1), an issue to which I will return, their Honours noted that if that subjective understanding was necessary to be proved, s 361(1) would have application.
The actual existence of the circumstance said to be the subject of the coercive "action" organised, taken or threatened
31 A further objective element that an applicant must prove and to which s 361(1) has no application, is the factual existence of the circumstance said to be the subject of the coercive "action" organised, taken or threatened: Hall at [15]-[16]. It is far from clear, however, what the relevant circumstance or circumstances that need to be proved are. I discussed that issue at [69]-[81] of Fair Work Ombudsman. Without reaching a concluded view, I there observed that it may be necessary for an applicant to prove the factual existence, at the time that the coercive "action" was taken, of the choice or capacity which is sought to be protected by the provision in question. In the case of s 348 that choice or capacity is the ability to engage or not engage in the particular "industrial activity" which the applicant relies on. In the case of s 355 it will be one or more of the capacities enumerated at paras (a)-(d) of that provision. That is not a matter I need to consider further. Save for one reservation, it was not in contest that at the time the action here alleged was taken, the protected choices β relevantly, APC's capacity to engage in the "industrial activity" alleged (s 348) or its capacity to allocate or not allocate particular duties or responsibilities to Michael Newton (s 355), existed. In so far as, in relation to s 348, Michael Newton relied upon the "industrial activity" specified by s 347(b)(iv) of complying with a "lawful request", the APC respondents and the CEPU relied upon the reservation expressed in my judgment in the Bay Street Case at [82]-[85] to formally reserve their position. The same reservation was made by the APC respondents in relation to Michael Newton's reliance upon s 347(e). I note, however, that that provision was not the subject of the view I expressed in the Bay Street Case that a "request" within the meaning of s 347(b)(iv) is to be construed as limited to a request made to associate with or participate in the activities of the industrial association that made the request.
State of mind elements
32 The state of mind elements of ss 348, 355 (and s 343) arise from the fact that a contravention of those provisions depends upon action being taken, organised or threatened with a particular state of mind. As Greenwood, Besanko and Rangiah JJ said in Australian Red Cross Society v Queensland Nurses' Union of Employees [2019] FCAFC 215 at [75]:
one of the evident purposes of a section like s 361(1) as described by Mason J in Bowling is to place the onus of proving a mental state on the person best able to prove it, being the person whose mental state is in issue. It would be odd if the applicant bore the onus of proving part of the decision-maker's mental state.
33 There are two components to the state of mind elements required to be proved under ss 348 and 355 (and s 343). The first goes to the respondent's intent and the second to the respondent's reason. Section 361(1) is applicable to each. In Construction, Forestry, Mining and Energy Union v McCorkell Constructions Pty Ltd (No 2) [2013] FCA 446 at [230] and in relation to s 343, which is relevantly in the same form, I said this:
Section 343(1) is a provision which, in the words of s 361, depends upon action taken 'for a particular reason or with a particular intent'. The intent which s 343(1) deals with has two aspects. The first aspect is addressing the nature or character of the intent. The particular intent required is an intent to coerce. The second aspect of the requisite intent is addressing the purpose or reason of the action taken. The purpose or reason for the taking of the action must be to have the other person (or third person) do or not do one of those things specified by paragraphs (a) and (b) of s 343(1). The first aspect may be characterised as a 'particular intent' and the second as a 'particular reason' within the meaning of those terms in s 361(1).
34 On appeal, that approach to s 361(1) was left undisturbed with apparent approval: Victoria v Construction, Forestry, Mining and Energy Union at [82] (Buchanan and Griffiths JJ). In Hall (at [24]) Tracey, Reeves and Bromwich JJ expressly endorsed the reasoning in McCorkell.
35 Accordingly, to establish a contravention, both the requisite nature of the intent (an intent to negate choice) (as discussed above at [27] and see Hall at [25]-[27]) and that a reason or purpose of the action taken, organised or threatened was the engagement in "industrial activity" (for s 348) or, the engagement in the particular conduct specified by paras (a)-(d) of s 355 (for s 355), must be proved. As stated, s 361(1) is applicable.
Engaging s 361(1)
36 In order to engage s 361(1), there are two pre-conditions that need to be met.
37 First, as is stated by s 361(1)(a) itself, to engage the benefit of s 361, an applicant must make the allegation that "a person took, or is taking action for a particular reason or with a particular intent": Celand v Sky City Adelaide Pty Ltd (2017) 256 FCR 306 at [147] (Bromberg J with whom Charlesworth J agreed at [167]); Australian Red Cross Society at [65] (Greenwood, Besanko and Rangiah JJ). In Hall (at [14]) the Full Court emphasised that the allegation "must precisely and distinctly identify the alleged reason or the alleged intent, for contravening conduct". As discussed at [35], a contravention of ss 348 and 355 requires the respondent to have both a "particular intent" (an intent to negate choice) and a particular reason (for s 348, engagement in one or more of the industrial activities defined in s 347 and, for s 355, one or more of the matters addressed by paras (a)-(d) thereof). Both the particular intent and the particular reason will need to be precisely and distinctly conveyed in the allegation made: Hall [40]. In identifying the "particular intent" an applicant must, by the allegation made, "convey the relevant particular intent required for a contravention of [ss 348 or 355], namely an intent to negate choice": Hall at [41]. To merely allege an "intent to coerce" may not suffice, a matter further discussed at [169] below.
38 Second, the evidence must be consistent with the hypothesis that the respondent was actuated to take the impugned action by the reason or intent alleged. I discussed the relevant authorities on that issue in Celand at [155]-[157] (Charlesworth J agreeing) and see Australian Red Cross Society at [67]-[74] (Greenwood, Besanko and Rangiah JJ). As Greenwood, Besanko and Rangiah JJ sought to emphasise by reference to the discussion in Celand, it is not necessary for the applicant to establish a prima facie connection between the alleged action and the impugned reason or intent but only that the connection is not so remote as to be fanciful.
39 A second pre-condition to the engagement of s 361(1) was referred to in Hall at [15] and at [19] where the Full Court said:
an applicant wishing to take advantage of the presumption in s 361, in addition to making the allegation in a form that meets the requirements of s 361(1)(a), must provide sufficient information about the action, and the related reason or intent (or both) for which that action was taken, to show that, in combination, they would constitute a contravention of a provision of Pt 3-1 of the FWA.
40 In my respectful view, that observation is not intended to raise a third precondition but should be understood consistently with the second pre-condition to the engagement of s 361(1) articulated in Celand and Australian Red Cross Society and the authorities there discussed.
When the rebuttal of the presumption falls to be determined
41 Lastly, as was mentioned in Hall at [18] by reference to observations made by the Full Court in Construction, Forestry, Mining and Energy Union v Anglo Coal (Dawson Services) Pty Ltd (2015) 238 FCR 273 at [27]-[28], whether the presumption in s 361(1) has been displaced falls to be determined at the end of the trial and its answer would depend on "the assessment of all of the facts by the trier of fact, including, most importantly in the conventional case, his or her assessment of the evidence given by the decision-maker acting on behalf of the [respondent]".
Can s 361(1) apply to a threat?
42 An issue arises as to whether the reference in s 361(1) to the need to allege that "a person took, or is taking, action" extends to an allegation that action is or was threatened. The respondents assert that a threat is not "action" within the meaning of that term in s 361(1) and that therefore s 361 can have no application where the making of a threat is the conduct alleged against the respondent.
43 There is authority for the proposition that s 361(1) does not apply in relation to an alleged contravention of s 355 where the alleged conduct is a threat: Director of Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union (The Red and Blue Case) [2015] FCA 1125 at [111] (Jessup J). In the Red and Blue Case and for the same reasons, Jessup J also determined that s 361(1) does not apply in relation to an alleged contravention of s 355 of the FW Act where the alleged conduct was the organising of action taken by others (at [114]). His Honour said that s 361(1) applies "only to the mental element involved in taking action. In terms, it does not apply to a threat to take action" (at [111]).
44 If that reasoning in relation to s 355 is correct, it would also apply to the other provision here in question, s 348 of the FW Act. The Red and Blue Case has been followed by a number of authorities to which I will shortly refer. There are other authorities which are inconsistent with the reasoning in the Red and Blue Case.
45 In my view, an allegation that a person made a threat or organised action is an allegation that "a person took, or is taking, action" within the meaning of that phrase in s 361(1).
46 First, on the natural meaning of the word "action" it means the "process or condition of acting or doing": Shorter Oxford English Dictionary (6th ed, Oxford University Press, 2007) Vol 1 p 22. "Action" is a word of broad application and as White J said in Director of the Fair Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCA 1293 at [102] "[t]he word 'action' is used in s 361(1) without qualification". Its intended broad application is confirmed by the definition of "action" in s 12 of the FW Act as including "an omission". The term plainly extends to the act of making a threat or the act of organising someone else to do or not to do an act. To threaten or to organise is to do an act and engage in an "action" and to make an allegation that a person has made a threat or has organised others, is to allege that "a person took, or is taking action".
47 Second, s 361(1) serves a beneficial purpose and ought not be narrowly construed. Third, if resort is to be had to the context and purpose of s 361, as Mason J explained in General Motors-Holdens Pty Ltd v Bowling (1976) 51 ALJR 235 at 241, the "plain purpose" for a reverse onus provision such as s 361 is that a respondent's reason for engaging in the impugned conduct "lies peculiarly within his [or her] own knowledge": see further Celand at [148], (Bromberg J) and Australian Red Cross Society at [69]-[70] and [75] (Greenwood, Besanko and Rangiah JJ). Bearing in mind its purpose, there is no discernible reason why s 361(1) should be regarded as not intended to have application to the state of mind elements required to be proved where action is organised or threatened. Further, the Explanatory Memorandum to the Fair Work Bill 2008 (Cth) at [1459]-[1461] supports the proposition that the term "action" includes threatened action. So much is expressly referred to at [1461] and the content of [1459] makes good the proposition that, when the word "conduct" used in the legislative predecessor to s 361 (s 809 of the Workplace Relations Act 1996 (Cth)) was replaced with the word "action", there was no intention to narrow the scope of the provision: see further Director of the Fair Building Industry Inspectorate at [103] (White J).
48 The reasoning in the Red and Blue Case purports to construe the plain words of s 361(1) not by reference to s 361(1) itself, but through the prism of s 355 and the phrase "[a] person must not organise or take, or threaten to organise or take, any action". That provision, like others to which s 361(1) has application, can provide context but the focus of the constructional exercise must be the words of s 361(1). In any event, each of the words "organise", "take" and "threaten" used in s 355 are verbs which, like all verbs, are words which are used to describe an action. The phrase "any action" is used in s 355 to clarify the broad nature of the prohibition. It is not being used to deny that to "threaten" or to "organise" is a form of action.
49 There are a number of authorities which support the view I prefer: I have already mentioned the judgment of White J in Director of the Fair Work Building Industry Inspectorate at [101]-[104]. Although the issue was not there in contest, McCorkell is an example of a case where s 361 was applied in relation to an allegation of threatened action (see at [229]). As outlined above at [34], the approach I took in McCorkell was endorsed in Hall in a passage which expressly referred to s 361(1) having application in relation to "actionβ¦threatened to be taken". Section 361(1) has also been applied to threatened action in Director of the Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCA 225 at [264]-[265] (Tracey J); Director of the Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union (No 2) [2015] FCA 199 at [100] (Mansfield J).
50 Furthermore, and with respect to Jessup J, his Honour's approach in the Red and Blue Case is at odds with the approach that his Honour took in Esso Australia Pty Ltd v Australian Workers' Union [2015] FCA 758 at [167] where, in relation to the organising of (and not the taking of) industrial action, Jessup J held that s 361 applied. On appeal Esso Australia Pty Ltd v The Australian Workers' Union (2016) 245 FCR 39 ("Esso-FC") Buchanan J (with whom Siopis J agreed) also held (at [172]-[173]) that s 361(1) applied. That approach was not disturbed in the High Court when the operation of s 361(1) was addressed in the passage set out at [22] above. The reference I have made to Esso-HC in the last sentence of [30] above, also supports the view that s 361 has application to all of the possible state of mind elements in ss 348, 343 and 355.
51 Having said all that, I appreciate that the Red and Blue Case has been followed by a number of authorities, although not necessarily in circumstances where the approach there taken was in contest: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (The Quest Apartments Case) [2017] FCA 1398 at [70]; Australian Building and Construction Commissioner v O'Connor (No 3) [2018] FCA 43 at [128]; Australian Building and Construction Commissioner v Parker [2017] FCA 564 at [105]-[106]. In Australian Building and Construction Commissioner v Upton (The Gorgon Project Case) [2017] FCA 847 at [119], Barker J did not regard the reasoning in the Red and Blue Case as "plainly wrong"; Charlesworth J applied this reasoning in McDermott [2018] FCA 1611 at [137]-[147] with which Banks-Smith J agreed in Australian Building and Construction Commissioner v Molina (No 2) [2019] FCA 1014 at [175]. In Construction, Forestry, Mining and Energy Union v De Martin and Gasparini Pty Ltd (No 2) [2017] FCA 1046 (at [364]) Wigney J expressed reservation about the correctness of the Red and Blue Case but followed it in circumstances where its correctness was not there challenged.
52 There is, in my view, a conflict in the authorities on this issue. For the reasons stated, the better view is that s 361(1) can have application to an allegation that a person has organised or has threatened action. I will proceed on that basis.
Standard of proof
53 The respondents emphasised the gravity of the allegations made against them by Michael Newton. They characterised the allegations as allegations of unlawful conduct deliberately taken and involving intentional impropriety. They relied upon s 140(2)(c) of the Evidence Act 1995 (Cth) as embodying the principle in Briginshaw v Briginshaw (1938) 60 CLR 336 and contended that the allegations made by Michael Newton cannot be proved on the strength of "inexact proofs, indefinite testimony or indirect inferences": Briginshaw at 362 (Dixon J).
54 I accept that any contravention of the FW Act must be "clearly established": Bragdon v Director of the Fair Work Building Industry Inspectorate (2016) 242 FCR 46 at [45] (Buchanan, Reeves and Bromberg JJ). Nor is a finding of contravention to be lightly made: Australian Building and Construction Commissioner v Hall [2017] FCA 274 at [20] (Flick J). In Hall, the Full Court referred to the applicable standard as "the Briginshaw standard" (at [100]). However it must always be appreciated, as Jagot J helpfully observed in Fair Work Ombudsman v Maritime Union of Australia [2017] FCA 1363 at [20], that:
The standard of proof is on the balance of probabilities. Section 140(2)(c) does not alter the standard of proof in a civil matter. It speaks to the process of reasoning by which a finder of fact may be satisfied that the evidence reaches or does not reach the standard. In that process, due recognition must be given to the fact that some events are inherently more or less likely than others.
55 I have adopted that process of reasoning in carrying out the fact finding task required in relation to each of the statutory claims made by Michael Newton. Furthermore many of the facts sought to be established by Michael Newton rely on the Court drawing inferences from the evidence. In the approach to inferential fact-finding which I am bound to take, I will need to be satisfied that the circumstances appearing in the evidence give rise to reasonable and definite inferences and not merely to conflicting inferences of equal degrees of probability: Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466 at [38] (Weinberg, Bennett and Rares JJ) citing Trustees of the Property of Cummins (a bankrupt) v Cummins (2006) 227 CLR 278 at [34] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ).
Admitted Allegations
56 I will shortly refer to the pleadings and, in particular, to allegations made by Michael Newton that were admitted in the Amended Defence of the APC respondents but not admitted by Metcher or the CEPU.
57 It is not in contest that Michael Newton is, as against the APC respondents, entitled to rely upon the allegations admitted by those parties. The admitted allegations concern factual matters and the effect of the admissions is to put the facts alleged out of dispute. A court is not bound to act on admissions (Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (2007) 160 FCR 321 at [42] and [49], Gray J), but in the absence of any contention to the contrary, I intend to treat the factual allegations admitted by the APC respondents as binding and as establishing against them the existence of those facts.
58 However, it is necessary to observe that the allegations admitted by the APC respondents are not received as evidence. Particularly where, as here, pleadings are not required to be directly verified by the party on whose behalf they are made, admitted allegations are not to be treated as though they are evidentiary admissions made by the party making a pleadings admission: Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 at 86 (Mason CJ and Brennan J). That the allegations admitted by the APC respondents through their pleadings should be treated as evidentiary admissions was the premise upon which Michael Newton contended that, in the context of the conduct of "several trials that have been joined", the admissions made by the APC respondents can also be relied upon by Michael Newton as against Metcher and the CEPU. That submission must be rejected.
59 That contention is rejected because, first as already stated, pleadings admissions are not evidentiary admissions even against the party whose pleadings contain the admission. Second and by analogy, in the absence of consent, even evidentiary admissions are not admissible as against a party to the proceeding where the admission is made by evidence adduced by another party: s 83 of the Evidence Act. Third, Michael Newton's reliance on the conduct of a joint trial is misplaced A joint trial involving multiple respondents is not one trial but several trials in which, putting aside exceptions not presently relevant, admissions made in the trial of one respondent are not admissible as evidence in the trial of another. For an example of the application of that principle see R v Cornelissen [2004] NSWCCA 449 at [110]-[115] (James J, with whom Hidden and Bell JJ agreed).
The Pleadings and the Admitted Allegations
60 Before referring to the evidence, it is both necessary and convenient to set out the critical conversation between Metcher and Fahour on 5 February 2016 as pleaded in Michael Newton's Second Further Amended Statement of Claim ("SFASoC") and as dealt with in the Amended Defence of the APC respondents. Michael Newton pleaded that:
41. On 5 February 2016, Metcher spoke to Fahour by telephone. During the conversation, Metcher told Fahour that:
a. Metcher had in his possession leaked APC documents about 'Project Dove' (APC documents);
b. He was opposed to APC' s implementation of 'Project Dove'; and
c. He could not work with [Michael Newton] any more.
41A. By telling Fahour that he could not work with [Michael Newton] any more, Metcher was in effect demanding that [Michael Newton] be removed from his role as National Compensation Manager.
41B When Fahour was told by Metcher that he (Metcher) could not work with [Michael Newton] any more, Fahour understood that this was in effect a demand by Metcher that [Michael Newton] be removed from his role as National Compensation Manager.
42. During the conversation, Metcher also said that he would:
a. leak the APC documents to the media and politicians;
b. arrange protest rallies about 'Project Dove';
c. take [APC] to the cleaners;
d. take serious industrial action; and
e. take legal action.
unless Fahour:
i. cancelled Project Dove; and
ii. removed [Michael Newton] from his position as National Compensation Manager.
43. Fahour agreed with Metcher that APC would:
a. cancel 'Project Dove'; and
b. remove [Michael Newton] from his position as National Compensation Manager.
Particulars
The agreement was made orally on 5 February 2016 during a telephone conversation between Metcher and Fahour.
61 The APC respondents jointly filed an Amended Defence. They admitted para 41 of the SFASoC subject to disputing that Metcher described the slides in his possession as "leaked". Importantly, the APC respondents admit that Metcher told Fahour that he could not work with Michael Newton anymore. However, in answer to para 41A of the SFASoC, APC and Fahour deny that by saying that he could not work with Michael Newton, Metcher was in effect demanding that Michael Newton be removed from his role as National Compensation Manager. They also deny para 41B of the SFASoC that, from the statement made by Metcher that he could not work with Michael Newton, Fahour understood that the demand was made. They say that the alleged demand was not made either expressly or impliedly.
62 The alleged threatened actions are the subject of para 42 of the SFASoC. The APC respondents admit the content of the statements alleged by Michael Newton to constitute the "threats", but say that those words were not said in the context of Metcher asking, requesting or requiring of Fahour that Michael Newton be removed from his position as National Compensation Manager. In so far as they admit that the threats were conditional upon APC taking any action, the APC respondents only admit that they were conditional upon Fahour cancelling Project Dove.
63 The APC respondents denied the allegations in para 43 of the SFASoC that Fahour agreed with Metcher that APC would cancel Project Dove and remove Michael Newton from his position as National Compensation Manager.
64 Further in pleading Fahour's reason for removing Michael Newton from his position as National Compensation Manager, the APC respondents say that during the course of the phone call on 5 February 2016, Metcher said to Fahour words to the effect that "[Michael Newton] had a personal zealotry to hurt injured workers the subject of Project Dove and that [Metcher] was angry with [Michael Newton]" and "that [Michael Newton] was the cause of problems that [Metcher] perceived with [APC's] workers' compensation function". The pleadings of the APC respondents also state that during the phone call, Metcher expressed anger and volatility, including specifically towards Michael Newton.
The Facts
65 The only direct evidence of the conversation on 5 February 2016 between Fahour and Metcher was given by Fahour. Metcher was not called. At the time that he gave his evidence, Fahour was no longer employed by APC and was working as the Managing Director and CEO of a financial services company.
66 Fahour first commenced employment with APC in February 2010 in the role of Managing Director and CEO. That was the role he held at the time of the conversation with Metcher. Before dealing with the conversation itself, there are some background matters that Fahour and others gave evidence about which provide a relevant context.
67 APC utilised over 50,000 direct and indirect employees. It had, at the time, a 4 level management structure with about 10 people on an executive committee and a second layer of 30-40 managers at a management committee level. Walsh was at that level. There was a third level, the "senior leadership team" of about 200 managers, followed by a fourth level of some 1,000 managers. Michael Newton was at that fourth level. Whilst Fahour had regular contact with Walsh, he had no prior contact with or knowledge of Michael Newton before 5 February 2016.
68 Fahour deposed that in late 2013/early 2014, APC began to develop a reform program ("APC reform program") designed to save thousands of jobs and APC's business from looming significant financial loss. The APC reform program was designed to transform APC from being a letter delivery company to a parcel delivery company. It was described by Fahour as the largest reform in APC's history. The Commonwealth Parliament approved the APC reform program in late 2015 and the implementation of those reforms began in January 2016.
69 Of the 30,000 or so employees directly employed by APC, Fahour deposed of his understanding that around 22,000 were members of the CEPU. The primary contact with the CEPU was through its National Secretary but contact on State-based issues occurred with other officials. In relation to New South Wales, where the largest number of employees of APC resided, the contact for him and APC was largely with Metcher.
70 Fahour described his understanding of Metcher as someone who had a very long history in the CEPU. He said that what struck him most about Metcher when he met him was that he almost had an obsession with the everyday employee, those at the bottom of the income pile, for whom he felt a special connection. Fahour considered that he had very professional dealings throughout most of the time he interacted with Metcher until the APC reform program began, when Metcher seemed concerned about how management was going about the path of reform. He described Metcher as "cynical".
71 Fahour also felt that something happened in 2015 to Metcher which changed the nature of his interaction with APC. A number of communications were made by Metcher on "regular issues" in which Metcher seemed quite antagonistic and quite agitated. In about mid-2015, Fahour was notified by the National Secretary of the CEPU that he would no longer deal with Metcher who was taking a leave of absence and Metcher "disappeared" for the second half of 2015. Fahour's understanding of that absence was described by him as "a medical absence" which he later suggested was mental health related.
72 Fahour deposed that in late January 2016 he was conscious that pretty serious accusations were being made by Metcher about APC failing in its workers' compensation unit. He was conscious of various communications forwarded by Metcher on the issue. Metcher became particularly involved in the case of Ms Leanne White ("White"), which he viewed as a "primary case study to what [was] occurring within the [APC] workers' compensation department in how claims are being managed".
73 From 22 January 2016 to 3 February 2016 email correspondence ensued between Metcher and senior executives at APC, including Walsh, in relation to alleged defects in APC's workers' compensation system, and concerns relating to White's case. In that correspondence Metcher repeated an intention to publicly expose APC "in Canberra" in relation to those concerns and also the CEPU's intention to commence legal proceedings.
74 It is in the context of this communication that Fahour emailed Walsh on 3 February 2016 at 9.16am requesting that she get together with Blake, Nick Macdonald, General Counsel and General Manager, Assurance (Corporate Centre) ("Macdonald"), Darryl Newton, Chief Risk Officer ("Darryl Newton"), Paul Burke, Corporate Secretary and General Manager, Government Affairs ("Burke"), Blee and Laz Cotsios, Group Executive, Business Services and "lay out the allegations" made by Metcher and propose a "very quick review".
75 The communication emphasised the urgency of the matter, requiring the review to "begin on Friday (very important that it is documented as beginning this Friday)". It stated that the questions "we need answered in the next 4 weeks" include the allegations made about workers' compensation and payments, the current process for handling claims and any improvements that can be made, whether there is any basis in the White case and also the best process "to handle Union escalation and deal with issuesβ¦distracting the whole Organisation". This "quick review" became what I will refer to as the "Leanne White Review".
76 Although chronologically out of order, it is desirable to here set out the conduct and findings of the Leanne White Review.
77 The Leanne White Review was carried out by Darryl Newton, who chaired the committee and had management accountability for the performance of the Review, Roger Sweet, Senior Manager, Internal Audit, BRM Risk Management, an external audit firm, and Tim Lyon ("Lyon"), former Assistant Secretary of the Australian Council of Trade Unions ("ACTU"), who was engaged as an independent reviewer.
78 The review was to investigate two matters: first, the conduct of White's workers' compensation case, and second, to consider the management activities of the workers' compensation unit. The review involved conducting interviews with ten APC personnel, including Blee and Michael Newton, interviews with White and Metcher, and the review of over 100 documents and over 200 emails. The final report was released on 20 April 2016 and was provided to a broader group of people, including Fahour, Metcher, Lyon and Michael Newton.
79 The report found that the management of her claim resulted in a "poor experience" for White and that she had experienced delays and errors, some of which resulted in "technical non-compliance with procedural requirements under the [Safety, Rehabilitation and Compensation Act 1988 (Cth)]", however none of which constituted a breach of that Act. The review found that all payments had been made to White and her sick and annual leave balances were correct and that there had in fact been a minor overpayment.
80 The report noted that the manner in which concerns had been raised by the CEPU "has often not been conducive to their resolution", and that the "volume, tone, timing and escalation of communications, along with demands for sometimes unreasonable timeframes for responses and regular threats of external action has hindered the ability for the claim to be effectively managed". The report further stated that this had also resulted in "significant negative personal impacts" to some APC staff.
81 Returning to events of 3 February 2016, Fahour agreed that he called for the Leanne White Review, in part, because Metcher was "ratcheting up his concerns" by raising his allegations with other union officials. Fahour said that he was concerned about the escalation of the issue and, in circumstances where APC was seeking to implement the APC reform program, the issue represented a "significant distraction". Fahour considered that APC may learn something from studying White's case to see if there were any wider implications.
82 Fahour's decision to have a review of workers' compensation practices occurred in the context that Fahour was aware that, before he joined APC and in 2009, APC's injury management unit and workers' compensation system was the subject of a Parliamentary review by the Senate. He described his understanding that that review had been preceded by a one-year campaign (presumably by the CEPU) which had made claims about failures in the way APC managed workers' compensation. He said that APC had agreed "to a bunch of undertakings" in relation to the Parliamentary review. In that context and in January 2016, when allegations made by Metcher of failures in APC's workers' compensation unit were being received, Fahour deposed that he and Walsh were "concerned deeply" because APC had just received approval from the Senate for the APC reform program. Fahour said this:
And, of course, in the back of my mind, I was deeply concerned about that, so what then I tried to do, without making this thing bigger than Ben Hur, rather than boiling the ocean, as such β what I suggested to [Walsh] is this Leanne White case seems to be becoming much bigger than what it really seems, but maybe we can learn something from that case by studying it to see if there's any wider implications. So we had developed, over time, this terms of reference to have a short, sharp review so that when I did face the Senate, I was in a position to be able to respond to the allegations if they were the case.
83 Earlier in his evidence, Fahour deposed that he had anticipated that the allegations that were being made by Metcher might find their way into the Senate estimates program and that he had suggested that APC had three or four weeks to prepare an answer to the allegations that he contemplated may be raised. That was a motivation for conducting the Leanne White Review and appears to have been the motivation for Fahour requiring, in his 3 February 2016 email, that the review be conducted urgently with answers "in the next four weeks".
84 At 9.29am on 4 February 2016 Metcher sent a further email to Walsh, this time copying in Fahour, in relation to White's case. In that email Metcher stated that he intended to present White and other sick and injured APC workers as examples of how APC treats its sick and injured workers and manages their claims, when in Canberra on the following Monday and Tuesday.
85 Later, on 4 February 2016, Metcher attended a meeting of the APC Workers' Compensation Reform Forum via phone link from Sydney. Blee and Michael Newton were in attendance. It was at this meeting that Metcher informed Michael Newton that he was in possession of Project Dove documents. Michael Newton deposed that he told Metcher that he was happy to coordinate another meeting to discuss Project Dove to which Metcher laughed down the phone. Michael Newton deposed that Metcher's comments caused a "flurry of activity" and a "sense of panic" at APC.
86 At 9.03am on 5 February 2016, Walsh sent an email to Metcher detailing how APC was taking proactive steps to address the complaints that he had been making regarding White, and noting that Metcher's complaints about White and the workers' compensation system generally were being taken seriously. In response to the email, at 10.48am Metcher emailed Walsh (copied to Fahour) stating that APC management and himself were "embroiled in a bitter brawl" over APC's workers' compensation management systems. He concluded the lengthy email by stating that "Operation Dove" had been leaked to him, and that Michael Newton had confirmed to him that it existed, and further "this is all I needed to know to what is occurring with the present [workers' compensation] strategy and attack on sick and injured workers by [APC]." Metcher concluded the email with a threat of exposing APC. Fahour deposed that he hadn't read this email.
87 At 11.54am on 5 February 2016 Fahour sent Metcher a letter attaching an explanation about the Leanne White Review and its Terms of Reference.
88 At 12.32pm, less than an hour after Fahour sent his letter to Metcher, Metcher emailed Fahour. He expressed his disappointment that the proposed Leanne White Review was only an internal review, during which "life goes on as normal". He then added the following line:
In addition - Michael Newton's 'Operation Dove'!
Got to be kidding me.
89 The email was signed off by Metcher with: "Return to Sender".
90 Fahour deposed that he read that email sometime between 12.32 and 2.17pm on the day it was sent. When he read it, he did not know who Michael Newton was. Nor did he know what "Operation Dove" was. He said that, at that time, he had never heard of "Operation Dove".
91 At 2:17pm on 5 February 2016 Fahour forwarded the email he had received from Metcher to Walsh asking her "Who is Michael Newton and what is Operation Dove?"
92 Later that afternoon, and before Walsh had responded to Fahour, Metcher and Fahour spoke by phone. The call took place at some time between 2.17pm and 5pm.
93 Before recounting the evidence of the critical conversation between Fahour and Metcher on 5 February 2016, it is convenient that I express my reservations about the reliability of the evidence given by Fahour. In particular, those concerns attend the evidence Fahour gave about that critical conversation as well as the conversation Fahour later had with Walsh and the evidence given by Fahour as to what motivated the actions he took on 5 February 2016, including his decision to remove Michael Newton from his position.
94 In assessing the reliability of the evidence given, including that of Fahour, I have had regard to the following considerations conveniently collected by Wigney J in Rush v Nationwide News Pty Ltd (No 7) [2019] FCA 496 at [307]-[309]:
[307] Witness demeanour is one consideration which may assist a judge to resolve conflicting evidence. Sometimes the demeanour of a witness while giving evidence about contentious issues may provide insight into whether the evidence given by the witness is either honest and reliable, or dishonest or unreliable. Signs that may indicate dishonesty or unreliability include evasiveness, nervousness, an apparent unwillingness on the part of the witness to make appropriate or obvious concessions and even, in some circumstances, overconfidence.
[308] Even where a witness displays such traits when giving evidence, however, some caution must generally be exercised. That is because a witness may, for example, appear nervous or evasive for reasons that have nothing whatsoever to do with the honesty or reliability of their evidence. Other witnesses may be able to give evidence in an appropriately confident and direct manner and yet their evidence may be found to have been unreliable or, worse still, dishonest. Witness reliability is not always a reliable signpost. Indeed, judges have often cautioned against the dangers of too readily drawing conclusions about truthfulness and reliability based solely or mainly on the appearance of witnesses. Scientific research has also cast doubt on the ability of judges to tell truth from falsehood accurately on the basis of such appearances: see Fox v Percy (2003) 214 CLR 118 at [30]-[31] and the cases there cited.
[309] Aside from demeanour, there are other factors or considerations which may assist a judge in determining the credibility of a witness and the reliability of his or her evidence. Those considerations include: whether the witness has previously given an account of the events in question and, if so, whether that previous account is consistent or inconsistent with the evidence given by the witness; the plausibility and apparent logic of the events described by the witness; and the consistency of the account of the events described as compared with other objectively established events. Such considerations often turn out to be a much surer guide to the reliability of the evidence given by a witness about disputed events. As Atkin LJ observed in SociΓ©tΓ© d'Avances Commerciales (SociΓ©tΓ© Anonyme Egyptienne) v Merchants' Marine Insurance Co (The 'Palitana') (1924) 20 Ll L Rep 140 at 152; cited in Fox v Percy at [30]:
β¦ I think that an ounce of intrinsic merit or demerit in the evidence, that is to say, the value of the comparison of evidence with known facts, is worth pounds of demeanour.
95 The events Fahour gave evidence of occurred some two and three quarter years prior to him giving that evidence. It would be understandable if the detail of what was said and the detail of Fahour's reactions and his own thought processes were lost or diminished by time. That is particularly so given that Fahour was a very busy CEO of a very large corporation and, it may be assumed, most of the events in question were not of much significance to a person in that position at the time they occurred. But my concern with Fahour's evidence is not about any professed inability to recall the detail. To the contrary, most of Fahour's evidence on these matters was given by a person who gave the impression that he mostly had very good recall. However, the evidence was so plagued with implausibility and contradictions, including that the same events were described differently from one day to the next, that it was clear to me that the detail of these events was often being reconstructed rather than being accurately recalled. Many of the inconsistencies are recorded in the submissions made by Michael Newton. I refer to some of those inconsistencies below. As will also be apparent shortly, there were direct and substantial inconsistencies between Fahour's pleaded case and the evidence he gave about his critical conversation with Metcher on 5 February 2016. I have reached my view about the reliability of Fahour's evidence without the need to rely on those inconsistencies. I accept, however, that in the absence of any attempt made to explain those inconsistencies (including, if it were relevant, some explanation as to why an explanation could not be given), Michael Newton was entitled to rely on those inconsistencies to impugn the reliability of Fahour's evidence.
96 In my view, the evidence given by Fahour was peppered with speculative and often self-serving reconstructions of the detail of conversations and motivations, many of which are critical to the issues I need to determine. I do not reject all of Fahour's evidence. Some of it I accept as reliable. To some extent documentary corroboration has assisted. In other respects, I have regarded some of the evidence as plausible. I have used the apparent logic of events as a strong guiding consideration in assessing the reliability of Fahour's evidence. My general approach has been to only accept Fahour's evidence where it is corroborated by other evidence or is sufficiently consistent with objectively established events for me to regard the evidence as plausible.
97 The references to the evidence which Fahour gave which now follow are not intended to necessarily suggest my acceptance of that evidence. So much of Fahour's evidence which I do accept, and which is necessary for me to make findings about, will be set out later in these reasons.
98 Fahour's evidence was that he was sitting in his car on the afternoon of 5 February 2016, possibly in Sydney, when he participated in the call with Metcher. He was not sure who called whom and he did not know how long the call lasted. His evidence was that White and the proposed Leanne White Review, Project Dove, Michael Newton and the APC reform process were all discussed. Fahour deposed that the majority of the conversation was about "the workers' compensation system". He said that Metcher was obsessively concerned about what he perceived to be the injustice in relation to White. Fahour then said that towards the back end of the call the conversation turned to Project Dove and Michael Newton. Given the importance of the conversation it is best that the account given in chief by Fahour be set out largely in full. For ease of reference I have emphasised some elements I consider to be most significant:
he β he raised once again β he said β and really he said, 'You know, [Fahour], you know, you've gotten through the Parliament this reform program of yours and you've made all these promises about saving people's jobs and it's all about, you know, transferring them over and that's what your intention β that you told them was, but here you are in the background working out how you're going to hurt the most vulnerable of your employees and our members and those that are injured.' And I said, 'What are you talking about?' He said, 'Operation Dove.' And I said β I said, 'Is this a joke? What is Operation Dove?' He said, 'You know what it is.' I said, 'I have no clue. I haven't heard what it is. You know, I β I tried to get hold of [Walsh] to find out and I have not been able to get an answer. So what are you talking about?'
And what did he say?---Well, he said, 'You're β I've got some slides and it shows that you're planning, through this operation, to fire 3000 or so people so that you can save a tonne of money and you think by saving that money, you're going to save [APC] but you're going to do it on the back of the most vulnerable, injured, hurt people in the company. These are the posties, the staff members.' He β and β and he said some, you know, some words against me.
Doing the best you can, what can you remember the words β about the words he used and what he said?---Well, when β when Mr Metcher is angry, his language can be quite vile and he was upset because he thought β he thought, and I might say completely wrongly, that I was somehow secretly plotting behind the scenes to β to β to fire the people that I have spent five years working on to help and support and to take care of. And he β he β he then said words to the effect, 'You know, do you not have any morals? Do you have any values? How could you do this to these people? These are β these have given their heart and soul to the company and look what you're doing to them', blah, blah, blah, blah, blah. And then the first time, you know, he mentioned any other name β then he said β then the next person he went after was Catherine Walsh and he said, 'I've worked with her for all these years and I can't believe that she's turning her back, as the head of HR, on these injured people.'
And did he mention anyone else from [APC]?---He mentioned very much in passing β and he said something to the effect, 'And your henchman,' something β some word to that effect, 'Michael Newton's doing all your dirty work for you in this analysis that I've got here or in these spreadsheets that I've got here or these slides,' or something to that effect.
And did you say anything in response to that?---I said, 'How can I have somebody doing my dirty work for me in the background when I don't even know who he is?' He said, 'You know who he is. He's done all this work for you.'
And I said, 'I don't.' And then because he could see that I actually [sic] no answer, he then went back at that point to accusing [Walsh] and I of all sorts of accusations that, quite frankly, are a bit unfair and, well, that are wrong, but just not very nice.
Again, what can you recall about the words he used in making any accusations?---He was just really, really angry that we were lying, that we were deceiving the Australian people about our true intention of how we were going to save [APC]. He thought that we were going to fire and hurt the livelihoods of all these injured people who were the most vulnerable. He β he was deeply and emotionally β beyond anything I've ever seen in my life felt that he was the last man standing to take care of these 3000 people. And I said to him, '[Metcher], I remind you these are my staff and I don't need you to tell me this point. I will take care of my own people.'
Can you recall anything else that he said during the call, anything else that you said to him?---I raised several times an opportunity to do this β this β the β a more thorough review about how we can do this, about how we can tackle the Workers' Compensation review. And then, he said to me along the lines, you know, you β'You're about to launch this Operation Dove and I'm going to make sure that I expose you and all your staff for what you're about to do.' And I said to him, 'I think you're exaggerating, and there's nothing going to occur about this because I don't know anything about it.' So he was very focused on β he thought there was something imminent that he had stumbled upon that we were about to do, and he couldn't be further from the truth.
99 Fahour was reminded by his Counsel about the evidence he had given that Metcher's language can be vile and was asked whether there was any swearing during the phone call. Fahour confirmed that there was. He then gave the following evidence about Metcher's language and how the call ended (emphasis added):
Well, you see, he β he was really, you know, you fucking bastards, you have β you're going to fuck these people over, and how fucking dare you, you know, treat injured people this way, you know. They're β they're hurt. They're at home and they can't pay their mortgages. You're going to fucking ruin their lives. You're going to β you're β you're going to send people to, you know, suicide and things like that. And it β it really β the language was one thing, but it was quite emotionally distressing. Really emotionally distressing actually.
100 Despite the admission made in his pleading, Fahour denied that Metcher had made a demand that he shut down or cancel Project Dove, or said anything that he interpreted as a demand made by Metcher that he shut down or cancel Project Dove. Fahour denied that he had agreed with Metcher that he would shut down or cancel Project Dove. He was also asked by his Counsel whether, during the phone call, Metcher had demanded that he remove Michael Newton from his position or from the workers' compensation unit or whether Metcher had said anything which he had interpreted as being a demand to that effect. Fahour denied that such a demand had been made or that so much was suggested by what Metcher had said. He also denied that he agreed with Metcher that he would remove Michael Newton from his position or from the worker's compensation unit. He added that one of the statements made by Metcher was something along the lines of "I don't give a fuck what you do, you do what you do and I will do my job".
101 Although not mentioned by Fahour in the initial account of the conversation given by him in chief and set out above, in cross-examination, Fahour agreed that during the conversation Metcher had made a number of "threats". Fahour deposed that Metcher said that he would do certain things, that he had uncovered this conspiracy and that he was going to stop it. One of the "threats" made by Metcher was that he would organise protest rallies. Metcher also threatened industrial action. Fahour thought that Metcher was referring to the taking of "legal" industrial action that APC could not stop. He agreed, however, that it was most likely that all that Metcher said were words to the effect "we are going to take industrial action". Based on that threat about industrial action, Fahour came to the view that there was "an impending disaster looming from an industrial point of view". Another threat raised by Metcher was publicity that could be instigated β publicity about Project Dove. This threat made Fahour concerned that Metcher would spread misinformation about the APC reform program. Metcher also raised, as another threat, instigating legal action against APC. Fahour said that Metcher mentioned "some legal threats, because he seemed to have some information that could prove that we had breached the Act".
102 Later in his cross-examination (on the next day of the trial) Fahour sought to deny that Metcher had uttered any "threats" saying that Metcher "did offer a number of actions that he would take". Despite having himself used the word "threat" several times on the previous day, Fahour disagreed with that characterisation on the basis that a threat meant "if you don't do A, I am going to do B", whereas he deposed that what Metcher was saying was "I don't care what you do". Fahour insisted that Metcher had said he would do a number of things "anyway", irrespective of whatever Fahour did.
103 In cross-examination, Fahour described Metcher as having got "extremely emotional" during the conversation. Metcher accused Fahour of lying and got "quite verbal. The language really escalated". Fahour described Metcher as being absolutely convinced that he and Walsh and the management team "were up to some big, massive program to fire 3,000 people". To Fahour's protestations that Metcher was wrong and that there was no conspiracy, no secret plan, Metcher said "I've got slides". Fahour described the issue that Metcher "got most distressed about" was that he thought that Fahour and his team were working to fire 3,000 people. It was then that Metcher "got emotional and his voice really elevated. And he used some language which was quite profane".
104 Fahour agreed that Metcher had expressed very strong negative views about Project Dove and when asked whether it was clear to him that Metcher didn't want Project Dove to proceed, Fahour said "[h]e didn't tell me that. But I can assume that that's something he wouldn't want done."
105 When it was later suggested to Fahour that Metcher's focus was on Project Dove, Fahour said that his focus was "on exposing me and [APC]β¦that we were doing something β breaching the Act". Fahour said that Metcher had some legal action that he was going to take to expose APC and that he was going to organise political rallies against APC. Fahour accepted that Project Dove was part of the focus but stated that the mismanagement of White's case as well as Metcher's view that the APC reform program "was flawed and not true" was also at the heart of the discussion.
106 Fahour confirmed that Michael Newton was mentioned during the conversation. He was reminded of his evidence that Metcher had referred to Michael Newton as "your henchman". Fahour was asked what he understood by that. He said "I just assumed he meant he was the guy doing my dirty work" and that the "dirty work" was the secret plan to sack 3,000 employees.
107 Fahour denied that Metcher had said he would do "those things", unless Fahour cancelled Project Dove or unless Fahour removed Michael Newton from his position as National Compensation Manager. Fahour also denied that Metcher had said during the conversation, that he considered Michael Newton to be the cause of the problems with APC's workers' compensation system.
108 Despite the admission made by his pleading, when asked whether Metcher had raised during the course of the telephone call that he could not work with Michael Newton anymore, Fahour said "I don't recall him saying those words". To the suggestion that Metcher had said words to the effect that his working relationship with Michael Newton had broken down, Fahour said "No, he didn't say it like that". When asked if Metcher had said anything about whether he was prepared to continue working for Michael Newton, Fahour said that what Metcher said about Michael Newton was that he was "your henchman". Fahour stated that Metcher described Michael Newton as one of Fahour's underlings out there doing his dirty work for him, trying to fire 3,000 injured workers. Fahour also denied that Metcher expressed any dislike for Michael Newton.
109 There was evidence of Fahour's reaction to his conversation with Metcher and the actions he took in response to it. Fahour deposed that once he was able to compose himself after the conversation with Metcher, he sat in his car and thought through "how do I avoid what seemed to be an impending disaster looming from an industrial point of view". He said that he was concerned that Metcher was going to use a political rally, and that there was a political meeting of some sort in the lead up to "the Senate that was going to derail the reform". By that, I understand Fahour to be referring to committee hearings held as part of the Senate estimates process which he feared would be used to derail the APC reform program. He also said that he had "the industrial actions looming" and that he thought about how "do I get this [workers' compensation] review done". He said that he then called Walsh.
110 Fahour deposed that he told Walsh of his conversation with Metcher. He paused to ask her "who is Michael Newton?" To that, Fahour said that Walsh described Michael Newton as a mid to lower-level manager who works in the workers' compensation unit. Fahour deposed that he then mentioned that Metcher had said something about Operation Dove and the firing of 3,000 injured workers and asked Walsh what all that was about, to which Walsh replied "its some desktop analysis that one of my staff, Emma Blee, is working on with the team to identify some opportunities of how can we deal withβ¦the injured employees". Fahour stated that he then told Walsh that he did not know anything about it; that it had never been raised with him and it was the first time he had heard of it. He stated that Walsh replied that "it's just some analysis that somebody is doing". Fahour then said that he responded to Walsh as follows (emphasis added):
'Okay. Well, that's useful to know.' I said, 'But it seemed to me, from what I gathered, [Metcher] was very agitated, very concerned that we are secretly plotting to do this and that Michael Newton was leading this analysis and he had it in for these 3000 people, it seems. That's my impression that I've gathered. And I'm concerned that if Michael [Newton] is just doing his job, that somehow, he's going to, you know, be targeted in ordinary course of doing his job and I'm really concerned about that.'
111 Asked whether in the phone call he gave Walsh any instructions or directions, Fahour referred to four things as follows (emphasis added):
Well, after she had explained to me what was going on, I said to [Walsh], 'Look, [Walsh], I've thought this thing through, and I'm doing this a little bit on the fly, but I need to do something today because I'm worried about what's going to happen over the weekend, and misinformation is going to be spread about our reform program and this Operation Dove.' And I said, 'If this is just an analysis, the numbers don't sound right to me at all. As if we would ever, ever fire 3000 injured employees, let alone if it's even legal to do such a thing. We β this is completely in contrast. So do you agree with me that there is nothing to be lost by just stopping this analysis so that we can demonstrate unequivocally, at least to Greg Rayner, the national secretary of the union, that there is no substance to this secret project to fire 3000 people?' And she said, 'That β that is no problem at all. We can easily close that analysis,' is what she said to me. So I said, 'Fine. Well, that's an easy decision.' The second one of what I communicated β and I think was very clear in my mind β I said, 'Look, it's really important that the health and wellbeing of the people who are surrounding this area is protected, including you, [Walsh], because I've noticed you've been copping a lot with me, as you know, [Metcher's] fury, and I'm really worried about you and your health and wellbeing.' I said, 'I can handle it; I'm the CEO, and so, therefore, I can take this pressure. We've got 1000 things we're doing. I need you to get some help for yourself and any support, so let's talk about that.' So we talked about that. And then thirdly, I said, 'This review that we have to do on workers' compensation that we need to do, given that this person whom I don't know, Michael Newton, is heading it, can we park him aside somewhere else just temporarily while we sort out what's going on here and how we handle this because I don't want him to cop any flak from [Metcher] or anybody else. So just move him somewhere. Just don't let him be affected by this β this situation.' And then last, 'Can we catch up some stage early next week and talk about ideas that I've been developing of how we can do this workers' compensation review so that we can get agreement with the union movement that we would do that.' They β they were the β essentially the four or five things that I had come up with on the spot to defuse and to protect the organisation and the individuals within the organisation to the best of my ability.
112 Fahour also added that he asked Walsh to "by the close of business to discuss this with her team and to cease this Operation Dove analysis". He said that Walsh agreed she would do that.
Consideration
Were threats/demands made by Metcher?
113 For the reasons already discussed, Michael Newton bears the onus of proving the "action" alleged under ss 348 and 355, namely that Metcher made the threats alleged and recorded at [13] above. By reason of the principles expressed at [25] above, I reject the contention made by the APC respondents that because the alleged threats were conditional they were not "threats" of a kind which are capable of engaging ss 348 or 355 of the FW Act.
114 The conditional nature of the threats as alleged is nevertheless important, the condition being that the threatened actions would be taken unless Fahour cancelled Project Dove and removed Michael Newton from his position. Those conditions are what Michael Newton asserts was demanded of Fahour by Metcher. They form part of the "action" that Michael Newton must demonstrate occurred. The trial was conducted on the basis that Michael Newton accepted that it was his onus to prove that Metcher demanded that Project Dove be cancelled and demanded Michael Newton's removal from his role as National Compensation Manager.
115 Additionally and in support of his claim that APC and Fahour were accessorily liable, Michael Newton has also alleged that in the 5 February conversation with Metcher, Fahour responded to Metcher's threats and demands by agreeing to cancel Project Dove and remove Michael Newton from his position. That is also an allegation that Michael Newton must prove.
116 At the outset, I should say that the fact finding exercise in which I am here involved is not straightforward. It has been complicated by issues of credit and also by the fact that some matters have been admitted by some respondents but not others. Nevertheless, in the end, I have been able to reach the conclusions I have made with sufficient confidence.
117 There is direct evidence from Fahour which denies each of the two critical demands alleged to have been made by Metcher in Metcher's conversation with Fahour on 5 February 2016. Fahour denied that Metcher demanded that he cancel Project Dove or that he remove Michael Newton from his position. If all that evidence was accepted, Michael Newton's fate on his ss 348 and 355 claims would be sealed. However, as earlier indicated, the caution which I have determined to take with the evidence given by Fahour means that I have not been prepared to accept his evidence as reliable unless it is corroborated by other evidence or there is a basis for believing the evidence to be plausible.
118 Michael Newton's best point in support of a finding that the demands for which he contends were made, is the uncontested fact that the decisions made by Fahour to remove Michael Newton from his position and to cancel Project Dove were made by Fahour very shortly after his conversation with Metcher and were likely to have been responsive to something said, done or appreciated in that conversation. On any view, the decisions taken by Fahour to cancel Project Dove and remove Michael Newton from his position were extraordinary decisions taken in great haste. It may be inferred that Fahour was responding to an extraordinary circumstance which had imposed intense pressure upon him to act extraordinarily.
119 Objectively discerned, the decision to remove Michael Newton from his position was extraordinary for many reasons. Fahour must have known that such a decision was likely to have ramifications for Michael Newton and for APC. Such a decision would not ordinarily be made by a manager in Fahour's position without advice, including advice as to APC's contractual or other legal obligations to Michael Newton. The ramifications for APC and for Michael Newton would ordinarily be carefully assessed. Yet Fahour's decision to remove Michael Newton was made with no apparent consideration of its potential ramifications for either Michael Newton or for APC.
120 On Fahour's account, the decision to remove Michael Newton was made in circumstances where Fahour knew nothing of Michael Newton other than that Walsh told him that he was a manager working for APC in the workers' compensation unit. There is no suggestion in the evidence that when the decision was taken Fahour knew anything at all about Michael Newton's contract of employment, or very much about the nature of the work he was doing within the workers' compensation unit or of its importance. A decision of that kind, particularly if it were taken, as Fahour deposed, to protect Michael Newton from Metcher might be expected to have been taken after some consultation with Michael Newton. There was no consultation. Nor was there any evidence of any significant attempt made by Fahour to obtain information to enable an informed decision. The decision was obviously made with extraordinary haste, indeed as Fahour told Walsh in their conversation of 5 February 2016, he was acting "a little bit on the fly". Fahour required that the decision be implemented immediately (before the close of business on 5 February 2016). All of that is demonstrative of the likelihood that Fahour was acting under great pressure.
121 The decision to cancel Project Dove was also taken without Fahour having any significant understanding of the nature, objective or importance of Project Dove and the ramifications, both legal and operational, of its immediate cancellation. I say that accepting Fahour's evidence that as at 5 February 2016 and prior to his interactions with Metcher on that day, he knew nothing of Project Dove, but not accepting Fahour's evidence that in his conversation with Walsh she told him that it was "some desktop analysis" that Blee was working on. For Walsh to have down-played the prominence of Project Dove in that way would have involved Walsh substantially misrepresenting the position to Fahour. Although still in a development phase, there was cogent evidence before me to which I have already referred, that by 5 February 2016 Project Dove was no "desktop analysis". Apart from the extensive attention given to its development by Michael Newton, other senior managers (including Walsh, Bass and Blee) had had considerable input into Project Dove. Project Dove had a not insignificant history at APC. Between January and June 2015 Michael Newton and others were scoping the project which was formalised in June/July 2015. Project Dove then became a performance target for Michael Newton, with 20% of his performance review for the 2015/16 financial years relating to Project Dove. Further, as Michael Newton deposed, and as the evidence suggests, Project Dove was approved at the APC People Remuneration Culture Forum ("PRCF") in September 2015, a management committee chaired by Blake, where a noting paper on the Project was tabled and accepted as read. After receiving PRCF approval, in January 2016 letters were being sent out as part of Phase 1 of Project Dove to APC's long-term workers' compensation claimants.
122 Even if Fahour had been misled into believing that Project Dove was of less significance than the reality, the lack of information he had or sought about Project Dove and about Michael Newton's circumstances, strongly suggests that Fahour was of the view that whatever the ramifications were for APC or for Michael Newton of Michael Newton being removed and Project Dove being cancelled, those ramifications were far less serious than the ramifications of not acting to remove Michael Newton and cancel Project Dove. I readily infer, and it is not really in contest, that something highly consequential occurred in the conversation between Fahour and Metcher, something which was sufficiently serious and substantial to have motivated Fahour to take the extraordinary and urgent action that he did.
123 That all makes it likely that something that Metcher said or did during the conversation or something that Fahour appreciated as a result of that conversation was the impetus for Fahour's decision.
124 That Metcher may have made forceful demands or threats would not, on the evidence, be out of character. The evidence suggested a significant history of antagonism and anger from Metcher directed at APC managers in relation to concerns Metcher had for the plight of injured CEPU members and their treatment under APC's workers' compensation system. Metcher had expressed those concerns in strong, colourful terms and, at times, in terms that were open to be regarded as disrespectful. A range of examples were relied upon by Michael Newton including comments made in various email exchanges relating to the White issue, to which I have referred earlier. The examples relied upon include Metcher describing APC's workers' compensation processes as a "broken system"; that he described himself as being "filthy angry" at APC's workers' compensation unit and described that unit as a "dam disgrace"; that he accused the unit of being "incompetent" and that he accused Blee of lying to him.
125 To further support the characterisation of Metcher as forceful and demanding, Michael Newton relied on various records made by APC employees. In particular Blee made a complaint on 16 April 2016 to APC (the "Blee complaint") in which she stated that APC employees are repeatedly told that they have to tolerate or ignore "Metcher's tirades even when the attacks are incredibly personal". She described Metcher as a bully and characterised APC's acceptance of his behaviour as amounting to "company sanctioned bullying". In other documentary evidence, Walsh described Metcher as a "bear" in observing that APC employees dealing with workers' compensation claims were "well versed in not poking the bear". Neither Walsh nor Blee were called to give evidence. Their characterisations of Metcher were not objected to or otherwise contested.
126 There was other evidence relied upon by Michael Newton to portray Metcher as the type of person likely to make threatening demands. As earlier recorded, shortly after Michael Newton commenced his employment, he met with Metcher in a meeting held on 1 April 2014 also attended by Blee and Metcher's son, Nathan Metcher. Michael Newton deposed that at the meeting Metcher said words to the effect that nothing happened at APC within its workers' compensation unit without it going through him as otherwise there would be consequences, and further that Metcher had had a previous manager dismissed and that the same would happen to Michael Newton if Metcher was not treated with respect. That those words were said was denied by Nathan Metcher. It is, however, unnecessary to resolve that particular conflict in the evidence other than for one purpose. In so far as that evidence was directed to persuading me that Metcher was well capable of making threatening demands upon APC, and doing so forcefully, there is sufficient other evidence which has persuaded me to accept that proposition. In so far as that evidence was being relied upon by Michael Newton to suggest that Metcher had previously demanded that a manager be sacked and was thus predisposed to make a demand of that kind, I do not accept the evidence to be reliable. Michael Newton had contemporaneous notes which he recorded during the course of the meeting. However, the line in his note concerning Metcher having had a previous manager dismissed was not written during the meeting like the rest of the note. Michael Newton deposed that it was written into his note when he was in a taxi after the meeting. Michael Newton explained that he did not bother to record Metcher's comments, in particular the threat in relation to Michael Newton's position during the meeting because Metcher's bad behaviour was tolerated by APC. He also said that he did not take the claim seriously. It is difficult to accept Michael Newton's claim that shortly after the meeting he added a reference to Metcher's asserted claim. Why he did that after the meeting in circumstances where he was not motivated to do that during the meeting was not explained and caused me to doubt the reliability of the evidence in circumstances where Nathan Metcher denied that the assertion was ever made. In any event, Michael Newton's evidence that he did not take the claim made by Metcher seriously diminishes the potency of that evidence, even if I had accepted it.
127 Although I accept Michael Newton's contention that Metcher had a history of making threats and demands and that APC was inclined to tolerate his behaviour and be responsive to his demands, I think it is also important to notice Metcher's modus operandi. The threats made by Metcher which were in evidence and which were made prior to 5 February 2016, were not threats of disruption, whether by way of industrial action or otherwise, or threats of any unlawful conduct. The threats made by Metcher that he or the CEPU would take action unless his complaints about the workers' compensation system were addressed, were threats about the CEPU publicly and politically exposing the way in which injured workers were being treated by APC. An important example is contained in an email mentioned at [84] and sent by Metcher to Walsh and Fahour (copied to the CEPU National Office officials) on the day before his conversation with Fahour, in which Metcher informed Walsh and Fahour that (emphasis added):
I intend to present Ms White and other sick and injured workers of [APC] as examples to [sic] how sick and injured workers are treated by [APC] and their claims are being managed under the Workers' compensation systems of [APC] when in Canberra on Monday and Tuesday next week.
128 APC is a major government business enterprise. It is also a prominent entity whose activities, although diminished in the modern era, remain important to all Australians and attract political attention. Fahour expected that negative information about a government business enterprise like APC would be communicated to parliamentarians in the Labor Party by the unions. That APC was frequently subject to or likely to be subjected to parliamentary oversight through Senate estimates processes was apparent from Fahour's evidence. APC's sensitivity to political scrutiny and potential criticism was manifest in the evidence Fahour gave on that issue, evidence which I regard as plausible. Even prior to receiving the 4 February 2016 email in which Metcher expressly told APC that he would raise his complaints "when in Canberra", Fahour had anticipated that allegations were being made by Metcher that might find their way to the Senate estimates program. For that reason, as discussed at [74]-[75], on 3 February 2016, he instigated the Leanne White Review requiring that the review be conducted urgently so that APC would have an answer at Senate estimates for the allegations Fahour contemplated would there be raised.
129 APC's appreciation that political exposure would be Metcher's weapon of choice and APC's sensitivities to that eventuality is also demonstrated in an email dated 23 January 2016 which was sent to various APC managers, in which Walsh stated that "[Metcher] has gone off again about a workers' compensation issue and has now made a number of serious threats about having a very public outing of the [APC] workers' compensation system flawsβ¦at Senate estimates, in the media or potentially a Senate Inquiry". Walsh stated that the particular issue that had driven the "current escalation" was whether APC was required to pay public holidays to its employees on workers' compensation and at what rate. She stated that she feared that whatever position APC took, Metcher was "so unwell and irrational at the moment" that he would nevertheless "still play this out at Senate Estimates or call for a Senate inquiry". Walsh then suggested that APC should do some background lobbying with the "Labour [sic] Party" so that APC could try to get on the front foot and "prevent this going down the Senate estimates path".
130 In my view, it is highly likely that Metcher's threats that he would take his complaints to Canberra were made with an appreciation of APC's sensitivity to political scrutiny of its activities. It is likely that a long standing senior and experienced union representative of APC employees well understood APC's sensitivity to public and political scrutiny. It is likely, that Metcher considered that the threat of political exposure was likely to be an effective strategy to be deployed by the CEPU in addressing concerns about the mistreatment of injured employees. As Metcher's 4 February 2016 email to Walsh and Fahour referred to at [84] demonstrates, Metcher was upfront about his intentions. He told them that he would be raising his concerns about APC's treatment of injured workers in Canberra on the following Monday and Tuesday.
131 It is not clear on the evidence exactly when Metcher discovered the existence of Project Dove. It is clear that about an hour and a half after he sent the email of 4 February 2016 and at the conclusion of the meeting of the APC Workers' Compensation Reform Forum, Metcher told Michael Newton that he "was in possession of Project Dove documents" as detailed above at [85]. Given that none of Metcher's earlier communications with APC complaining about the treatment of injured workers raised Project Dove or its subject matter, it seems to me most likely that Metcher learned of Project Dove on or perhaps shortly before 4 February 2016. I do not doubt that Metcher was likely incensed by what he had discovered which, from his perspective, was the prospect that APC was working on a plan to dismiss some 3,000 injured workers on workers' compensation payments. Those prospective dismissals, I would infer, would have been regarded by Metcher as highly detrimental to the interests of both the injured employees and the CEPU. If Metcher believed that APC was intent on dismissing 3,000 injured employees he is likely to have regarded that prospect as both unprecedented and outrageous. Any union official in his position would likely have been incensed and most if not all union officials in Metcher's circumstances would likely have been highly motivated to do something to stop it. There is good reason to accept Fahour's evidence that when his conversation with Metcher on 5 February 2016 turned to Project Dove, Metcher's language was "vile", that he was "upset", "really really angry", that "he was deeply and emotionally [disturbed] β beyond anything I have ever seen in my life".
132 The evidence also permits the inference that on learning of Project Dove and given Metcher's understanding of what was intended by APC, Metcher must have thought he had struck gold in relation to his intended campaign to politically expose APC in Canberra about how APC treated its injured workers.
133 Whilst I need to be cautious with evidence given by Fahour, I accept his evidence that Metcher said in relation to Project Dove words to the effect that "I'm going to make sure that I expose you and all your staff for what you are about to do". I also accept that it is likely that Metcher said that he was going to stop Project Dove and identified at least some of the means he intended to utilise.
134 The APC respondents admitted that Metcher made a request that Project Dove be cancelled. However, as against Metcher and the CEPU there is no such admission. Michael Newton contended that the evidence of Fahour denying that such a request was made should be rejected and that an inference should be drawn that the request was made because it is inherently unlikely that Metcher would make a series of threats to Fahour to take certain action, not seek anything in return and not subsequently carry out any of the threats he had made.
135 Fahour denied that Metcher had demanded that he shut down or cancel Project Dove or that he had interpreted that any such demand had been made from anything said by Metcher. However, he confirmed in cross-examination that it was apparent to him that Metcher had strong negative views about Project Dove. As referred to earlier at [104], in response to whether it was clear to him that Metcher did not want Project Dove to proceed, Fahour said "He didn't tell me that. But I can assume that that is something he wouldn't want done".
136 It may well be the case that a request to cancel Project Dove was not expressly made but that does not foreclose a finding that the request was not made implicitly. Fahour's evidence of his subjective perception as to whether or not such a request was implicit is contradictory. His answer given in cross-examination suggests that it was. In any event, Fahour's subjective perceptions are not determinative. As stated earlier, the issue must be assessed objectively.
137 Given my acceptance that Metcher was strongly opposed to Project Dove and made that opposition crystal clear to Fahour including by threatening the actions he threatened to take as part of his campaign to stop it, I accept that a reasonable person would have construed Metcher as demanding that Fahour shut down or cancel Project Dove.
138 As to the actions that were threatened should Project Dove not be cancelled, I accept that it is likely Metcher raised the organisation of protest rallies and exposing APC to negative publicity. I accept that it was likely to have been at least implicit from what Metcher did say that he intended to pursue the issue politically. All of that is entirely consistent with reliable evidence of Metcher's stated position prior to the 5 February conversation in relation to how he would fight to address what he perceived as APC's mistreatment of its injured employees. It is reasonable to infer that Metcher wanted to stop Project Dove in circumstances where he likely perceived it as a further and gross example of APC's mistreatment of its injured employees.
139 I am satisfied on the basis of the findings I have just made as to the actions raised by Metcher that those actions are objectively to be construed as having been threatened. I take into account not only what was said but the context in which it was said and the aggressive and forceful manner in which the taking of those actions was raised. I accept Fahour's evidence about the forceful nature of the language used by Metcher in the conversation. That is all consistent with evidence of Metcher's prior behaviour and also consistent with reliable evidence of Fahour's reaction to the conversation and what I have described as the extraordinary decisions that he then took. In relation to Metcher's communications that he would organise protest rallies, expose APC to negative publicity, pursue APC politically and take legal action against APC, I am satisfied that the communication was a warning of an intention to inflict harm made for the purpose of intimidating Fahour and APC and that Metcher held a subjective intent to carry out those actions. Each of those communications was capable of constituting a threatened action within the meaning of s 348 of the FW Act.
140 I accept that Metcher threatened to take action within the meaning of s 348 of the FW Act. The action threatened was to organise protest rallies and expose APC to negative publicity and political scrutiny if Project Dove was pursued. For the purpose of proving that Metcher threatened to take action within the meaning of s 348, the threat of organising political exposure is of itself sufficient to establish that element of the cause of action as against each of the respondents. However, that was but one of the five threatened actions pleaded by Michael Newton.
141 Michael Newton also pleaded that Metcher said that he would "take [APC] to the cleaners". As against Metcher and the CEPU and in so far as that allegation is to be understood as a threat to expose APC to negative publicity, I accept that the threat was made. As against the APC respondents the making of that threat was admitted so far as it was conditional upon the cancellation of Project Dove. I would accept that the threat of action was likely associated with the demand that Project Dove be cancelled.
142 I also accept that Metcher said he would "take legal action". Metcher had made a number of complaints prior to his conversation with Fahour that White and others on workers' compensation payments were not being paid their annual leave entitlements. Consistently with the making of those complaints, I accept Fahour's evidence that Metcher raised the taking of legal action against APC for breaching "the Health and Safety Act". The APC respondents admitted that that threat was made. However, as against each of the respondents, it has not been demonstrated that the threat was made in relation to either Project Dove or any demand made to remove Michael Newton. It is likely that this threat was made in relation to Metcher's complaint that APC had failed to pay annual leave entitlements to White and other employees.
143 Michael Newton also pleaded that Metcher said that he would "leak the [leaked APC documents about Project Dove] to the media and politicians". In support of that contention, although it is not clear, Michael Newton appears to have relied upon evidence given by Fahour that he suspected that at "some stage" (a likely reference to a time much later than February 2016) Metcher "leaked, discussed Project Dove to [sic] the Parliamentarians". Fahour went on to say that this was his assumption and that he did not know where information about Project Dove in the hands of politicians came from including because representatives of both the Opposition and the Government questioned APC about Project Dove at a hearing of Senate estimates. That evidence does not address what was said in the conversation of 5 February 2016 at all. Although the evidence deals with communications received by politicians about Project Dove, it does not in terms address "leaked APC documents about Project Dove". The evidence is not capable of sustaining an inference against Metcher and the CEPU that the threat as pleaded was made on 5 February 2016. As against the APC respondents, those respondents admitted the making of the threat although they did not admit that Metcher referred to the APC documents as "leaked".
144 Further, Michael Newton pleaded that Metcher also said that he would "take serious industrial action". Michael Newton contended for a finding that Metcher threatened that he would organise unlawful industrial action. The finding sought goes beyond the threat which was pleaded. The taking of industrial action by the CEPU and its members may be lawful or it may not be. Much depends upon whether the industrial action is taken as "protected industrial action" provided for by Part 3-3 of the FW Act. The allegation that "serious industrial action" was threatened is not an allegation of a threat of unlawful industrial action. Whilst the APC respondents admitted the allegations made, the admission does not constitute an admission that Metcher threatened unlawful industrial action. Fahour deposed that Metcher raised the taking of industrial action. His evidence was that Metcher was talking about "legalised industrial action", that is, action that APC could not stop. What Metcher actually said to give him that impression was not dealt with.
145 I am not prepared to accept that a communication was made by Metcher that the CEPU and its members would take unlawful industrial action. First, there is no evidence that action of that kind was ever previously raised by Metcher in support of his campaign against APC's treatment of its injured workers. If I accept Fahour's evidence, which is the only available evidence as to whether lawful or unlawful industrial action was threatened, Fahour deposed that his understanding was that lawful industrial action was threatened. If I do not accept Fahour's evidence, there is simply an insufficient basis available on the evidence to make a finding that unlawful industrial action was threatened.
146 I will return to consider the other elements necessary for Michael Newton to demonstrate a contravention of s 348 in relation to threats made by Metcher to take action unless Project Dove was cancelled. It is convenient that I first consider, in relation to the s 348 claim, whether Michael Newton has established that Metcher made threats demanding that Michael Newton be removed from his position as well as, in relation to the claim of contravention of s 355, whether Metcher demanded that Michael Newton not be allocated the duties or responsibilities of the position he then held as National Compensation Manager. I will first consider the position as against Metcher and the CEPU.
147 The factual circumstances that support my finding that Metcher had a strong motivation to stop Project Dove are not necessarily transferrable to support a finding that Metcher was motivated to have Michael Newton removed from his position. The extent to which Metcher considered Michael Newton responsible for Project Dove is not entirely clear. In his email of 5 February 2016 he did refer to Project Dove as "Michael Newton's 'Operation Dove'!" Fahour said that he told Michael Newton, in their conversation on 12 February 2016, that Metcher had referred to Michael Newton leading Project Dove with Walsh. However, on Fahour's account, Metcher attributed primary responsibility for Project Dove to Fahour. Metcher thought that Fahour was "secretly plotting behind the scenes". Fahour said that after himself "the next person [Metcher] went after was [Walsh]". On Fahour's evidence, Michael Newton was mentioned "very much in passing" and referred to as "Fahour's henchman" doing Fahour's "dirty work". Fahour described Metcher as being absolutely convinced that Fahour and Walsh and the management team were involved. Fahour said that Metcher's focus was "on exposing me and [APC]".
148 It is sufficiently clear on the evidence that on 5 February 2016 Metcher understood that Michael Newton had a significant association with Project Dove. However, there is no basis for thinking that Metcher would have regarded Michael Newton as the only person responsible for Project Dove and given the subject matter of Project Dove, its scale and unprecedented nature, I would infer that Metcher would likely have assumed that such a program could not get off the ground without the support of very senior management including Fahour. I would accept Fahour's evidence that Metcher perceived Fahour as being behind Project Dove and that Michael Newton was his "henchman". Fahour's evidence that Metcher refused to accept Fahour's protestations that he was not involved is, in my view plausible.
149 Further, there is no cogent basis for thinking that Metcher would have regarded the removal of Michael Newton from his position as likely to significantly ameliorate, let alone remove, his concerns about the implementation of Project Dove. In terms of Metcher's perceptions, the removal of Michael Newton from his role would have achieved very little unless Project Dove itself was cancelled. There is no reason to infer that Project Dove and its cancellation was not Metcher's main objective. If Metcher wanted the removal of a person from his or her position, that objective was only ever likely to have been supplementary or subsidiary to the cancellation of Project Dove. The evidence does not enable the inference that Metcher would have held the view that it was necessary to take down Michael Newton in order to stop Project Dove.
150 If Metcher was motivated to take a scalp out of vengeance rather than necessity, it is not clear that Michael Newton would have been the head that he wanted rolled. It may have been that Metcher recognised Michael Newton as the instigator of Project Dove but on Fahour's evidence Metcher directed his anger firstly at Fahour and secondly at Walsh with whom he had a long-standing relationship and according to Fahour said, as referred to at [98], "I've worked with her for all these years and I can't believe that she's turning her back, as the head of HR, on these injured people". The evidence demonstrates that Metcher had issues with a number of employees within the workers' compensation unit, including Blee, who he accused of lying to him. There is no credible evidence that at least before 4 February 2016 or thereabouts (when Metcher discovered Project Dove), Michael Newton was on Metcher's radar at all. The complaints that he had made critical of the workers' compensation unit did not single out Michael Newton for any criticism.
151 Fahour's denials that any such request or demand was made would be determinative of the issue if that evidence is accepted. If that evidence is rejected as Michael Newton urges me to do, there is really little beyond the fact that Michael Newton was removed from his position shortly after Fahour spoke to Metcher to sufficiently support an inference that Metcher demanded that Michael Newton be removed. If the only possible and cogent explanation for that removal was a demand made by Metcher, Michael Newton's position may well be stronger.
152 However, Michael Newton's contention that there was no "logical explanation" for his removal from his position other than that Fahour acceded to a demand from Metcher that that be done should not, in my view, be accepted. On the basis contended for by Michael Newton, that Fahour's evidence that no such demand was made is unreliable and that Fahour's explanation for removing Michael Newton is also unreliable (a matter to which I will return), there is at least one other logical explanation for why Michael Newton was removed.
153 In my view the following statement made by Fahour cogently identifies the primary fear, sensitivity and concern held by Fahour as a result of what Metcher communicated to him during their telephone conversation on 5 February 2016 (emphasis added):
And I got off the phone and I remember I looked out the window of my car and I was in shock. I actually didn't know what β like I was in β I was in shock that he could be so wrong and so misjudge what I wanted to do and what I was trying to do for the staff, and the intention, and I was concerned, deeply concerned, that he could, through negative publicity, derail the single largest reform program in the history of [APC]. And that would be a monumental disaster, because, if the Parliament reversed the decision we had to go and find $6.7 billion of funding, and I was really afraid for the 20,000 people that worked in the mail centres, the posties, the retail staff. I was deeply concerned about where their livelihood would come from, and that if he had used his industrial power to cause us to not reform, that β and on β on an incorrect assumption, that this would bring down [APC]. And I didn't want to be the last chief executive to see 20,000 people marched out without a job.
154 There is, on the evidence, a plausible basis for thinking that there were three driving reasons to explain why immediately after his conversation with Metcher, Fahour was under the immense pressure that I accept he was subjected to. First, he was deeply concerned that Metcher's threats about exposing Project Dove may bring down the APC reform program. Second, he had failed to convince Metcher that Project Dove did not exist or would not be pursued. Third, he was convinced that Metcher had the capacity to and would begin using Project Dove to seriously damage APC immediately, recalling in particular that Metcher had stated in his email of 4 February 2016 that he was taking his campaign to Canberra on the following Monday 8 February 2016. In those circumstances and particularly as Fahour had no attachment to Project Dove, the most obvious thing for Fahour to do was to continue to try and convince Metcher that Project Dove was not going to occur. It seems to me at least logically possible (if not likely) that Fahour realised that it was necessary for him to do something concrete and convincing and do it quickly. One possible means of convincing Metcher that Fahour had no intention of pursuing Project Dove was to remove from the arena the person that Metcher regarded as Fahour's "henchman" for implementing Project Dove. On that scenario, Michael Newton was the sacrifice necessary to be made in order for Fahour to protect what he was most deeply concerned about, the damage that Metcher and the CEPU could do, mainly through political processes, to the APC reform program.
155 It is instructive, I think, to notice that there is no evidence of Metcher exposing Project Dove in Canberra on 8 February 2016 or any time soon thereafter or possibly at all. Indeed, at about 11am on Monday 8 February 2016, Metcher sent an email to Fahour referring to their discussions of the previous Friday. The email was civil and polite. It indicated that Metcher was now receptive to the conduct of the Leanne White Review and proposed the CEPU's nominee for the team of persons who were to conduct that review. The email made no mention of Project Dove. It seems likely that by the time this email was sent, Metcher had been convinced to accept that which he had rejected during the conversation with Fahour on the previous Friday, that APC would not pursue Project Dove. There is only one event of relevance in the evidence before me that occurred between the conversation on 5 February 2016 and Metcher's communication on 8 February 2016. That event is that Michael Newton was removed from his position. There is no direct evidence of how the removal of Michael Newton from his position was communicated to Metcher. Fahour deposed that he did not communicate that to Metcher but, although he said he was speculating, he said he assumed that Walsh would have done so.
156 I do not positively find that Fahour removed Michael Newton from his position because he sought to convince Metcher that Project Dove was truly dead and buried. I need not make that finding. However, that Fahour removed Michael Newton for that reason is an inference not less supportable than the inference that Michael Newton was removed from his position because Metcher demanded that Fahour do so. In other words, each of those reasons are possible logical explanations for why Michael Newton was removed from his position. If the existence of only one logical explanation for Fahour's conduct had been sufficient to allow the inference contended for by Michael Newton to be drawn, the inference cannot be drawn because there are other logical explanations which can explain Fahour's conduct.
157 I have arrived at that conclusion mindful of the fact that, although I raised the possible explanation I have just set out with Michael Newton's Counsel, it had not been raised or relied upon by any of the respondents and not put to Fahour. None of the respondents had an incentive to put that case because each sought to convince the Court that Fahour was a reliable witness whose explanation for removing Michael Newton should be accepted. Fahour deposed that Michael Newton was removed because of Fahour's concern for Michael Newton's wellbeing and in order to protect him from exposure to Metcher. Michael Newton contended that I should not accept Fahour's explanation and for the reasons that follow I do not. However, my non-acceptance of that evidence (which has contributed to my concern about the reliability of Fahour's evidence and the general impression I gained of him), serves to support the existence as a logical possibility of the undisclosed explanation I have raised, and does so despite the unfortunate position that the explanation was not explored with Fahour.
158 There are a number of reasons why I do not accept that Fahour removed Michael Newton from his position to protect Michael Newton's wellbeing. First there was an inconsistency in Fahour's evidence as to who raised a concern for Michael Newton's welfare. Fahour deposed that he explained his decision to Walsh (in his conversation with Walsh following his conversation with Metcher) on the basis that he did not want Michael Newton "to cop any flak from [Metcher] or anybody else". Contrary to that evidence given in chief, which suggested that protecting Michael Newton was Fahour's idea, in cross-examination and in an attempt to explain his decision in the context of his evidence that he did not know Michael Newton at the time, Fahour deposed that Walsh had told him that Michael Newton was a "good person" and "good manager" and that it was Walsh who raised the need to protect Michael Newton.
159 Second, Fahour's evidence that he told Walsh to remove Michael Newton in order to protect him is inconsistent with the explanation for the decision given by Walsh in a meeting she had with Blee and Michael Newton shortly after her conversation with Fahour on 5 February 2016. Walsh did not explain the decision on the basis that it was made to protect Michael Newton. She merely said that Michael Newton was being removed from his position "as a result of a phone call Ahmed Fahour received about proposed management of injured workers".
160 It seems to me more likely that if the decision was taken for Michael Newton's benefit and out of a concern for his wellbeing, especially if taken at Walsh's suggestion, Walsh would have explained the decision to Michael Newton on that basis. She did not. Neither did Blee when two days after the decision was made she wrote to another APC senior manager saying that Fahour had insisted that she and Walsh inform Michael Newton "of the temporary change Friday afternoon because of some pending media and legal threats".
161 Third, I think it unlikely that such a decision would have been taken for the reason given by Fahour without some consultation with Michael Newton. If the object of the exercise was to look after Michael Newton, surely his input including his view as to whether or not he needed protection from Metcher and his view as to whether or not the removal from his position was ultimately of benefit to him, would have been canvassed.
162 Fourth, why was it imperative for the decision to be made and implemented immediately? Surely if Michael Newton's welfare was the driving motivation, the decision could have waited until the following Monday or later. Fahour's suggestion that he was concerned that Metcher would attack Michael Newton over the weekend was unconvincing, particularly in light of the next reason I have for rejecting his explanation.
163 Fifth, Fahour's evidence was that Michael Newton needed protection from Metcher not because of anything to do with Project Dove but because Michael Newton was "heading" the Leanne White Review. Read in the context of other evidence Fahour gave, I understood Fahour to mean by that that Michael Newton would be particularly exposed to Metcher whilst the Leanne White Review was being conducted because he was the person responsible for the workers' compensation unit. There are a number of difficulties with that evidence including that, when the decision was made on 5 February 2016 shortly after the discussion between Fahour and Metcher, given the conversation he had just had with Metcher, Fahour could have had no confidence that the Leanne White Review (which required the cooperation and involvement of Metcher) would be conducted. Secondly, Michael Newton had little to do with the complaint made in relation to White or the wider issues raised by those complaints. There are others, including Blee, that the evidence suggests were far more directly in Metcher's sights than Michael Newton in relation to issues that would be the subject of the Leanne White Review. Why Fahour considered it was necessary to protect Michael Newton from Metcher rather than someone like Blee was not really explained by Fahour and it was Blee who took over the responsibilities of Michael Newton's role when he was removed from his position. Additionally, and I think tellingly, Fahour's evidence that his concern to protect Michael Newton from Metcher because of the Leanne White Review is entirely inconsistent with Fahour's refusal to allow Michael Newton to take up a position in the workers' compensation unit after the Leanne White Review had been completed. Fahour adopted that position, despite the Leanne White Review making no finding of any sort against Michael Newton, and despite the fact that following the Leanne White Review a new process for interacting with the CEPU ("CEPU escalation arrangements") was established within the workers' compensation unit such that all future interaction with the CEPU would be directly through Darryl Newton and not with the workers' compensation unit. This new process would have prevented Michael Newton from having any potential interaction with Metcher if returned to the workers' compensation unit.
164 Fahour's refusal to permit Michael Newton to return to a position involved with workers' compensation or injury management continued through to the termination of Michael Newton's employment in August 2016. As the evidence I discuss when dealing with the contractual claims demonstrates, that was so despite suitable alternative positions in that area of APC's activities being available and despite both Walsh and Darryl Newton being of the view that Michael Newton should take up the position of Manager Injury Management Strategy. It became clear from the evidence of Darryl Newton that Fahour had directed that Michael Newton not be placed in that role and nor was he to be reappointed into the National Compensation Manager position. Despite efforts made between April and August 2016 to find an alternative position for Michael Newton, no position in workers' compensation or injury management was ever offered to him. I would infer that that occurred because of the direction made by Fahour.
165 That all of that occurred out of a concern by Fahour for Michael Newton's welfare is neither plausible nor believable. All of those findings serve to demonstrate that there was another reason, a reason other than that proffered by Fahour, for Fahour's deep-seated objection to Michael Newton occupying a position which involved Michael Newton with workers' compensation or injury management at APC. The difficulty for Michael Newton's case is that the available explanations which may reveal that other reason, are not confined to the "logical explanation" for which Michael Newton contended.
166 For all of those reasons, Michael Newton has not established as against Metcher and the CEPU that, in the conversation between Fahour and Metcher, Metcher demanded that Michael Newton be removed from his position or that any demand was made that Michael Newton not be allocated the duties or responsibilities of that position. The evidence admissible as against Metcher and APC does not give rise to reasonable and definite inferences that such demands were made.
167 Nor has that been established as against the APC respondents. Both of those respondents denied the making of any request or demand by Metcher that Michael Newton be removed from his position. They did however admit that Metcher told Fahour that he could not work with Michael Newton anymore. The admission cuts both ways. It supports Metcher having a motive to make the demand contended for by Michael Newton. However, that that was said by Metcher also supports Fahour using the removal of Michael Newton as an instrument to convince Metcher that Project Dove would not be pursued. In the end, I am not satisfied that the circumstances appearing in the evidence admissible against the APC respondents give rise to a reasonable and definite inference that Metcher made a request or demand that Michael Newton be removed from his position or not be allocated the duties of his position.
Intent to coerce
Removal of Michael Newton
168 My finding that Michael Newton has failed to establish that Metcher threatened action unless Michael Newton was removed from his position or that he not be allocated the duties of that position is critical to Michael Newton's ss 348 and 355 claims based on that threatened action. If I am wrong about that and such a threat was made, those claims would fail in any event.
169 There is an issue as to whether Michael Newton engaged s 361(1) by making the requisite allegation (see [37] above) that Metcher had an intention to negate APC's choice. In relation to the s 348 claim, the allegation made in the SFASoC was that "Metcher intended to overbear the will of APC". In my view, that description was sufficient (in the words of the Full Court in Hall at [41]) to "convey the relevant particular intent" required for a contravention of s 348. In relation to s 355, Michael Newton pleaded that Metcher threatened to take action "with intent to coerce APC". Pleading the requisite allegation in that form may well be insufficient. I consider, however, that attention must be given to what is conveyed rather than merely what is stated. In the context of what was earlier stated in the pleading as to the nature of Metcher's intent and given the settled view as to the singular nature of the intent necessary to be proved, I consider that for the legally represented respondents to whom the pleading was directed, the pleading conveyed the allegation that Metcher intended to negate APC's choice. No practical unfairness was occasioned upon those respondents. There is no basis for thinking that they did not fully appreciate this aspect of the case being put against them.
170 Assuming in favour of Michael Newton that by his pleadings he did enough to engage s 361(1) of the FW Act and proceeding on the basis earlier discussed that s 361(1) is available to be engaged in relation to the making of threats, I would have been satisfied, because the presumption created by s 361(1) was not rebutted, that the "intent to negate choice" element of coercion was established.
171 I would have rejected Michael Newton's contention that he discharged his onus to establish the second necessary element of coercion β the use of unlawful, illegitimate or unconscionable means. The legal basis for my view that on this issue Michael Newton bears the onus of proof is set out at [29] above. Even if that legal analysis is wrong, and I took the view that Michael Newton could have engaged s 361(1) on this issue, at the factual level and by reason of the pleading deficiencies to which I will shortly refer, I would not have come to the view that s 361(1) was engaged.
172 The deficiencies in the pleading on this aspect of Michael Newton's case are manifest. Michael Newton failed to plead any material facts in support of any asserted unlawfulness, illegitimacy or unconscionability in relation to his s 348 case. In relation to his s 355 case, even the bare allegation that the threats made by Metcher were unlawful, unconscionable or illegitimate was not pleaded.
173 Michael Newton conceded in submissions made by his Counsel that there was "little by way of articulation" of those matters. It was said, however, and it is the case that the fact that Metcher had leaked APC documents in his possession and that he had told Fahour that he would leak those documents to the media, was pleaded. The first difficulty for Michael Newton is that whilst those allegations were made, the pleading failed to link or connect those allegations to the claims that the threats made by Metcher were unlawful, unconscionable or illegitimate. No such connection is expressed or reasonably to be implied. I would not conclude that, in this respect, the SFASoC satisfied Michael Newton's obligation to clearly and precisely inform the respondents of the case they had to meet: Hall (at [50]).
174 Michael Newton also relied on an outline filed prior to the commencement of the trial to buttress his contention that the respondents had been put on notice as to the case that they would need to meet that the threats made were unlawful, illegitimate or unconscionable. Paragraphs 26 and 27 of that outline were relied on. There is no mention there made of any leaked APC documents. Under the heading "Coercion: unlawful, illegitimate or unconscionable" the only allegations of any substance were that Metcher "was seeking to interfere with the contractual relationship between APC and [Michael Newton]" and that Metcher's conduct was "illegitimate" because the means employed by him (presumably in making the threats) "were clearly disproportionate, assessed objectively, to what he and the CEPU might have legitimately wanted to achieve". No material facts in support of those allegations were given. Michael Newton further submitted that there was no unfairness as proper notice had been given and the respondents' ability to conduct a trial fairly was not impacted.
175 In Hall, the Full Court at [48] and [51] rejected a contention made by the appellant in that case that the deficiencies in the appellant's pleading of its case under ss 343 and 355 were overcome by reason of statements made in opening and closing submissions which clarified how those cases were put. Referring to the observations of Mason CJ and Gaudron J in Banque Commerciale SA En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286-287, the Full Court in Hall accepted that the general rule that relief is confined to that available on the pleadings, may be avoided where the parties have deliberately chosen to conduct the case on a basis different to that disclosed by the pleadings. However, the Full Court held that there was insufficient evidence in that case of the respondents making any such deliberate choice.
176 There is here no evidence of any deliberate choice made by the respondents sufficient to abrogate the general rule that relief is confined to that available on the pleadings. In any event, the failure of the SFASoC to set out the material facts relied upon to support the allegation that Metcher's threats were made unlawfully, illegitimately or unconscionably, was not cured by what was stated in the outline of submission relied upon. The outline did no more than pose two legal conclusions. No material facts were given in support of those conclusions. The case that the respondents had to meet was not articulated by the outline relied upon.
177 As no unlawful, illegitimate or unconscionable conduct was either pleaded or established in relation to the threatened action directed at the removal of Michael Newton from his position as National Compensation Manager, the ss 348 and 355 claims must also be rejected for this reason.
Cancellation of Project Dove
178 The same conclusion is applicable in relation to the threat that I have found was made β that unless Project Dove was cancelled Metcher would carry the actions referred to above at [13]. For that reason β that no unlawful, illegitimate, or unconscionable conduct was either pleaded or established in relation to that threat β Michael Newton's claims of contraventions of ss 348 and 355 in reliance upon that threat, must fail.
179 I should add that even if I had found contraventions of ss 348 and 355 based on the threat directed at Project Dove, no attempt was made by Michael Newton to establish that the conduct in question had caused him any loss or damage. The only apparent purpose of that cause of action appears to be the pursuance of pecuniary penalties.
180 For all those reasons each of the claims made by Michael Newton of contraventions of ss 348 and 355 must be rejected.
Availability of a Jones v Dunkel inference
181 For completeness, I should record that at various times Michael Newton sough to support the factual findings he contended for on the basis of the principle in Jones v Dunkel (1959) 101 CLR 298. Reliance in particular was placed on the failure of APC to call either Walsh or Blee. I would accept that both of those individuals ought to be regarded as in the camp of the APC respondents. If the APC respondents had desired to put a full and comprehensive picture before the Court, it might have been expected that those respondents would have called Walsh and Blee. Nevertheless, Michael Newton did not persuade me that in relation to any particular finding of consequence, the finding he contended for could be made with greater confidence because of the failure of the APC respondents to call Walsh or Blee. It is important in this respect to recall that the principle in Jones v Dunkel is not to be utilised for the purpose of gap-filling: see Hutchinson v Comcare (No 4) [2019] FCA 1133 at [215] (Bromberg J).
Accessorial Liability of Fahour and APC
182 Each of Fahour and APC are alleged to have been "involved in" the contraventions of ss 348 and 355 committed by Metcher within the meaning of s 550 of the FW Act. Section 550 provides:
Involvement in contravention treated in same way as actual contravention
(1) A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.
Note: If a person (the involved person) is taken under this subsection to have contravened a civil remedy provision, the involved person's contravention may be a serious contravention (see subsection 557A(5A)). Serious contraventions attract higher maximum penalties (see subsection 539(2)).
(2) A person is involved in a contravention of a civil remedy provision if, and only if, the person:
(a) has aided, abetted, counselled or procured the contravention; or
(b) has induced the contravention, whether by threats or promises or otherwise; or
(c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d) has conspired with others to effect the contravention.
183 Although pleaded more widely, ultimately, Michael Newton only pressed reliance upon paras (c) and (d) of s 550(2).
184 The accessorial liability of the APC respondents would only arise for determination if I had found, on the admissible evidence in the case as against the APC respondents, that a primary contravention (by Metcher) of either ss 348 or 355 had occurred. I have not made those findings. In case I am wrong not to have done so, I will briefly outline why, if either or both of those findings had been made, I would nevertheless have rejected Michael Newton's case that the APC respondents were accessorily liable. For the purpose of the exercise, I will assume that the contraventions alleged against Metcher are made out ("assumed contraventions").
185 Michael Newton contended that Fahour (and APC derivatively by reason of s 793 of the FW Act) were "involved in" Metcher's assumed contraventions by being "knowingly concerned in or party to "those contraventions" (s 550(2)(c)) because:
in succumbing to Metcher's coercion, Fahour helped Metcher achieve the outcome Metcher wanted and was thereby "a participant in" Metcher's contravention; and
by appeasing Metcher, Fahour associated himself with Metcher's contravening conduct and was linked in purpose with Metcher.
186 Further, it was contended that Fahour and APC were "involved in" Metcher's contraventions by "conspiring with others to affect the contraventions" (s 550(2)(d)) because in the conversation of 5 February 2016 Fahour agreed with Metcher to effect Metcher's demand that Michael Newton be removed from his position and further "effected" Metcher's contravention by removing Michael Newton from his position. At a factual level, I would not have found that Fahour agreed to effect Metcher's demand that Michael Newton be removed because I have found that no such demand was made. However, I will, for current purposes, assume that I should have made such a finding. I will also proceed on the basis that Fahour's preparedness to cancel Project Dove may be characterised as Fahour agreeing to Metcher's demand that that be done.
187 Michael Newton's contentions on accessorial liability must be rejected. They are founded upon a misunderstanding of the particular contraventions said to have been committed by Metcher and when those contraventions were complete.
188 The assumed contraventions in question are contraventions committed by Metcher making threats in his conversation with Fahour on 5 February 2016. On the assumption that those threats were made and made with the state of mind requirements of ss 348 and 355, the contraventions of those provisions were complete the moment that the threats were uttered. The contraventions of those provisions do not require any further or later conduct or consequence. As Buchanan J (with whom Siopis J agreed) said in Esso-FC at [180] in relation to s 343 "the nub of s 343 is that it is not necessary to wait until the action takes its toll and has overborn the will of the target". As I said about that same provision in McCorkell at [227] by reference to the Explanatory Memorandum to the Fair Work Bill, the prohibition applies irrespective of whether the action taken to coerce another person is effective or not, the focus of s 343 is upon the intent and reason for action of an alleged offender. Those observations are equally applicable to ss 348 and 355.
189 All of the conduct of Fahour relied upon by Michael Newton for demonstrating that Fahour and APC were "involved in" Metcher's assumed contraventions (ie succumbing to Metcher's coercion, appeasing Metcher, agreeing to Metcher's demands and affecting them) occurred after the threats were uttered and the contraventions were complete. There is no suggestion, let alone evidence, that Fahour was "involved in" the uttering of the threats. There is no evidence that Fahour was implicated in, consented to or concurred in or had a practical connection with the uttering of the threats to him by Metcher: see Ezy Accounting 123 Pty Ltd v Fair Work Ombudsman [2018] FCAFC 134 at [13] (Flick, Bromberg and O'Callaghan JJ); Fair Work Ombudsman v Priority Matters Pty Ltd [2017] FCA 833 at [116]-[119] (Flick J). The APC respondents were correct to contend that they could only have conspired to affect the contraventions if Fahour had agreed with Metcher in advance for Metcher to threaten Fahour.
190 The APC respondents are also right to contend that a fundamental defect underlying the approach to the construction of s 550 of the FW Act taken by Michael Newton is the characterisation of himself as being the "victim" or the "target" of the contraventions. It was the APC respondents who were subjected to the assumed contravening conduct. It was their capacity to engage in "industrial activity" and their capacity to allocate duties and responsibilities to a particular person that ss 348 and 355 sought to protect. Those provisions prohibit conduct which is likely to have the effect of denying or diminishing those protections and thereby victimising the person the provision seeks to benefit. A construction of s 550 of the FW Act which imposes accessorial liability upon the very person sought to be protected by a statutory prohibition, for having succumbed to the prohibited conduct, is most obviously unattractive. Michael Newton's contentions completely ignored the fact that no such consequence could have been intended. Those contentions must be rejected.
section 340 claim β removal decision
Relevant Legislation and Legal Principles
191 Section 340 of the FW Act is in the following terms:
340 Protection
(1) A person must not take adverse action against another person:
(a) because the other person:
(i) has a workplace right; or
(ii) has, or has not, exercised a workplace right; or
(iii) proposes or proposes not to, or has at any time proposed or proposed not to, exercise a workplace right; or
(b) to prevent the exercise of a workplace right by the other person.
Note: This subsection is a civil remedy provision (see Part 4-1).
192 The term "workplace right" is defined in s 341 of the FW Act and relevantly includes an entitlement to the benefit of or having a role or responsibility under a workplace law. The definition of "adverse action" is provided in s 342. Relevant for present purposes, the definition includes at item 1 of s 342, the employer:
(c) altering the position of the employee to the employee's prejudice; or
(d) discriminating between the employee and other employees of the employer.
193 The nexus in s 340(1) between the prohibition on taking adverse action and the holding or exercise of a workplace right is found in the word "because". As is well established on the authorities, that nexus will be satisfied and therefore s 340(1) will be contravened, where the holding or exercise by a person of a workplace right was a substantial and operative reason for the adverse action taken against that person: Short v Ambulance Victoria [2015] FCAFC 55, at [55]. At [54]-[56] of Short Dowsett, Bromberg and Murphy JJ said this:
[54] When an employee alleges that an employer has taken action against him or her because the employee exercised a workplace right s 361 casts the onus on the employer to 'prove otherwise'. Under s 360, while there may be multiple reasons for an employer to have taken the adverse action, the employer takes action for a prohibited reason if the reasons for the action include that reason. The rationale for the presumption was explained by Mason J in General Motors Holden Pty Ltd v Bowling (1976) 12 ALR 605 at 617 per Mason J as being to throw on to the employer the onus of proving that which lies peculiarly within its own knowledge (cited with approval in Board of Bendigo Regional Institute of Technical and Further Education v Barclay (2012) 248 CLR 500 at [50] (French CJ and Crennan J)).
[55] Where adverse action is taken by one person against another, the task of a court in a proceeding alleging contravention of s 340 or s 351 is to determine why the person took the adverse action and to ask whether it was for a prohibited reason or reasons which included a prohibited reason (Barclay at [5], [44] per French CJ and Crennan J). The question is whether a prohibited reason was a 'substantial and operative' reason for the respondent's action (Barclay at [104] per Gummow and Hayne JJ, see also [59] per French CJ and Crennan J). The relevant inquiry is therefore into the 'particular reason' of the decision-maker for taking action (Barclay at [42] per French CJ and Crennan J, [102] per Gummow and Hayne JJ), which is a determination of fact to be made by the court taking account of all the facts and circumstances of the case and available inferences (Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (2014) 88 ALJR 980 at [7] per French CJ and Kiefel J, Barclay at [45] per French CJ and Crennan J, [79] per Gummow and Hayne JJ).
[56] To displace the presumption created by s 361 in light of the effect of s 360, the respondent must prove that its conduct was not motivated in whole or in part by the prohibited reason alleged. A failure to displace the presumption enables the allegation by an applicant of adverse action for a prohibited reason to stand as sufficient proof of that fact: Davids Distribution Pty Ltd v National Union of Workers (1991) 91 FCR 463 at [109] per Wilcox and Cooper JJ.
194 As I said in McCorkell at [158] by reference to the observations made by Gray J in National Tertiary Education Union v Royal Melbourne Institute of Technology [2013] FCA 451 at [20], "what the party seeking to rebut the presumption must do is to establish on the balance of probabilities that the alleged improper reason was not a reason for taking the action."
195 Michael Newton alleged that the Removal decision constituted adverse action and that Fahour made that decision for the reason, or for reasons that include the reason, that Michael Newton had a "workplace right" namely, that (relying on s 341(1)(a) of the FW Act) he was entitled to the benefit of a workplace law being s 19(2)(a) (a likely intended reference to s 19(1)(a)) of the Work Health and Safety Act 2011 (Cth) ("WHS Act"). Michael Newton also pleaded (again relying on s 341(1)(a)) that he had a role or responsibility under s 28 of the WHS Act, but reliance on that matter was not pressed.
196 Section 19(1)(a) of the WHS Act provides that an employee has a right to a safe working environment. Relevantly it states that a person conducting a business or undertaking must ensure, so far as is reasonably practicable, the health and safety of workers engaged by that person while they are at work in the business or undertaking.
Whether the Removal Decision Constituted Adverse Action
197 Michael Newton bears the onus of establishing that adverse action was taken against him by APC. He has discharged that onus. I am satisfied, despite APC's denial, that the decision to remove Michael Newton from his position altered Michael Newton's position to his prejudice within the meaning of that part of the definition of adverse action provided by Item 1(c) of s 342(1) of the FW Act. The prejudice suffered included loss of security in employment: Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 at [4] (Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ), as later events demonstrated. In being removed from a position in which he was exercising high level skills and expertise in his chosen field of endeavour, Michael Newton was also denied non-pecuniary benefits (Maritime Union of Australia v Fair Work Ombudsman (2016) 247 FCR 154 at [22]-[24], Tracey and Buchanan JJ, and at [63]-[66] Bromberg J) associated with working in the position in which he was contracted to work in. As, for reasons later discussed, the Removal decision involved a breach of Michael Newton's contract of employment, Michael Newton was also injured in his employment within the meaning of Item 1(b) of s 342(1) (Patrick Stevedores at [4]).
Workplace Right
198 I am also satisfied that Michael Newton had the workplace right he contended for. The WHS is a "workplace law" within the meaning of s 341(1)(a) and Michael Newton was entitled to the benefit of s 19(1)(a) of the WHS Act.
State of Mind Element
199 I then turn to the state of mind element that constitutes another necessary ingredient of a contravention of s 340 of the FW Act. Section 361(1) has application. The relevant principles have already been set out. Michael Newton's SFASoC made the allegation necessary to engage s 361(1) β he alleged that Fahour made the Removal decision for reasons that included the reason that Michael Newton was entitled "pursuant to s 19[1](a) of the WHS Act, to be provided with a working environment that was, so far as reasonably practicable, without risks to his health and safety".
200 In relation to the removal decision, Fahour gave the following evidence:
When you made the decision to ask Ms Walsh to have [Michael] Newton stepped aside from his role, was it any part of your reasoning that [Michael] Newton was entitled to benefits under the [WHS Act]?---No.
Was it any part of your reasoning that [Michael] Newton was entitled to be provided with a working environment that was, so far as practicable, without risks to health and safety?---I wasn't thinking about that. I was thinking about just giving him something useful to do and where he could be out of any harm's way of any emotional or email abuse, and I could do this review independently without interference.
And was it any part of your reasoning in making the decision we've been talking about that [Michael] Newton, as a supervisor and manager, had himself some roles and responsibilities under the [WHS Act], including the obligation to take reasonable care for his own health and safety and for the health and safety of others?---No.
201 By that evidence APC rebutted the presumption which pursuant to s 361(1) would otherwise have applied. It was unpersuasively submitted that Fahour's evidence was equivocal. Beyond that faintly put contention, Michael Newton's submissions made no real attempt to persuade me that Fahour's evidence should not be accepted. Instead, Michael Newton contended that Fahour had a different reason for removing Michael Newton from the reason alleged in the SFASoC. It was said that Michael Newton was removed from his position because "APC had no means by which it could meet its statutory duty to its employees under s 19 of the [WHS Act] other than removing them from any function that would bring them into contact with [Metcher]".
202 That proposition is completely at odds with the pleaded case. The pleaded case relied upon the bizarre proposition that Michael Newton was removed so as to deny him his entitlement to a safe workplace. The alternative proposition is that he was removed to protect him or, in other words, to provide him with a safe workplace. That the alternative proposition was put, does no more than highlight the lack of any substantive merit in the case as pleaded.
203 I have already expressed my doubt that the reason for Michael Newton's removal from his position had anything much to do with his welfare. However, a finding to that effect is not necessary to dispose of this claim. It is sufficient for me to record that I am not satisfied that the reason for Michael Newton being removed from his position was the reason alleged by Michael Newton in the SFASoC. I have reached that view on the assumption favourable to Michael Newton that the second pre-condition to the engagement of s 361(1) (see [38]-[40] above) was met. I should not, however, be thought to have accepted that the connection between the adverse action and the prohibited reason alleged was not so remote as to be fanciful.
204 For those reasons, the claim that the Removal decision constituted a contravention of s 340 of the FW Act must be rejected.
contractual claims
205 It is convenient to set out an outline of the relevant events that occurred between 5 February 2016 and the termination of Michael Newton's employment on 11 August 2016. It is also convenient that I divide that time into three distinct periods. To the extent necessary, a more detailed discussion of particular events will be given later.
206 In a meeting with Walsh and Blee at approximately 5.30pm on 5 February 2016, Michael Newton was informed that Project Dove would be cancelled and told that he was removed from his position as National Compensation Manager. From that time through to 27 April 2016 ("first period"), Michael Newton attended work and undertook a range of minor administrative tasks at the direction of Blee and Bass.
207 On 21 April 2016, Michael Newton attended a meeting with Darryl Newton and Walsh where he was presented with a position description for the position of Manager Injury Management Strategy ("MIMS position"). On the morning of 26 April 2016 Michael Newton met with Roode to discuss the MIMS position. At a team meeting later that day Darryl Newton and Walsh announced that Michael Newton would take on the MIMS position. Whether Michael Newton actually took up this position will be further discussed below. On the next day (27 April 2016) at approximately 5.30pm, Michael Newton was directed by Roode that he was being sent home and that APC required that he be medically cleared before he could return to work. At that point, what I will characterise as the second period ("second period") commenced. That period extended until 20 June 2016 when APC's requirement that Michael Newton undertake a medical assessment was withdrawn. In this second period, Michael Newton did not perform any work at APC. Most of his interaction with APC concerned communications about whether he should, and the basis upon which he should, be required to undergo a medical assessment. The direction given for Michael Newton not to perform duties until he had obtained a medical clearance is the subject of Michael Newton's statutory and contractual claim that he was unlawfully required to take "garden leave".
208 A third relevant period followed from a discussion between Michael Newton and Darryl Newton on 26 May 2016. It was largely in consequence of that discussion that, on 20 June 2016, APC's requirement for a medical clearance was removed and on that day three potential roles that Michael Newton "may perform upon his return to work" were proposed by APC for Michael Newton's consideration. Those roles were Manager, Business Infrastructure and Integration ("MBII position"); Manger, People Framework Strategy ("MPFS position"); and Manager, Future Workforce Planning and Analytics ("MFWPA position"). What I characterise as the "third period" commenced on the making of that proposal and ended with the termination of Michael Newton's employment on 11 August 2016. In this period, Michael Newton did not perform any work. His interaction with APC involved various communications about the suitability of the three positions under discussion.
209 On 27 July 2016, APC directed that Michael Newton return to work on 1 August 2016 (later extended to 3 August 2016) to perform the MBII position. Michael Newton did not attend for work on 3 August 2016. On 4 August 2016, Michael Newton was informed that by reason of his failure to comply with the direction that he attend for work on 3 August 2016, APC was considering terminating his employment. By letter dated 11 August 2016, APC informed Michael Newton that his employment with APC was terminated effective immediately.
210 It is convenient that I now turn to identify those clauses of relevance in Michael Newton's contract of employment with APC ("contract"), the alleged breaches of that contract and determine any issues between the parties as to how those clauses should be construed. I will then turn to consider further the facts relevant to the contractual breaches alleged.
211 Clause 1 is headed "Your role" and relevantly provides:
1.1 Position
You will be employed in the position of National Compensation Manager on the terms and conditions set out in this document (Contract) from 24 March 2014 (Commencement Date).
1.2 Probationary period
...
1.3 Change of position
(a) [APC] may require You to occupy a position different from the position referred to at clause 1.1 of this Contract.
(b) Any such position must be suitable for You, having regard to Your skills, training and experience.
(c) Unless this Contract is replaced by another agreement, the terms and conditions set out in this Contract will continue to apply to your employment even if Your position is changed in accordance with this clause 1.3.
1.4 Duties and changes to duties
(a) You will faithfully and diligently perform, to the best of your abilities and knowledge, such duties as [APC] may from time to time assign to You.
(b) You are required to achieve a satisfactory level of performance of your duties as measured against agreed performance objectives.
(c) [APC] may at any time change the duties assigned to You.
(d) [APC] may only assign duties to you that are suitable for You, having regard to Your skills, training and experience.
(e) Unless this Contract is replaced by another agreement, the terms and conditions set out in this Contract will continue to apply to your employment even if Your duties are changed in accordance with this clause 1.4.
1.5 Reporting lines and changes to reporting lines
β¦
1.6 Location
β¦
1.7 Change of location
β¦
1.8 Employment Checks
Throughout Your employment in the position referred to in clause 1.1 or any subsequent or alternative position in accordance with clause 1.3, [APC] may require you to undergo medical, criminal, security, or character checks where [APC] determines it desirable or necessary to do so. It is an ongoing condition of your employment that:
(a) You comply with any requirement to undergo a check; and
(b) the results of any check are satisfactory to [APC]
212 Clause 10 is headed "Ending Your employment" and relevantly provides:
10.1 Employment ending on notice by [APC]
(a) [APC] may terminate Your employment at any time by giving you 12 weeks' notice.
(b) Without limiting its rights under clause 10.3 or 10.1(a), [APC] may terminate Your employment under this clause if:
(i) You contravene or fail to comply with the terms and conditions upon which You are employed, including, without limitation, the achievement of a satisfactory level of performance as measured against agreed performance objectives;
(ii) in the reasonable opinion of [APC], You are unable to adequately and safely perform the inherent requirements of your position; or
(iii) Your position no longer exists.
(c) [APC] may provide payment in lieu of all or part of this notice period.
10.2 Employment ending on notice by You
You may terminate your employment at any time by the provision of 12 weeks' written notice to [APC].
10.3 Summary dismissal
...
10.4 Garden leave
(a) During part or all of any period of notice of termination given by You or by [APC] or during any period in which [APC] is investigating any disciplinary issue involving you, [APC] may, at its sole discretion:
(i) require you to perform only such duties as [APC] may determine or not to perform any duties at all;
(ii) require you not to have any contact with any employees, customers or business associates of [APC] other than normal social contact; and/or
(iii) exclude you from all or part of [APC's] premises.
(b) Your remuneration will not be withheld or reduced as a result of You complying with such directions.
213 Clause 13 is headed "General" and relevantly at cl 13.3 provides:
13.3 Rights cumulative
Except as expressly stated otherwise in this document, the rights of a party under this document are cumulative and are in addition to any other rights of that party.
214 There are two categories of breach pleaded in the SFASoC. The first is concerned with the Removal decision and asserts a breach of cll 1.1, 1.3 and 1.4. The second concerns the Garden leave decision and asserts a breach of cl 10.4.
Alleged Contractual Breach Relating to the Removal Decision
215 That Michael Newton was, with effect from 24 March 2014, employed by APC in the position of National Compensation Manager was admitted in the pleading of the APC respondents. The duties of the position of National Compensation Manager were set out in a document entitled "ROLE PROFILE (Proposed Only)" ("Role Profile"). It was not in contest that in the position of National Compensation Manager Michael Newton was expected to perform duties in accordance with the Role Profile.
216 The SFASoC alleged that cll 1.1, 1.3 and 1.4 of the contract were breached by APC by reason that, on 5 February 2016, Michael Newton was removed from his position of National Compensation Manager and that, upon being removed, Michael Newton was not offered an alternative position with APC, required by APC to fulfil the duties of another position, or assigned to alternative duties by APC. Read in the light of the particulars given of the breach, the pleading is to be understood as alleging a breach by reason of APC removing Michael Newton from his position of National Compensation Manager on 5 February 2016 without placing him into an alternative "suitable" position within the meaning of cl 1.3 of the contract.
217 That was essentially the way in which the breach was put and pursued at trial. There was no reliance placed on cl 1.4 of the contract and in so far as the SFASoC asserted a breach of that clause such a breach was not pressed.
218 The focus of Michael Newton's submission was on cl 1.3 as encapsulated in the following contention made in written submission:
On 5 February 2016 when [Michael Newton] was removed from the position to which he had been appointed without being assigned to another position that was suitable for him having regard to his skills, training and experience in breach of cl 1.3.
219 Whilst the submission was never a model of clarity, as I understood it, Michael Newton maintained that under his contract he had a "dual right". First (and pursuant to cl 1.1) a right to be employed in "the position under the contract", that is the position of National Compensation Manager, and second a right to a "suitable" alternative position under cl 1.3(b) if he was removed from the position of National Compensation Manager.
220 Michael Newton's case was really that APC had an obligation to employ him in either the position of National Compensation Manager or in an alternative but suitable position in accordance with clause 1.3(b). Michael Newton accepted that a reasonable period may be allowed for APC to move him from the National Compensation Manager position into an suitable alternative position without the contract being breached. He contended, however, that on 5 February 2016 he was removed from his position as National Compensation Manager and that thereafter, and in breach of the contract, he was not employed in either the National Compensation Manager position or a suitable alternative position.
221 Despite the lack of clarity in the way in which this part of Michael Newton's case was pleaded and pressed, APC's submissions indicate a sufficient appreciation of the case against it which it was being required to meet.
222 APC denied that cll 1.1 or 1.3 were breached. By its written submissions, APC contended that there was no breach because Michael Newton was offered a number of roles which were "suitable" positions within the meaning of cl 1.3, in particular the MBII position, a position that Michael Newton was initially directed to perform on 11 July 2016 but later altered to commence on 3 August 2016. APC contended that there is no temporal limitation imposed by cl 1.3 but, in the alternative, if a temporal limitation existed it required only that a suitable alternative position be offered within a reasonable period of time from Michael Newton's removal from his position as National Compensation Manager.
223 APC's written submissions largely proceeded on an implicit assumption that save for allowing for a reasonable period of time between positions, cl 1 of the contract imposed upon APC an obligation to employ Michael Newton in either the National Compensation Manager position or in a suitable alternative position. However, somewhat inconsistently with its written submission, in oral argument, APC contended that cl 1.3 conferred a right upon APC but did not confer any right upon Michael Newton and that cl 1.3 did not oblige it to provide Michael Newton with an alternative position at all once he was removed from the National Compensation Manager position, but merely required that if and when Michael Newton was required to take up an alternative position, that position had to be a suitable alternative position. APC contended that until a suitable alternative position was provided to Michael Newton, at common law, it was entitled to have Michael Newton carry out various tasks without providing Michael Newton with any position at all. That submission seems to have been put in addition to the contention that APC was entitled under the contract, to a reasonable period of time in which to place Michael Newton in a suitable alternative position.
224 I do not accept that the contract is to be construed as APC contended that it should be. Nor do I construe cl 1 entirely consistently with the contentions made by Michael Newton.
225 Clauses 1.1, 1.3 and 1.4 deal with the position that Michael Newton must be employed in and its duties. The position that Michael Newton must be employed in on commencement of the employment is specified as that of National Compensation Manager. The contract contemplates that Michael Newton will continue to be employed in that position (referred to at cl 1.3(c) as "Your Position"), unless a change of position is affected in accordance with cl 1.3. Under the heading "Change of Position", cl 1.3 provides APC with the capacity to require Michael Newton "to occupy a position different from" the National Compensation Manager position but restricts the exercise of that right by requiring that the alternative position "must be suitable for You, having regard to Your skills, training and experience".
226 That restriction is directed at protecting Michael Newton's interests. It is not a restriction beneficial to APC. Although cl 1.3 provides APC with a right to change Michael Newton's position, it nevertheless imposes a negative or restrictive stipulation upon the exercise of that right. A failure to comply with a negative or restrictive stipulation in a clause otherwise permissive is capable of constituting a contravention of the clause: see as an example Construction, Forestry, Maritime, Mining and Energy Union v Hay Point Services Pty Ltd [2018] FCAFC 182 at [12]-[13] (Reeves, Bromberg and O'Callaghan JJ).
227 However, in my view, cl 1.3 must be read with cl 1.1. When read together, I consider that the obligation imposed upon APC is to be found in cl 1.1. That obligation is to employ Michael Newton in the position of National Compensation Manager unless APC is relieved of that obligation, if and when, it affects a change to Michael Newton's position in accordance with cl 1.3. Put another way, whilst Michael Newton is not employed in the National Compensation Manager position, APC will be in breach of cl 1.1 unless it has availed itself of the capacity to move him to a suitable alternative position in accordance with cl 1.3.
228 APC may be correct in its submission that cl 1.3 is directed at a right conferred upon it and that it is not obliged under cl 1.3 to do anything at all. However, that acceptance does not relieve APC of its obligation under cl 1.1 to have employed Michael Newton in the position of National Compensation Manager unless and until it moved him to a suitable alternative position in accordance with cl 1.3.
229 I would accept that cl 1 should be construed as permitting APC some reasonable time to move Michael Newton from the National Compensation Manager position into a new position which accords with the requirements of cl 1.3, without APC being in breach of the contract. Clause 1 should be construed to operate in the practical manner as was obviously intended. The possibility of a necessary interregnum between roles must have been contemplated to address practical considerations such as a shift of locations to the new role or perhaps the need for the occupant of the new position to vacate.
230 However, the clause is addressing an exchange of the National Compensation Manager position for an alternative position in circumstances where APC is requiring Michael Newton to occupy the alternative position. It contemplates that the alternative position be identified and, practical considerations aside, that it be available in the exchange which cl 1.3 permits APC to effectuate. I do not construe cl 1 as authorising the removal of Michael Newton from his position per se. The capacity given to APC to remove Michael Newton from his contracted position, is part and parcel of a single process in which Michael Newton's existing position is replaced with a different position which accords with the suitability requirement in cl 1.3(b).
231 The obligation imposed on APC by cl 1.1 is not suspended where Michael Newton is removed from his position as National Compensation Manager on the basis that some unidentified suitable position may be found for him at some indeterminate time in the future. That, as I will shortly explain, is what I consider occurred in this case.
232 It is first necessary to address two matters before returning to the facts. First, there is a distinction to be drawn between APC's power to direct Michael Newton not to perform his duties in the position of National Compensation Manager and its power to remove him from that position. That distinction was not observed in the submissions made by APC that sought to justify the interregnum inflicted upon Michael Newton based upon APC's asserted common law right not to have Michael Newton carry out his duties as National Compensation Manager and perform other duties instead.
233 Second, save for the exception allowed for by cl 1.3, the obligation upon APC imposed by cl 1.1 to employ Michael Newton in the position of National Compensation Manager is a continuing obligation. On-going conduct in breach of cl 1.1 would therefore constitute a continuing breach β a breach which subsists so long as the requirements of cl 1.1 remain unsatisfied. An obligation to employ an employee in the contracted position was held to be a continuing obligation in Norwest Holst Group Administration Ltd v Harrison [1985] ICR 668 at 681 (Neil LJ). In Mann v Capital Territory Health Commission (1982) 148 CLR 97, a failure to employ the services of an employee in a senior capacity as a general surgeon was regarded as a "continuing wrong": see at 100-101 (Stephen, Wilson and Brennan JJ).
234 The SFASoC does not expressly plead a continuing breach of the contract. Strictly read the pleading suggests that all that is alleged is a single breach on 5 February 2016 consequent upon Michael Newton's removal from his position as National Compensation Manager. The case was run more broadly and was the subject of some complaint by the APC respondents but not any formal objection. No practical unfairness was either asserted or is apparent if Michael Newton's case is permitted to be made on the basis of a continuing breach rather than a single breach on 5 February 2016. Including because the result would be the same in either case, I will proceed on the correct characterisation of the nature of the breach in question.
First Period
235 Michael Newton's evidence was that at a meeting with Walsh and Blee at approximately 5.30pm on 5 February 2016, Walsh told him that he was removed from his role as National Compensation Manager at the request of Fahour. He deposed that Walsh had indicated that he would be looked after and that he would be put into a different role, that that role had yet to be determined but that the role "sat with Peter Bass". He deposed that Walsh told him that he could be in that other role for one or more months and that Walsh could not indicate how many months. Michael Newton also deposed that Walsh and Blee spoke about replacing him, discussed a contractor being brought in to fill his position and also discussed "a direct report stepping up into my position". In a handwritten note made by Michael Newton of the meeting, Michael Newton recorded that "[a]s a directive of [Fahour], [Walsh] withdrew me from my position and the [sic] proposed a role with [Bass] in Operationsβ¦"
236 That evidence includes the suggestion that the removal of Michael Newton from his position was represented to him as a temporary removal. There is other evidence of correspondence sent by Blee on 7 February 2016 and 9 February 2016 that suggests that Blee regarded the change to be temporary and that Michael Newton was joining the Mail Network Leadership Team managed by Bass for two months, which she described as a short-term secondment. Blee directed that in that period, the APC employees who reported to Michael Newton report to her. On 8 February 2016, Michael Newton was asked to remove himself from all his work and pass it on to his direct reports. There is no evidence that after 5 February 2016 Michael Newton undertook any of the duties of the National Compensation Manager position.
237 The evidence is best characterised as establishing that on 5 February 2016, Michael Newton was removed as the occupant of the position of National Compensation Manager albeit that Blee and Walsh may have, at that time, regarded the removal as temporary. The unchallenged evidence of Michael Newton as to what he was told by Walsh at the meeting of 5 February 2016 and her characterisation of the nature of the change being effectuated, persuades me that Michael Newton was not merely directed to temporarily not perform the duties of his position but, instead, was removed from that position in a manner sufficient to meet the contractual description of no longer being "employed in the position of National Compensation Manager".
238 It is not in contest that in what I have described as the first period (5 February 2016-27 April 2016), Michael Newton was not occupying a "suitable" alternative position in accordance with cl 1.3(b) of the contract. I hold that in that first period, APC's conduct constituted a continuing breach of its obligation under cl 1.1 of the contract to employ Michael Newton in the position of National Compensation Manager.
Second Period
239 What I have described as the second period commenced on 26 April 2016 when at a meeting attended by over 100 employees about a proposed restructure of APC's workers' compensation unit, it was announced by Walsh and Darryl Newton that Michael Newton would take on the MIMS position. Given that it was not in contest that the MIMS position was a "suitable" position for Michael Newton within the meaning of cl 1.3(b) of the contract, a question arises as to whether on or about 26 April 2016, Michael Newton occupied that position thereby ending the continuing breach of cl 1.1 of the contract by APC.
240 A discussion of the events here in question should commence with some background. In the course of what I have referred to as the first period, Michael Newton made a number of attempts to have APC provide him with a new role. At a meeting with Blee on 22 March 2016 he asked that he be provided with options for either returning to the position of National Compensation Manager or undertaking other roles within APC that were commensurate with his skills and experience. It appears that as a result of that request a meeting was organised for Michael Newton with Walsh and Darryl Newton on 21 April 2016. The evidence is not clear, but it would appear that either at that meeting or prior to that meeting, Michael Newton was informed that he would not be able to return to the National Compensation Manager position. At the meeting with Walsh and Darryl Newton, he was presented with a position description for the MIMS position. He asked for time to read the position description and have a discussion with Roode. He met with Roode on the morning of 26 April 2016 where he raised some concerns about the conditions of employment in the MIMS position. He suggested a further meeting with Roode be held by 28 April 2016 "so that all parties can move forward". It would appear, that later that same day and without any prior consultation with or notice to Michael Newton, it was announced at the meeting to which I have already referred that Michael Newton would be taking on the MIMS position.
241 On the following day, 27 April 2016 Michael Newton was verbally directed by Roode that he was being sent home and that APC required that he be medically cleared before he could return to work. That was confirmed by a letter dated 29 April 2016 in which Michael Newton was informed by Roode that:
As I advised on Wednesday, we have received a complaint that has specifically raised concerns that you have been under a level of work stress that has placed your health and wellbeing at risk. While I accept that you are of the view that this is not the case and you are able to continue work, given the seriousness of the allegations, we are of the view that we have a duty of care to obtain independent medical opinion confirming your fitness for duty.
242 Roode requested Michael Newton to refrain from contacting anyone at APC or accessing his emails. He also stated that he would be in touch again with Michael Newton shortly with details of medical appointments he was to attend.
243 Darryl Newton's evidence was equivocal as to whether Michael Newton had been appointed into the MIMS position. At times he referred to Michael Newton having been "appointed" into that position on 26 April 2016 in the expectation that he would start work as soon as possible. However, when asked whether Michael Newton ever commenced in the role, Darryl Newton indicated that he never did. When it was suggested to him that Michael Newton was "appointed" into the position on 26 April 2016, Darryl Newton said "[a]ppointed is an interesting expression. We announced Michael into that role". He then agreed that Michael Newton "never fulfilled the role". Michael Newton was adamant that he never took on the MIMS position.
244 In the terms utilised by cl 1.3(a) I am not satisfied that APC did "require [Michael Newton] to occupy" the MIMS position. I am satisfied therefore that APC's breach of cl 1.1 continued throughout the course of the second period.
Third Period
245 It is not necessary for current purposes to describe in any detail the interactions between Michael Newton and APC (over some two months) about APC's requirement that Michael Newton undergo medical examinations and Michael Newton's resistance to that course. It is sufficient to say that the requirement for Michael Newton to undertake medical examinations arose from a direction made by Fahour. Fahour asserted that the direction was instigated by the Blee complaint on 16 April 2016 in which Blee complained that her team had been subjected to constant harassment and bullying by Metcher and noted that, as a result, a number of members of her team, including herself, were under the care of medical professionals. Blee complained that APC's acceptance of the behaviour amounted to "company sanctioned bullying".
246 Having been sent home on 27 April 2016, it was not until 9 May 2016 that Roode forwarded to Michael Newton drafts of letters that were proposed be sent to Michael Newton's treating general practitioner and to other medical practitioners in relation to obtaining medical assessments and reports. That correspondence from Roode only came after Michael Newton had prompted Roode to deal with the situation. Michael Newton took issue with the wording of the draft letters and further issue with later drafts of those letters through to about 20 May 2016.
247 In correspondence of 23 May 2016, Michael Newton wrote to Roode and again communicated his discontent with further revised draft letters and requested further revisions. He suggested that APC was not engaged in the process of returning him to employment. He also stated that he considered the request for him to attend a medical examination unreasonable and unlawful. He requested that he be provided with a copy of the Blee complaint. Michael Newton deposed that he was unhappy with the medical clearance request and stated that it was his impression that he was being put through the first process of being removed from his employment.
248 Michael Newton's resistance was not without its justification. There was no foundation in the evidence that Michael Newton's psychological wellbeing was affected by his prior interactions with Metcher or that he was otherwise unwell. Some of the other employees who had also been on Blee's team who had extensive involvement with Metcher were not directed not to work. Additionally on 13 May 2016 Blee wrote an email to which Newton was copied in apologising that he had been caught up in "this whole mess" and stated that at no point in her complaint did she raise a concern about Michael Newton's fitness for duty, although she noted that she had said to APC that she felt that Michael Newton (and others) were under inappropriate levels of stress because of APC's expectation that they tolerate Metcher's behaviour.
249 On 26 May 2016, Darryl Newton telephoned Michael Newton. This was a long conversation and, again, it is not necessary to set it out in detail. It is sufficient to say that Darryl Newton contacted Michael Newton to try and bring things to a head including to determine whether or not Michael Newton would continue to be employed by APC. Although there is some suggestion in the evidence that Darryl Newton may have commenced the conversation with the intention of ending the employment relationship between Michael Newton and APC, I accept that Darryl Newton was by no means fixed in the pursuance of that course. He was however as he himself said, intent on having a discussion with Michael Newton about whether, being realistic, there was a job for Michael Newton at APC. The conversation led to a without prejudice meeting held on 6 June 2016 in which Darryl Newton, Walsh, Michael Newton and Michael Newton's lawyer ("Maley") participated, and a further without prejudice meeting on 15 June between Darryl Newton, Macdonald and Maley.
250 On 20 June 2016, Mcdonald sent a letter to Maley in relation to Michael Newton's employment. In that letter APC's requirement that Michael Newton be medically assessed was removed. That was said to have occurred on the basis of Michael Newton's assurance that he was physically and mentally fit to work and APC's desire to get Michael Newton back into the workplace. Mcdonald's letter enclosed three position descriptions for Michael Newton which had been discussed with Maley at the meeting on 15 June 2016. Those positions were for the:
MBII position;
MPFS position; and
MFWPA position.
251 On 4 July 2016 Macdonald sent a letter to Maley. In that letter Macdonald noted that Darryl Newton had not received a response from Michael Newton indicating a preference for any of the proposed roles. Macdonald reiterated APC's position that the roles were "appropriate for Michael Newton's experience and skill set" and asked for a response from Michael Newton by 5pm on 8 July 2016. The letter stated that if Michael Newton did not respond by that date that he would be appointed to one of the proposed roles and would be required to return to work from 18 July 2016.
252 By letter of 8 July 2016, Maley responded to APC's letter; Maley noted that he had reviewed each of the proposed roles and that they did "not appear to us to be suitable for Michael [Newton], having regard to his skills, training and experience." Maley specified the basis upon which it was asserted that the positions were not suitable.
253 Maley proposed an alternative solution; that Michael Newton be returned to the National Compensation Manager position, and that if the conduct of Metcher remained problematic that APC should make an application under the FW Act anti-bullying provisions. If it were not possible to return Michael Newton to his previous positon, Maley proposed that Michael Newton should be placed in the MIMS position.
254 On 11 July 2016, Macdonald sent two letters to Maley regarding Michael Newton's employment. In the first letter APC noted its disagreement with the assertion that the roles were not suitable and stated "we maintain that each of these roles are appropriate: they are all senior, strategic roles and are roles Michael [Newton] would be capable of performing given his training, skill-set and experience." It was noted (presumably because Fahour had so directed) that APC had made a "business decision" not to return Michael Newton to the workers' compensation unit and instead that Michael Newton had been appointed to the MBII position and was required to return to work on 18 July 2016. The second letter largely reiterated statements made in the first letter with the additional comment that should Michael Newton refuse to return to work in the MBII position that APC is available to attend a without prejudice meeting with Maley and Michael Newton to discuss the basis upon which his employment will end.
255 Maley wrote to Macdonald on 13 July 2016 seeking a letter setting out the basis and reasoning for the "business decision" not to place Michael Newton in any role in the workers' compensation unit.
256 In further correspondence dated 14 July 2016, APC confirmed that the decision not to return Michael Newton to the workers' compensation unit was made because it was "no longer tenable" due to the tensions between Michael Newton and a key external stakeholder and due to APC's concerns about the ongoing impact of this tension on Michael Newton's wellbeing.
257 Further correspondence ensued between Macdonald and Maley as a result of which APC made a number of changes to the MBII position description. By letter dated 27 July 2016, APC noted:
in light of the concerns you have raised, and to give Michael [Newton] some comfort, we have made some adjustments to the position description...to more accurately reflect the skills, experience and training required for the role.
Although we consider that Michael [Newton] has the skills, experience and training required for this role, we anticipate that it may take some time to bring Michael [Newton] up to speed on the specific requirements of the role. We confirm that this will be taken into account when assessing Michael [Newton's] performance in the role.
258 The letter stated that Michael Newton was expected to return to work on 1 August 2016. The letter attached an updated position description for the MBII position. Key changes included removal of the requirement for "data manipulation and analysis" skills and removal of design and management requirements in relation to database and technology. The position description also changed the required technical and professional skills to only a tertiary level qualification in business or a related discipline.
259 Maley sent an email to Macdonald on 28 July 2016 in response to the updated position description. Maley stated that the position being offered was different to that previously offered, and requested until 10 August 2016 to consider the "new" position.
260 Macdonald responded by email on 29 July 2016. He stated that "ample opportunity" had been provided to Michael Newton to decide whether to return to work, that the position was not a "new position" and that as a "gesture of good will" the return date would be extended to 3 August 2016.
261 On 3 August 2016 Michael Newton did not attend work in accordance with the direction made by APC.
262 On 4 August 2016, APC sent correspondence to Michael Newton. The correspondence asserted that the decision to appoint Michael Newton to the MBII position "was made in accordance with clause 1.3 of your 13 March 2014 employment contract, which allows [APC] to appoint you to another position suitable for you having regard to your skills, training and experience". The letter referred to APC's direction that Michael Newton return to work to perform the MBII position and stated that:
Given your failure to comply with this direction to attend work on 3 August 2016, we are now considering terminating your employment with [APC], and we propose to make a final decision by early next week.
263 By letter of 11 August 2016, on behalf of APC, Darryl Newton informed Michael Newton that his employment was "being terminated due to your failure to comply with a lawful and reasonable direction, namely that you attend for work on 3 August 2016 in the [MBII position]". Darryl Newton further stated that:
[a]lthough we are of the view that under clause 10.3(a) of your employment contract, we are entitled to summarily terminate your employment on the basis of your failure to comply with this lawful and reasonable directionβ¦we have made the decision to terminate your employment under clause 10.1(a), with pay in lieu of notice.
264 As will be apparent from the facts set out above, APC appointed Michael Newton to the MBII position on 11 July 2016 and required him to commence work in that positon initially by 18 July 2016 but ultimately the commencement date was extended to 3 August 2016. If I had found that the MBII position was a "suitable" position within the meaning of cl 1.3(b) of the contract, I would have held that APC's continuing breach of cl 1.1 extended to 11 July 2016. However, for the reasons I will now address, I do not consider that the MBII position was a "suitable position". I hold, therefore, that APC's continuing breach of cl 1.1 extended through to the termination of the contract on 11 August 2016.
Suitability of alternative positions proposed/offered
265 It is not uncommon for contracts of employment and industrial instruments such as enterprise agreements made under the FW Act to allow for an employer to shift an employee into a different position but at the same time protect the employee by requiring that the new position be suitable or a suitable alternative position. A contractual provision of that kind must be construed according to its own terms and that is the approach I will adopt in relation to cl 1.3(b). Nevertheless, it is instructive to examine some of the authorities and the approach taken to exercises similar to that with which I am here confronted.
266 In CMP Manufacturing Pty Ltd v Barbieri [2018] FCA 622 at [41], a contractual provision required that on the redundancy of an existing position, an employee had to be offered "an alternative" to "your position". I there determined that, read in context, an "alternative positionβ¦connotes a reciprocity or an equivalence in the exchange. A reciprocal position in the context in question would be a position with the same or similar characteristics to [the employee's] existing position". I observed that an assessment as to whether a position is an "alternative position" required an assessment of the nature and character of the existing position as well as the employee's career expertise and experience. Further, that "[a]n assessment of whether the work and duties of one position is the same or similar in nature or character to the next, is likely to have both a quantitative and a qualitative dimension" (at [44]-[45]). This is essentially the approach taken by Harper and Tate JJA and Kyrou AJA in Gamboni v Bendigo and Adelaide Bank Ltd (2013) 39 VR 578 where, in assessing whether a new position offered to an employee was a "suitable alternative position" in accordance with the employer's redundancy policy, their Honours made a qualitative and quantitative assessment of the attributes of the two positions. In particular, the Full Court compared the status and seniority of the positions, including the number of subordinates, supervisory responsibilities and access to business funds, and whether the work and skill sets required to carry out the new position were commensurate with those exercised by the employee in the former position. At [88], Kyrou AJA (with whom Harper and Tate JJA agreed) said, alluding to the managerial nature of the positions being compared:
[88] The concept of 'position' in the present context includes at least the following features:
(a) the nature of the work attached to the position;
(b) the title that is associated with the position;
(c) the status and seniority of the position;
(d) the reporting lines associated with the position, including the number and seniority of the persons reporting to that position and the seniority of the superiors to whom that position reports; and
(e) the level of autonomy associated with the position.
267 The comparison of positions made in Gamboni focused upon whether there was sufficient commonality between the "defining features of the work performed" (at [79]) in the respective positions. Important to the conclusion that the latter position was not a "suitable alternative position" was that when the attributes of the work required to be performed were compared, a major portion of the work required in the former position was not required in the latter position (see at [65]-[82]) in particular). This was a qualitative assessment in which the "work" compared involved a comparison of the skill and expertise required to perform the work of the respective positions.
268 Further, in assessing what a contractual position requiring suitability for an alternative position intends, it is helpful to bear in mind the settled principle that, as a general rule, a significant diminution in an employee's remuneration, status or responsibility may constitute a repudiation of the contract in and of itself: see Whittaker v Unisys Australia Pty Ltd (2016) 26 VR 668 at [41] (Ross J) and Westen v Union des Assurances de Paris (1996) 88 IR 259 (Madgwick J).
269 Clause 1.3(b) of the contract provides that the different position that Michael Newton may be required to occupy "must be suitable for [Michael Newton] having regard to [Michael Newton's] skills, training and experience". Unlike Gamboni, where the criteria required assessing one position against another, the criteria in cl 1.3(b) is more personal to Michael Newton and calls for a comparison of the skills, training and experience held by him in his employment at APC and those called for by the alternative position. There is no subjective element in that criterion. The question is not whether Michael Newton regards a position to be suitable. Suitability is to be assessed objectively. Michael Newton's skills, training and experience are the primary considerations which the clause intends should inform the assessment. Regard must be had to Michael Newton's skills, training and experience, meaning that both the quality and extent of the skills, training or experience held or undertaken must be given weight in the assessment. Thus, if Michael Newton has high level management skills and experience managing a large team of employees, all other things being equal, a position that does not require that level of skill or experience is to be regarded as less suitable than a position that does.
270 The clause is not suggesting that a position is suitable simply because it is within Michael Newton's skills and competence to perform the role. A position as a clerk is not a suitable position for a person with the skills, training and experience of a supervisor or manager simply because that person has the ability to perform the clerk's role. If cl 1.3(b) was merely intended to empower APC to transfer Michael Newton into a position that he has the capacity to perform, the clause would not have used the phrase "suitable for You" as the controlling condition. A phrase like "within your skills, training and experience" might have been used in that case. What the clause calls for is a sufficient alignment or correspondence between the skills, training and experience held or undertaken by Michael Newton and the skills, training and experience required to perform the alternative position, to make the alternative position befitting or suitable for Michael Newton. It is in that sense that the "position must be suitable for [Michael Newton]". The employment context suggests that a holistic and practical rather than a technical or formulaic assessment was intended.
271 Turning then to the requisite assessment, I will commence with what the evidence reveals about Michael Newton's skills, training and experience. For most of 2016, Michael Newton was 45 years of age. He completed his Victorian Certificate of Education in 1989. He then obtained a Bachelor of Engineering and a Post Graduate Diploma in Occupational Health and Safety. He also obtained a Masters of Business Administration and a further Masters of Business in Industrial Relations and Human Resources. In 2016, Michael Newton commenced studies for a legal degree.
272 Utilising his engineering skills, from about 1993 Michael Newton worked as a metallurgical and then as a galvanising line operator for some 3 years at BHP. He then commenced work for Pacific Brands Ltd as the National Workers' Compensation Manager. In the latter part of his seven years working for Pacific Brands Ltd, he also undertook a role as a Business Analyst. For a short period, a year or two, Michael Newton worked in Business Planning before returning to Pacific Brands Ltd in 2009 to the National Workers' Compensation Manager role. In that role he managed five employees. He left Pacific Brands Ltd in 2014 to take up the position with APC as National Compensation Manager. He moved to APC including because APC was of the largest self-insurers for workers compensation. He referred to working for a self-insured employer as an aspect of the career he had had working at Pacific Brands Ltd.
273 In the position of National Compensation Manager, Michael Newton managed some 30 employees with 5 managers directly reporting to him. His day to day work in the position included liaising with Blee, attending to project work allocated to him and overseeing the work of his direct reports, in particular reviewing high risk worker's compensation claims.
274 The skills, training and experience held by Michael Newton are reflected in the Role Profile for the position of National Compensation Manager. The evidence was that Michael Newton had performed well in the position of National Compensation Manager and I would infer that his skills and expertise were commensurate with those required by the Role Profile.
275 The Role Profile described the purpose of the National Compensation Manager position as including developing APC's compensation strategy and developing the future compensation operating model by reviewing existing practices and processes and examining external best practice approaches, considering the broader APC operating model and determining efficiency opportunities. Michael Newton deposed that he had been able to draw on his past experience in the worker's compensation field to fulfil that objective and in particular his experience working for a self-insurer. In this respect, Michael Newton deposed that he had conducted research examining the efficiency of other self-insurers and was able to offer suggestions for improvement to assist APC to effectively improve their claims management of workers' compensation. As I understood it, much of that evidence related to the development by him of Project Dove.
276 In identifying its purpose, the Role Profile also referred to the need for the National Compensation Manager to lead the implementation of "the new compensation operating model by leading their team through the change process and ensuring the business is supportive of the new model". Further, the National Compensation Manager was charged with ensuring the performance of the workers' compensation unit including continuing to effectively manage APC's compensation obligations, a responsibility stated to involve the maintenance of APC's self-insurance licence by ensuring compliance with legislative requirements, providing specialist advice and guidance to business leaders and working in conjunction with the compensation team to contribute to mitigating workers' compensation liability.
277 The Role Profile described the position's "Major Accountabilities" as follows:
Provision of Compensation Expertise
β’ Management of [APC's] workers' compensation function nationally.
β’ Provide expert advice and guidance on the complex and high risk workers compensation related matters.
β’ Provide senior management with detailed analysis of the cost of workplace injuries to the organisation, injury types and trends
β’ Oversight and effectively manage the workers' compensation national provision.
β’ Ensure compliance with all policies, procedures, legislative and SRCC licensing requirements
β’ Source and manage professional development for claims managers specifically relating to medical and legal knowledge
Strategy Execution & Customer
β’ Accountable for the development of the future compensation strategy and operation model.
β’ Investigating external best practices for managing the compensation function in other comparible [sic] organisations.
β’ Take an enterprise wide approach to the management of compensation and the long term success of [APC].
β’ Manage the change transition function from a state based team to a national function to meet the needs of the business.
Financial
β’ Manage workers' compensation provision and costs.
β’ In conjunction with finance, develop a business case for the new operating model.
Leadership & Organisation
β’ Lead a high performing team with behaviours aligned to Culture Pillars
β’ Ensuring the people are committed and accepting of change and there is stakeholder buy-in to facilitate change.
β’ Facilitate the people strategy and planning process for the BU in partnership with HR Business Partners, Business Leaders, other COE teams and Corporate strategy
β’ Coach & monitor performance of direct reports
β’ Actively manage safety, health and wellbeing of team
278 Two aspects of what are described in the Role Profile as "Person Specification" are worthy of detailed consideration. Under the subheading "Essential Experience" the Role Profile called for:
β’ Experience in the management [sic] a high volume workers' compensation claims unit
β’ Managing Stakeholder relationships including employee unions, staff, government and community
β’ Experience working with legal advisors to manage workers' compensations [sic] litigation obligations
β’ Managed a number of projects (ideally managing change) simultaneously from conception to implementation and realisation of program objectives
β’ Significant experience diagnosing and delivering organisational development and change solutions with business leaders
β’ Communicating with, influencing and advising senior business and HR stakeholders
β’ Established record of coaching, development and managing the performance of others
279 Under the subheading "Critical Knowledge" the following was stated:
β’ Detailed understanding of the Safety, Rehabilitation and Compensation Act 1988 and expert knowledge of compensation
β’ Detailed understanding of the workers compensation regulatory environment
β’ Detailed understanding of the Self Insurance licensing system and compliance requirements
β’ Business analysis, understanding of key financial tools and management reports to measure performance and inform decision making
β’ Tertiary qualifications in Business, OH&S or related discipline
β’ Extensive knowledge of key market drivers, industry players and latest developments within Comcar [sic] jurisdiction
β’ Existing and new workers' compensation processes and regulatory requirements
β’ Must have existing knowlege [sic] of processing systems
β’ Must have understanding of [APC] SBU components parts (PON, Retail, CMS), interfaces, key processes and information/material flows
β’ Business and financial analysis and reporting process
β’ High level decision making and communication skills
β’ Capacity to understand complex issues, analyse data and develop appropriate solutions
Suitability of the MBII position
280 The MBII position was one of the three roles offered for Michael Newton to consider. The context in which those roles was offered is of some relevance. The MBII position did not exist within APC at the time it was offered. It is not clear on the evidence whether the other two positions were also newly created. These positions were offered to Michael Newton in the circumstances earlier recounted where, at the direction of Fahour, Darryl Newton was unable to offer Michael Newton a position in workers' compensation or injury management.
281 As earlier set out, a position description for the MBII position was provided to Michael Newton with two other position descriptions on 20 June 2016. After a complaint from Maley on 8 July 2016 that each of those positions required skills that Michael Newton did not possess, the position description for the MBII position was amended and provided to Michael Newton by letter on 27 July 2016. APC's position was that the adjustments to the position description did not create "a different or new position" and Darryl Newton's evidence was that, despite the adjustments, the "essence of the role hasn't really changed". It is helpful to identify the adjustments in setting out the role description in its adjusted form. If the essence of the role was not changed the requirements deleted serve to help to identify that essence.
282 The MBII position description sets out the business context in which the position was intended to operate. It stated that APC had embarked upon a rapid transformation of its business model to better suit the needs of its customers in response to dramatic social and technological changes affecting Australia. Further, that APC was beginning "the next wave of change which will reposition it as a truly customer focussed organisation, with a broad offer beyond communications, and differentiated go-to-market propositions and associated brands". Under the heading "Position Purpose" the following was stated (with the words which appeared in the original position description crossed through):
The position brings together an unparalleled set of skills in data manipulation and analysis to help inform complex solutions and provide clarity to drive efficiencies within the Corporate Centre.
This role is accountable to design, implement and deliver the analytics framework to deliver efficiencies within the Corporate Centre and make it simpler and more customer orientated to support the [APC] strategy.
283 Matters listed under the heading "Major Accountabilities" were broken up into three categories β Strategic Execution and Customer Interaction, Leadership and Organisation and Execution. Much of the focus of these accountabilities was data collection and analysis including, for instance, ensuring "effective day-to-day oversight of analytics for the Corporate Centre and adherence to analytical protocols". The "Leadership" accountabilities made no reference to leading or managing other employees and other evidence confirmed that the role did not involve any direct reports. The role involved no management of employees. The "Organisation and Execution" accountabilities referred to problem solving skills critical to business issues, a demonstrated ability to deliver robust data analysis and reporting. References made in the original position description, to the ability to design data manipulation interfaces, perform data quality control, develop database reports and normalise relational data, were omitted.
284 Under a heading identifying the experience and knowledge that the position holder should ideally demonstrate, the position description set out the essential experience and critical knowledge required. For "Essential Experience" the following were stated (words in the original that were omitted are crossed out):
Industry and Function:
β’ Strong project management experience.
β’ Experience analysing data from financial systems.
β’ Strong attention to detail and thoroughness in following systems and procedures.
β’ Excellent organisational / time management skills.
β’ Strong written and verbal communication skills.
β’ Specific experience in the development of management and operational dashboards.
β’ Demonstrated analytical thinking combining business acumen and elements of creativity.
β’ Strong presentations skills; experience of presenting to internal and external stakeholders.
β’ Comfortable working both internally and externally with technical and business experts providing input into future business offerings and opportunities.
β’ Strong technical ability in the use of data analytical tools, data mining and data manipulation.
β’ Ability to design solutions with ease of use in mind enabling seemless handover to business users.
Relationships:
β’ Strong stakeholder management skills.
285 Under the heading "Critical Knowledge", the following was stated (words in the original that were omitted are crossed out additional words are underlined):
Market and Environment:
β’ Understanding of core accounting concepts.
β’ Date Warehousing methodologies/techniques; Business intelligence reporting; and ERP systems.
[APC] Specific:
β’ Not applicable.
Technical and Professional Qualifications/Skills Required:
β’ Qualifications in IT, Computer Science or Finance
β’ A solid technical grounding in SQL;
β’ Experience in predictive analytic tools β e.g. Alteryx, Viscovery. R, etc
β’ Data management and extraction experience β SSIS
β’ Tertiary level qualifications in business or a related discipline
286 The assessment I need to make is not assisted by the vacuous "HR speak" with which position descriptions are commonly plagued. The oral evidence given did not provide much clarity into what the new and never before performed MBII position really would entail.
287 It is sufficiently clear, however, that the MBII position had nothing to do with Michael Newton's defining skills, training and experience β his primary and essential skill and expertise as a manager leading and supervising a large team of employees and as a specialist in the field of the management of workers' compensation claims, including with extensive experience in a self-insured corporation. Michael Newton had some 14 years of prior experience in the management of injured employees and their claims for compensation. That he was given the task of developing Project Dove illustrates the sophistication of his skills in that area.
288 No doubt the MBII position would have involved the utilisation of what I might call the generic or basic competencies which a long-standing manager with significant responsibilities would have, such as effective communication skills or time management and organisational skills or a basic capacity to analyse data. However, skills of that kind are merely foundational. They do not reflect the particular and defining expertise and specialist capabilities held by Michael Newton which no part of the MBII position description called for. To my mind, the essential rather than basic or foundational skills and experience required by the MBII position are not at all matched or suited to those which defined Michael Newton in his employment with APC.
289 The essential skills and experience called for by the MBII position are directed to customer service, product and business development with a focus on sophisticated data gathering and analysis to solve problems and develop strategies. These are matters largely foreign to Michael Newton's particular expertise and specialist capabilities even though, including because of his training in business and some earlier relatively brief experience as a business analyst, Michael Newton may have been capable of carrying out the MBII position. It is suitability rather than capability which must drive the assessment. The fact that basic or foundational skills and expertise of the kind that Michael Newton has may make him capable of performing the duties of the MBII position, does not make the skills, training and experience required by the position commensurate with or matched with or befitting the skills, training and expertise held by Michael Newton. I do not consider the MBII position to be a "suitable" position within the meaning of cl 1.3(b) of the contract. The contrary conclusion would fall well short of the protection which cl 1.3(b) intended be provided to Michael Newton.
Suitability of the MPFS and MFWPA positions
290 APC did not require Michael Newton to occupy the MPFS position or the MFWPA position. It is not necessary to assess the suitability of those positions other than for questions of causation and mitigation of damages later addressed. It is convenient to assess here whether those two positions were "suitable" within the meaning of cl 1.3(b) of the contract. In my view neither position was "suitable for [Michael Newton]".
291 APC put forward the MBII position as the most suitable of the three. I would infer from that a likely acceptance that if the Court held that the MBII position was not suitable it would follow that neither of the other two positions were suitable. I do not mean to suggest that any concession of that kind was necessarily made. However, if it was, the concession was correctly made.
292 The purpose of the MPFS position was to develop and drive strategy and a holistic and integrated people and career framework. The position description clearly articulated that this position was suited to the experience and skills of a senior HR manager, requiring at least 10 years' experience in HR and extensive knowledge of HR strategy, best practice and principles. Michael Newton did not possess these skills or experience; he had never worked in HR let alone had 10 years' experience in HR. Although Michael Newton has a qualification in business, has undertaken some HR courses and has experience leading a team, this experience was not commensurate with the level of HR knowledge and experience required of the MPFS position. The essential skills and experience called for by the position were not commensurate or matched with Michael Newton's defining expertise and specialist capabilities. The position did not require Michael Newton to utilise his expertise as a manager leading and supervising a large group of employees. It had no direct or indirect reports and no management of budgeted spend. It was not a "suitable" alternative position within the meaning of cl 1.3(b) of the contract.
293 The purpose of the MFWPA position was to develop corporate strategy, the key accountabilities included developing a 3-5 year workforce strategy, supporting in the development and execution of a 1-3 year operating plan and contributing to the development of the enterprise strategy. The position requirements included strong working knowledge of the parcels/logistics industry and its consumers and the ability to lead quantitative and financial business analysis. Michael Newton did not have these skills or knowledge. Further, as deposed by Michael Newton, he did not have a "proven track record" in a top tier strategy consulting firm or strategic management role with at least 3-5 years' experience, as the position required. The position also had no direct or indirect reports and no management of budgeted spend. Again, although Michael Newton held an MBA, the defining skills and experience required of this position were not commensurate with or matched to Michael Newton's expertise and it was not a "suitable" alternative position.
Alleged Contractual Breach Relating to the Garden Leave Decision
294 Michael Newton's SFASoC alleges that APC breached cl 10.4 of the contract by directing that Michael Newton take "garden leave". The relevant direction was alleged to have been given in Roode's letter to Michael Newton of 29 April 2016 referred to at [241] above.
295 Fairly read, Roode's letter contained two directions:
(i) that Michael Newton's fitness for duty be assessed by a general practitioner and a psychiatrist ("medical assessment direction"); and
(ii) that until those medical assessments were obtained, Michael Newton not return to work, refrain from contacting anyone at APC or accessing his emails ("exclusion from work direction").
296 Clause 10.4 is headed "Garden leave". What is meant by that expression is apparent from its terms. The clause addresses APC's right to make an exclusion from work direction β that is, that no duties be performed, that no contact with APC employees, customers or business associates be made and that Michael Newton be excluded from APC's premises. The capacity for APC to make such a direction under cl 10.4 is limited. It may only be made during part or all of any period of notice of termination given by Michael Newton or by APC, or during any period in which APC is investigating any disciplinary issues involving Michael Newton.
297 Clause 10.4 does not in any way deal with the making of a direction by APC requiring Michael Newton to be medically assessed. Much of the submissions made by Michael Newton in support of the alleged breach of cl 10.4 of the contract were directed to demonstrating that the medical assessment direction was not a lawful and reasonable direction. There are a number of difficulties with the submissions made for that purpose. First, the SFASoC does not allege that cl 10.4 was breached by reason of APC making the medical assessment direction. The SFASoC only alleges that cl 10.4 was breached because APC directed Michael Newton to take "garden leave", which can only be a reference to the direction which I have described as the exclusion from work direction. Second, cl 1.8 of the contract provides that APC may require Michael Newton "to undergo medicalβ¦checks where [APC] determines it is desirable or necessary to do so". The clause states that it is an ongoing condition of Michael Newton's employment that he comply with any requirement to undergo a check. Neither the submissions of Michael Newton or APC seemed to have appreciated the existence of that contractual capacity given to APC.
298 There are two answers to Michael Newton's claim that cl 10.4 was breached by APC making the exclusion from work direction. The first is that, putting aside para (b) thereof which is not relevant for present purposes, cl 10.4 does not impose any obligation upon APC which it is capable of breaching. Second, the circumstances in which the exclusion from work direction was made, did not engage cl 10.4. Clause 10.4 specifically confines the circumstances of its operation and none of those circumstances were present in relation to the making of the exclusion from work direction.
299 Michael Newton's contention that cl 10.4 should be construed as a code which covers the field about the circumstances in which Michael Newton could be excluded from his workplace is entirely unpersuasive. Neither the terms of the provision nor common sense supports such a construction. Clause 10.4 could not have been intended to cover the field of reasons for which Michael Newton could be restrained from attending APC's premises. If that were so absurd results would prevail. For example, even if attendance was dangerous to the health of employees, on the construction of cl 10.4 for which he contends, Michael Newton could not be instructed to stay away.
300 In so far as Michael Newton's submissions relied upon the exclusion from work direction being an unlawful and unreasonable direction, that reliance has nothing whatsoever to do with an allegation that cl 10.4 of the contract was breached. That raises a different allegation of breach which has not been pleaded. Michael Newton ought not here be permitted to travel outside of his pleading including because, even if there were merit in the contention made, Michael Newton's submissions do not establish that any relief whatsoever would flow from that breach. Those submissions did not even attempt to demonstrate any connection between the breach contended for and the damages claimed. If it was intended to ascribe part of the general damages claimed to the "garden leave" contractual breach claim, for reasons I will set out below, general damages could not be awarded in any event.
301 For all of those reasons, I reject the contractual claim made in reliance upon the Garden leave decision.
section 340 claim β garden leave decision
302 It is not in issue that the exclusion from work direction communicated to Michael Newton by Roode was a direction which emanated from Fahour. Michael Newton contended that by excluding him from work, APC subjected him to adverse action within the meaning of s 342 of the FW Act for reasons including the reason that he had a workplace right being his entitlement to a safe working environment pursuant to s 19(1)(a) of the WHS Act.
303 The relevant legislation and legal principles, including the basis for the workplace right that Michael Newton relies upon have been discussed already at [191]-[196] above.
304 I am satisfied that Michael Newton had the workplace right he contended for. I am also satisfied, by reason of the authorities discussed at [197] above, that the exclusion from work direction denied Michael Newton non-pecuniary benefits of employment sufficient to constitute a prejudicial alteration to his position. So much was accepted by APC.
305 It is because I am not satisfied that the reason asserted by Michael Newton was a reason for the exclusion from work direction that this claim must fail.
306 Fahour denied that he was actuated by the alleged reasons relied upon by Michael Newton. There is no basis for that denial not to be accepted. It is entirely plausible that Michael Newton's entitlement to a safe workplace played no part in Fahour's decision to give the direction.
307 I say that despite the fact that I harbour some concern that the reasons for the direction may not be truly reflected in the evidence given by Fahour. The decision to send Michael Newton home was an odd decision. It came well after the making of the Blee complaint. At the time the decision was made, Michael Newton had had no contact with Metcher for many months. Some of the other employees on Blee's team, that Blee had suggested were put under stress by their contact with Metcher, were not sent home. Michael Newton had shown no symptoms of having been affected by stress. Neither Darryl Newton or Walsh could have held any concern about his fitness for duty including in relation to a position in injury management, as they had just selected Michael Newton to commence the MIMS position. The timing of the direction, coming a day or two after it was announced that Michael Newton would take up the MIMS position is also a matter which contributes to my concern given my conclusion about Fahour's resistance to Michael Newton returning to a position in the area of workers' compensation and injury management.
308 It is not, however, sufficient for Michael Newton to persuade me that Fahour had an ulterior purpose in making the exclusion from work direction. Michael Newton needs to demonstrate that that ulterior purpose or reason was the workplace right which he has asserted to be a reason which actuated the direction. To make that case out Michael Newton relied upon the same analysis as was put for the s 340 claim made in relation to the Removal decision which, as I have stated at [199], involved contending for a different prohibited reason to that alleged in the SFASoC. I have already addressed (at [201]-[202]) the reasons why that analysis is flawed. I have rejected this claim having assumed favourably to Michael Newton that s 361(1) of the FW Act was engaged, although I should not be taken to have accepted that the connection between the adverse action and the prohibited reason alleged was not so remote as to be fanciful.
relief
309 The only cause of action that has succeeded is Michael Newton's claim that the contract was breached when he was removed from his position as National Compensation Manager. I have determined that cl 1.1 of the contract was breached by APC on 5 February 2016 when Michael Newton was removed from his position and that the breach continued until the contract was terminated.
310 Michael Newton claims substantial damages in the sum of $1,702,582.00. That calculation includes what in truth is a claim for debt relating to an unpaid bonus for the 2015/16 financial year. That claim was not pleaded and ultimately no claim relating to that bonus was pressed. The calculation also includes $4,116 for the reimbursement of university fees, but that claim was not pleaded nor proved. A claim for general damages of $50,000 is also included.
Loss of Remuneration Damages
311 What remains when those claimed losses are put aside, is a claim for loss of remuneration both past (as at the time of the trial) and future. The loss of remuneration claim is based on the annual salary and full bonus that Michael Newton alleged he would have earned under the contract from August 2016 through to December 2024 (less 30% for contingencies in relation to future earnings). Michael Newton contended that, but for the breach of his contract, he would have continued working for APC in a senior managerial role.
312 The economic loss claimed by Michael Newton only fell in after the termination of the contract. All of the loss sought by Michael Newton referable to the breach of cl 1.1 of the contract post-date the termination of Michael Newton's employment.
Causation
313 The general principle is that damages for breach of contract are awarded to put the promisee, so far as money can do it, in the same situation as if the contract had been performed as promised: Clark v Macourt (2013) 253 CLR 1 at [26] (Crennan and Bell JJ). That principle emanates from a well-known statement made by Parke B in Robinson v Harman (1848) 1 Ex 850 at 855 that:
[w]here a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation with respect to damages, as if the contract had been performed.
314 As Brennan J stated in Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 98, the principle expressed in Robinson v Harman "identifies both the subject of compensation (loss sustained by reason of a breach of contract) and the measure of damages (the amount required to place the innocent party in the same situation as if the contract had been performed)". As Brennan J went on to say at 99, a plaintiff seeking damages from a defendant "bears the onus of proving both the loss sustained by reason of the breach and the damages for the loss".
315 Chief Justice Mason and Dawson J observed in Amann Aviation at 80, that the award of damages for breach of contract "protects a plaintiff's expectation of receiving the defendant's performance. That expectation arises out of or is created by the contract. Hence, damages for breach of contract are often described as 'expectation damages'".
316 It was not really in contest that if removing Michael Newton from his position as National Compensation Manager and not providing him with a suitable alternative position was a breach of the contract, that breach was a repudiatory breach. A repudiatory breach entitled Michael Newton to elect to accept the repudiation and sue for damages brought about by the termination of the contract. But such an election was not made, or at least, it was not Michael Newton's case that it was. However, contrary to the suggestion made in APC's submissions, Michael Newton's failure to rescind the contract for repudiatory breach did not foreclose his capacity to sue for damages relying on the same breach. A plaintiff can claim damages for breach of contract even though the plaintiff has not exercised a right to terminate the contract: Heydon JD, Heydon on Contract (Thomson Reuters, 2019) at [26.90]. As Mason J said in Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 31 (emphasis added):
It is often said that repudiation or fundamental breach - in the sense of breach of a condition or breach of another term or terms which is so serious that it goes to the root of the contract, and thus deprives the other party of substantially the whole benefit of the contract (Federal Commerce & Navigation Co. Ltd. v. Molena Alpha β entitles the innocent party to rescind the contract and sue for damages for loss of the bargain: see, e.g., Ogle v. Comboyuro Investments Pty. Ltd. But this does not mean that such damages are recoverable only in the event of discharge for breach though it is essential to an award of damages for loss of bargain that the defendant can no longer be required to perform his contractual obligations in specie.
317 In this case APC terminated the contract, not Michael Newton. Upon the termination of the contract APC was no longer required to perform its contractual obligations including the obligation to pay remuneration to Michael Newton.
318 As the contract was terminated, Michael Newton lost the benefit of the contract β namely, the remuneration he would have earned under the contract for the continuance of its term. If the breach of cl 1.1 was a cause of the termination of the contract then that breach was a cause of the loss or injury, being the remuneration Michael Newton would have earned under the contract.
319 On this head of damage Michael Newton contended that a loss of chance analysis was the appropriate approach to the assessment of his loss. It is not clear to me that it makes any difference to the assessment of this head of damage whether the loss is characterised as a loss of the bargain or the loss of a chance or opportunity to take the benefit of the bargain. In either case what is being valued is the benefit of the contract. In either case, what needs to be assessed is whether the loss flowed from the breach of cl 1.1 and, if it did, the extent of that loss by reference to the remuneration that Michael Newton has or is likely to earn by reason of other employments or engagements (a scenario I will call "the factual") and the remuneration he would have earned under the contract in his employment with APC (a scenario I will call "the counter-factual") over the period that that employment would have continued. Michael Newton's loss would be the difference between the remuneration that was or would have been earned on the factual and the remuneration that would have been earned on the counter-factual. By that process of assessment the object of putting the promisee, so far as money can do it, in the same situation as if the contract had been performed as promised, may be achieved.
320 There are issues raised as to whether Michael Newton has suffered loss by reason of the breach of the contract upon which his cause of action relies. APC contended that all of Michael Newton's claimed economic loss is referable to the termination of the contract by APC, an act not contended by Michael Newton to be in breach of the contract or otherwise unlawful. APC contended that Michael Newton suffered no loss by reason of any breach by it of cl 1 of the contract.
321 That contention raises a causation issue. Did the economic loss claimed by Michael Newton flow from the breach of cl 1.1 or did it solely flow from APC's unchallenged act of termination of the contract? That issue about causation is not avoided by Michael Newton characterising his claim for damages, as I perceive he attempted to do, as a claim for a loss of a chance. As Kiefel J said in Tabet v Gett (2010) 240 CLR 537 at [143] "[r]esort to the language of 'chance' cannot displace the analysis necessary for the determination of the issue of causation of damage".
322 The now well established principles relating to causation were recently expressed by the Court of Appeal of the Supreme Court of Victoria in Trampoline Enterprises Pty Ltd v Fresh Retailing Pty Ltd [2019] VSCA 74 at [86] (Kaye, McLeish and Hargrave JJA). Relying on a series of High Court judgments including March v E and M H Stramare Pty Ltd (1991) 171 CLR 506 at 514 (Mason CJ); Chappel v Hart (1998) 195 CLR 232 at 244 at [27] (McHugh J); Henville v Walker (2001) 206 CLR 459 at [106] (McHugh J) and also Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 at 315 (Glass JA), and at 357β8 (McHugh JA), their Honours said this:
In essence, the law does not take a philosophical or formulaic approach to the question of whether a breach of contract has resulted in loss to the injured party. Rather, the law approaches the issue of causation as a matter of common sense. In particular, it is not necessary for a plaintiff to establish that the relevant breach of contract was the sole or exclusive cause of the loss claimed. It is sufficient if, in the circumstances of the case, the breach of contract materially contributed to the loss.
323 It is helpful in understanding what was meant by the expression "the breach of contract materially contributed to the loss" to refer to its source and the observation made by McHugh J at [27] of Chappel v Hart, where his Honour said this:
Before the defendant will be held responsible for the plaintiff's injury, the plaintiff must prove that the defendant's conduct materially contributed to the plaintiff suffering that injury. In the absence of a statute or undertaking to the contrary, therefore, it would seem logical to hold a person causally liable for a wrongful act or omission only when it increases the risk of injury to another person. If a wrongful act or omission results in an increased risk of injury to the plaintiff and that risk eventuates, the defendant's conduct has materially contributed to the injury that the plaintiff suffers whether or not other factors also contributed to that injury occurring.
324 In my view, APC's breach of contract created or generated the situation in which it was likely that the injury suffered by Michael Newton would be sustained. In that respect the breach materially contributed to the injury and was thus a cause of it.
325 In assessing whether APC's breach of cl 1.1 was a cause of the loss of Michael Newton's employment and the remuneration he would have earned in that employment, it is important to properly identify the breach. As I have said, the breach was APC's failure, commencing on 5 February 2016, to employ Michael Newton in the position of National Compensation Manager. That breach could have been avoided or remedied if Michael Newton had been placed into a suitable alternative position but he was not.
326 At the heart of the contract of employment is an exchange of work for remuneration β the work/pay bargain. Under the contract, Michael Newton's remuneration was paid to him for providing the services required by the contracted position ie either the National Compensation Manager position or a suitable alternative position. Once Michael Newton was denied the capacity to provide those services to APC, for which he continued to be remunerated at the level commensurate with his contracted position, his ongoing future employment became commercially unsustainable. Taking a common sense view, it was likely, and in the absence of a variation of the contract it was inevitable, that that situation would result in the termination of Michael Newton's employment within a short period after what had been bargained for by APC was not being received. APC's failure to employ Michael Newton in his contracted position created or generated the very risk of injury that Michael Newton suffered β that his employment and earning capacity under the contract would be brought to an end by APC exercising its right to terminate on notice pursuant to cl 10.1(a) of the contract.
327 It would not be correct to construe APC's exercise of its right to terminate as based upon Michael Newton's refusal to obey a lawful and reasonable direction to perform the MBII position, because on the findings I have made about the suitability of that position, there was no lawful and reasonable direction made. It may however be said that a cause of the exercise of the right to terminate was APC's view that a lawful and reasonable direction had been refused. In either case, such a cause bore a relationship to the breach of contract proven by Michael Newton and was not independent of that breach as a cause of the loss suffered by Michael Newton. Even if an independent and separate cause existed, it was not necessary for Michael Newton to establish that the breach he relies upon was the sole cause of the loss claimed.
Did an intervening event break the chain of causation?
328 If APC's exercise of its contractual right to terminate is of itself to be regarded as an intervening event, it is not an event which broke the chain of causation because irrespective of whether that event was innocent or unlawful, it was, in the ordinary course of things, the very kind of thing likely to happen as a result of APC's breach. That conclusion is an application of what was said by Mason CJ in March at 518 as follows:
It has been said that the fact that the intervening action was foreseeable does not mean that the negligent defendant is liable for damage which results from the intervening action: see Chapman v. Hearse; M'Kew; Caterson v. Commissioner of Railways. But it is otherwise if the intervening action was in the ordinary course of things the very kind of thing likely to happen as a result of the defendant's negligence. In Dorset Yacht, Lord Reid observed:
'But if the intervening action was likely to happen I do not think that it can matter whether that action was innocent or tortious or criminal. Unfortunately, tortious or criminal action by a third party is often the 'very kind of thing' which is likely to happen as a result of the wrongful or careless act of the defendant'.
329 APC contended that the chain of causation between the breach and the termination losses was severed by the various actions of Michael Newton between February 2016 and 11 August 2016. In particular it was contended that what led to the termination of Michael Newton's employment was his own actions in failing to reasonably engage with any sensible return to work. In that respect it was said that Michael Newton failed to engage in a meaningful way with the process of meeting with Darryl Newton to discuss the roles being proffered or by attempting to grow into any of the roles on offer. APC contended that it was clear that Michael Newton would have remained in employment with APC, under the same contract of employment, at the same hierarchical level, earning the same amount of remuneration with the same bonus eligibility, if he had so engaged. Instead of so doing, APC submitted that it was Michael Newton's own free, informed and voluntary actions in failing to reasonably engage which ultimately led to the termination of his employment. It was APC's submission that it was those actions that are properly to be regarded as the only, or only effective, cause of Michael Newton's losses. It was further contended that the losses would not have been caused by the breach alone and could not have been caused without Michael Newton's own actions in failing to reasonably engage in the process of his return to work, or ultimately, to accept the MBII position he was directed to take up.
330 I do not accept that Michael Newton failed to reasonably engage in the process of being returned to work in a position including by not accepting the MBII position he was directed to take up. As I have found, neither the MBII position nor the other two positions offered for Michael Newton's consideration were a "suitable" alternative position. It was not unreasonable for Michael Newton to reject a return to work in a position of employment by, in effect, insisting on being employed in a position to which he was entitled to be employed under the contract. Michael Newton's conduct amounted to no more than an insistence that APC comply with its contractual obligation and was not unreasonable. If Michael Newton's conduct was not unreasonable, "it could not be said in the circumstances that that action, rather than [APC's breach], was the cause of [Michael Newton's losses]": Caterson v Commissioner for Railways (1973) 128 CLR 99 at 110-111 (Gibbs J, with whom Barwick CJ, Menzies and Stephen JJ agreed); see also Medlin v The State Government Insurance Commission (1995) 182 CLR 1 at 22.
331 It is APC that bears responsibility for the failure to place Michael Newton into a "suitable" alternative position. A number of "suitable" positions were available for Michael Newton to take up including a return to the National Compensation Manager position (available at least until 26 April 2016) and the MIMS position (available from that date). It was Fahour's refusal to permit Michael Newton to take up either position which denied Michael Newton's placement into a "suitable" position. As I have stated, I do not accept that Fahour's refusal was materially based on a concern for Michael Newton's wellbeing and no other basis to justify the refusal is apparent. That both Walsh and Darryl Newton were in favour of Michael Newton being appointed to the MIMS position persuades me that there was no reasonable basis for Michael Newton's exclusion from that position.
332 In so far as APC relies on Michael Newton's attitude and behaviour demonstrated during the process of being returned into a suitable position, I accept that at times Michael Newton was slow to respond to communications (although APC was slow as well) and that Michael Newton was less receptive and less willing to meaningfully engage with APC than he might otherwise have been. That needs to be assessed in the context of Michael Newton's justifiable view that he had been badly mistreated by APC and that the process that APC was engaging him in was really the first step in bringing about the termination of his employment. His behaviour was not unreasonable in the circumstances and could not be said to be the cause of the losses which he claims.
333 There is no reason, as Mason CJ said in March at 519 "in common sense, logic or policy" for refusing to regard APC's breach of cl 1.1 of the contract as a cause of the losses suffered by Michael Newton.
Remoteness of damage
334 APC also contended that the claimed termination losses were too remote from any breach of the contract. The principles for assessing whether damage is too remote were not in contest. The principles are set out by Brennan J in Amann Aviation at 98:
The rule in Hadley v. Baxendale prescribes the condition on which damages can be awarded in respect of a loss sustained by reason of a breach of contract:
'Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.'
Applying the rule in C. Czarnikow Ltd. v. Koufos, Lord Reid said that:
'The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.'
335 What is "sufficiently likely" are damages "not unlikely to result from the breach" (C. Czarnikow Ltd v Koufos [1969] 1 AC 350 at 382-3 and 385; Wenham v Ella (1972) 127 CLR 454 at 471-2), or which are a "serious possibility" (Alexander at 365; Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603 at [60]; Romero v Farstad Shipping (Indian Pacific) Pty Ltd (No 3) [2016] FCA 1453 at [21]).
336 As APC correctly contended, the onus of proving that the claimed losses are not too remote falls upon Michael Newton: Amann Aviation at 80 and 99; Clark v Macourt at [27].
337 APC contended that Michael Newton cannot establish that the losses were a "serious possibility" arising from the breach of cl 1 of the contract. It submitted that the relevant juxtaposition here is between the contract being performed (by Michael Newton being placed in a "suitable" position) and the contract being breached (by Michael Newton being placed in no position, or an unsuitable position). APC said that in either case, when the parties made the contract, they would not have reasonably contemplated that placing Michael Newton into an unsuitable position would have led to the claimed loss on termination and that, in fact, they would not have contemplated any loss arising from such a breach, as the contract would have remained on foot and the employment would have continued.
338 The submission is unpersuasive. It is premised on the unlikely scenario that the parties contemplated that the innocent party the subject of the breach of the contract, would have accepted the contract-breaker's non-performance and, by conduct or otherwise, assented to its variation.
339 The correct analysis, unburdened by a flawed premise, is that termination losses flow naturally from the breach of cl 1.1, including because it was a repudiatory breach of the contract and Michael Newton was entitled to terminate the contract and sue for termination losses. Termination losses are therefore damages "not unlikely to result from the breach". Furthermore, for the reasons explained at [326] as to why it was likely that the breach of the contract would result in termination and subsequent loss, those losses are damages "not unlikely to result from the breach" even if the analysis is to be confined to a termination at the instance of APC. Lastly, APC's contention that because Michael Newton refused to accept a "suitable" position he increased his damages thereby making those damages too remote, is rejected including because there was no rejection of a "suitable" position and further, the responsibility for any failure for a "suitable" position to have been provided so that it could have been accepted, falls at the feet of APC.
The Measure of Damages
340 I turn then to deal with the measure of damages. In dealing with the measure of damages, the "least burdensome principle" can have application. Under that principle and as the High Court (Gleeson CJ, Kirby, Heydon, Crennan and Kiefel JJ) said in Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237 at [89] "where a contract-breaker has a choice of methods of performance, damages will be assessed on the basis of the contract-breaker's minimum legal obligation β the method which would have been least onerous to the contract-breaker in the sense that non-compliance with it attracts the lowest measure of damages".
341 APC did not rely upon the "least burdensome principle" and it was correct not to do so. APC did not suggest that the termination effected on 11 August 2016 with the giving of notice, was the invocation by it of the least onerous method of non-compliance with its contractual obligation. No such suggestion was open including because by the time APC effected the termination, the breach upon which Michael Newton relies was complete. The facts are not relevantly dissimilar to those in Commonwealth Bank of Australia v Barker (2013) 214 FCR 450, where the failure to follow a redeployment policy and redeploy an employee was the alleged breach of contract but where the damage which the employee suffered fell in at the point at which he was later dismissed by his employer on four weeks written notice. In obiter but not in dissent on this issue and on the presumption that there was a breach of the contract by reason of the failure to redeploy, Jessup J at [354] rejected the employer's invocation of the "least burdensome principle":
The appellant's invocation of the least burdensome principle encounters an immediate obstacle in the facts of the case. The least burdensome principle takes it as a given that the party otherwise in default would seek to do, or at least to achieve the effect of, what was done irregularly. The appellant had no desire to terminate the respondent's employment. On 2 March 2009, he was told that it was the appellant's preference that he be redeployed to another position. It was not until 9 April 2009 that the appellant dismissed the respondent, but by then the breach of contract for which damages were assessed by the primary Judge was complete. In respects relevant to that breach, the case was not one in which the appellant made an ineffective attempt lawfully to terminate the employment of the respondent. It is not, therefore, a situation in which we should assume that the appellant would have adopted the least burdensome method of lawfully doing what it attempted to do. The question was not whether there was a means of dispensing with the services of the respondent that would not involve a breach of contract. The omissions which the primary Judge held to constitute a breach of contract on the part of the appellant were not by way of attempts to terminate his services. In my view, the least burdensome principle had no role to play in the assessment of damages in the present case.
The counter-factual
342 There is, however, another way in which the availability to APC of a contractual capacity to terminate the contract on providing notice of termination may be relevant in assessing the measure of damages where, on the counter-factual, the assessment of damages takes into account the future capacity to earn remuneration under that contract. APC's capacity to terminate is a hypothetical future event of relevance just like other possible personal exigencies or contingencies which must be taken into account. The relevant question being would APC have exercised its capacity to terminate the contract and if so when? That approach has been taken or considered in a number of cases including Walker v Citigroup Global Markets Australia Pty Ltd [2006] FCAFC 101 at [83]-[84] (Gyles, Edmonds, and Greenwood JJ), Willis Australia Group Services Pty Ltd v Mitchell-Innes [2015] NSWCA 381 at [117-123] (MacFarlan JA with whom Ward and Leeman JJA agreed) and Amann Aviation at 93 and 97-8 (Mason CJ and Dawson J). The approach is not, in my view, confined to cases where damages are being assessed on the basis of a loss of a chance.
343 However, no submission was made by APC and no evidence was called to the effect that if APC had not breached the contract and, on the counter-factual, Michael Newton had remained employed by APC, APC would have exercised its right to terminate the contract on providing notice either at the time it did or otherwise, save that in contending for a discount for contingencies APC referred to the possibility of Michael Newton's employment with it coming to an end.
344 I will return later to the issue of the appropriate discount for contingencies. I turn first to consider, on the counter-factual, the income Michael Newton would have likely earned under the contract. Under the counter-factual, I will assume that Michael Newton would have remained employed in the position of National Compensation Manager or in an alternative "suitable" position, although the assumption remains valid even if Michael Newton was placed into a position other than a "suitable" position so long as the remuneration in that other position remained commensurate with that likely to have been earned in the National Compensation Manager position.
345 Michael Newton's claim for loss is based on 8.33 years of employment with APC from 11 August 2016 when the contract was terminated. APC's submission did not specify the period Michael Newton would likely stay in employment with it on the counter-factual but that submission was based on the proposition that within no more than about 3 years and 9 months of August 2016, Michael Newton would have been in employment in which his income was commensurate with the income he would have earned at APC. For reasons I will further develop, I consider that assessment to be about right but would regard 4 years as a more likely time period by which Michael Newton's income would reach the same level as it would have been if he had remained employed by APC.
346 I am of the view that even if Michael Newton remains unemployed as at the time of this judgment, it is likely that he will obtain remunerative employment commensurate with the remuneration payable for the National Compensation Manager position by August 2020 because, by this judgment, a very significant impediment to Michael Newton's opportunity of obtaining such employment will be lifted. Michael Newton's employment history prior to August 2016 demonstrates that he has not previously had difficulty finding employment and securing new job opportunities commensurate with his skills and specialist expertise. As I later record, Michael Newton made extensive efforts to find work between August 2016 and the date of the trial without any success. But I regard that as an aberration largely brought about by the circumstances in which he lost his employment with APC. He has not been able to obtain a reference from APC and he has been often required to tell potential employers that he was dismissed by APC for refusing a lawful and reasonable direction. It is likely that any potential employer seriously considering employing Michael Newton would want to know the basis upon which he left his prior employment and will be greatly concerned, if not put off entirely, by being told that APC terminated Michael Newton's employment for the reason that APC gave. This judgment vindicates Michael Newton's position and provides Michael Newton the opportunity of conveying to potential employers that APC bears responsibility for the loss of what the evidence persuades me was a very capable and highly performing employee.
347 On that basis, in considering the counter-factual, it is only necessary to work on the assumption, which I consider to be reasonable, that Michael Newton would have stayed in employment with APC in his contracted position or another position with the same remuneration for four years β that is to 11 August 2020. At that time Michael Newton will be a little less than 49 years of age.
348 Michael Newton's annual salary when the contract was terminated was $187,480. Although it was contended that an allowance should be made for an increase in Michael Newton's annual salary based on likely future promotions, there was no evidence about the likelihood of future promotions nor was the extent of any allowance contended for specified. I would not provide for any such allowance.
349 The evidence persuades me that Michael Newton is a very capable high performing employee. In the last full financial year in which he worked in the National Compensation Manager position (2014/15) he earned a bonus of $34,701. I consider it reasonable to assume that in each of the four years through to August 2020 Michael Newton would have continued to earn an annual salary of $187,480 and a bonus commensurate with the bonus earned in 2014/15 ($35,000) ie a total salary of $222,480 per annum and, over the four year period in question, a total of $889,920.
350 I accept that that total should be discounted for contingencies. The submissions were not particularly enlightening as to the appropriate rate at which that should be set. For the first 2.33 years post August 2016, Michael Newton contended that no discount should be made but that thereafter a discount of 30% should be allowed. I assume, although it was not explained, that that discount was based on the vicissitudes of life and that in the first 2.33 years to the date of the trial which was attended by a seemingly fit and healthy Michael Newton, there could be no suggestion for a discount of that kind. Michael Newton referred to the 25% contingency discount applied in Walker "to take account of the possibility of early termination for one reason or another" (at [84] and [87]) as indicative of the appropriateness of the discount suggested by him.
351 By its submission, APC contended that the appropriate discount for contingencies would be in the order of 50%. APC relied on the discount of 50% found to be appropriate in Maritime Union of Australia v Fair Work Ombudsman [2015] FCAFC 120. In that case, a Full Court (Allsop CJ, Mansfield and Siopis JJ) in reassessing the appropriate discount for contingencies increased the discount applied by the primary judge from 20% to 50%. As is apparent from the observations made at [142]-[146], the basis for the 30% uplift to the rate applied by the Full Court was the failure of the primary judge to take into account the casual nature of the counter-factual employment as well as the particular vicissitudes of life at sea and the significant possibility that the employees concerned would find lengthy periods of separation unsustainable. None of the considerations upon which the 30% uplift was based are here relevant. In so far as I am assisted by the result in that case, it seems to me that that decision supports a discount rate of about 20%. However, I am not much assisted because in my view, primary attention must be given to the particular circumstances of the case in question.
352 APC contended that the evidence demonstrated that there was some turnover of managers at APC and that, despite there being no evidence of "mass redundancies", the workplace was redolent with change including because alterations to roles and duties are not infrequent. However, the evidence referred to does not suggest anything other than the ordinary turnover of staff in a large employer like APC. It was further contended that Michael Newton's employment may well have ceased either by reason of changes to his role, or by reason of his reaction to those proposed changes. The submission is unpersuasive. It is premised on Michael Newton being responsible for the loss of his employment in August 2016. I reject that premise for reasons previously addressed.
353 APC is a very large employer and as such its opportunity to provide its employees with ongoing employment is relatively large. I consider Michael Newton's characterisation of APC as a large employer that offered "security and longevity" likely to be accurate. I rely as well on the evidence that, on average, employment at APC lasts 16 years. Furthermore, prior to the termination of his contract, Michael Newton had a record of stability in employment and family and financial responsibilities which suggest that he would be keen to maintain secure employment. Michael Newton struck me as a capable individual, well respected by his colleagues, hard working and the kind of person who would be well placed to enhance the security of his employment. There is nothing out of the ordinary to suggest that as an individual of less than 50 years of age in a managerial role, health or personal considerations would have impeded his ongoing employment through to August of 2020. In the circumstances, I consider that a 20% discount for contingencies should be applied.
The factual
354 Turning then to consider what I have called the "factual scenario", there are known facts and yet unknown factors which need to be considered. At the time of the trial, evidence was received about Michael Newton's earnings and his attempts to secure work.
355 Michael Newton has not been able to secure any full-time work since his employment was terminated by APC on 11 August 2016. Since then he has undertaken paid and unpaid consultancy work for two businesses and has been self-employed as a landscape gardener. He has earnt $22,366 through this work. The calculation of his earnings must also take into account the 3 months' pay provided in lieu of notice by APC.
356 After the Removal decision and fearing that his employment at APC was at risk, Michael Newton first contacted a number of recruitment agencies in February 2016 and had weekly contact with those firms before the termination of the contract. Michael Newton provided the Court with a list of job positions that he had applied for commencing from February 2016 to the date of trial, and deposed that he was still searching for a job. The jobs that Michael Newton applied for were in the workers' compensation, injury management and occupational health and safety fields. The majority of salaries for these positions ranged from $120,000 to $150,000, the lowest salary was $90,000 and the highest was $200,000. Doing the best I can to interpret Michael Newton's comments on the list provided, he applied and was unsuccessful for approximately 31 positions and he made enquiries about approximately 28 other positions. Michael Newton also registered with approximately 15 recruitment agencies. Michael Newton deposed that in applying for positions he was often asked to provide the reason for leaving his position at APC and that he advised that his position was terminated due to not following a reasonable management request. Further, that many potential employers requested references and that he had attempted to secure references from his APC managers but that he did not receive any response to those requests. As at the date of the trial, a number of job applications were still pending.
Mitigation
357 APC was critical of Michael Newton's conduct contending that he failed to mitigate his losses. The legal principles are not in contest. They are helpfully surveyed by Ross J in Whittaker at [169]-[176]. Subject to the reservation that each case must be determined on its own facts, the observations of Ross J were adopted by Nicholson J (with whom Gray and Sulan JJ agreed) at [139]-[140] of Regional Development Australia Murraylands and Riverlands Inc v Smith [2015] SASCFC 160. Those authorities support the following principles:
the general rule is that an applicant is not entitled to recover damages for any loss that has in fact been avoided or could have been avoided by taking reasonable steps;
the question of what steps are reasonable is a question of fact to be determined having regard to the particular circumstances;
there is no onus on an applicant to show it has taken reasonable steps to mitigate loss, rather the onus is on the respondent to show that the applicant did not take reasonable steps and show the extent of the failure to do so;
mitigation does not require an applicant to do what is unreasonable including to do things that present serious risks to the applicant's interests;
in employment cases, personal factors are likely to be of greater weight than in commercial cases; and
it is not unreasonable to refuse an offer of employment where the level of remuneration or status of the position offered is less than that previously enjoyed by the applicant, but with the passage of time, it may be reasonable for the applicant to "lower their sights".
358 APC contended that Michael Newton's attempts to obtain employment are characterised by a lack of reasonableness. That was said to be so because Michael Newton focused almost exclusively on employment in the field of workers' compensation or injury management in circumstances where he has post-graduate qualifications in finance, human resources and industrial relations. In that respect APC contended that Michael Newton had not been prepared to "lower his sights".
359 That criticism must be rejected. The evidence that Michael Newton was prepared to "lower his sights" is manifest. The vast majority of positions that he applied for were positions well below the level of remuneration, and I would infer, level of status, of the position that Michael Newton previously enjoyed. The jobs applied for were in the fields of workers' compensation, injury management and occupational health and safety. Each of those fields are wide and the large number of positions applied for (as well as Michael Newton's registration with approximately 15 recruitment agencies) demonstrated that Michael Newton embarked upon a wide field of enquiry. Despite the fact that the field did not extend to finance, human resources and industrial relations (areas in which Michael Newton has some qualifications but no experience) does not in my view, demonstrate that the field of exploration chosen by Michael Newton was unreasonably narrow and that, in that respect, Michael Newton failed to "lower his sights". In any event, I note that Michael Newton did work outside of his occupational field including by taking on landscaping work. The most cursory of factual comparison with the facts in Riverlands, where the employee there in question was held to have failed to "lower his sights" well demonstrates how far off the mark APC's reliance on Riverlands is. In that case, the former CEO of a regional council only applied for four positions after his contract was repudiated in the 2 years and 4 months subsequent to the termination of his contract and did not lower his sights by applying for positions of a lower status or less remuneration to that which he previously enjoyed.
360 APC also contended that Michael Newton failed to mitigate his losses by refusing alternative positons offered to him by APC in the period after 5 February 2016. As only the MBII position was refused, I assume that the contention was confined to that position, although if reliance was also being made on the MPFS or MFWPA positions my conclusion would be the same. Although I doubt it to be the case, I will assume in favour of APC that a duty to mitigate loss exists at a time when that loss is merely prospective and whether it will eventuate is uncertain. Nevertheless, I reject APC's contention that there was a failure to mitigate by any non-acceptance of either the MBII, MPFS or MFWPA positions. As I have earlier discussed, there was nothing unreasonable in Michael Newton insisting on APC complying with its contractual obligations. Further, the duty to mitigate did not extend to requiring Michael Newton to do things that presented a serious risk to his own interests. Accepting a position that compromised his contractual entitlements would have, in the circumstance, likely to have been seriously adverse to Michael Newton's interests.
The need for updating
361 To return more directly to the assessment of earnings on the factual scenario, it is also necessary to assess Michael Newton's earnings after the trial and through to August 2020. As things currently stand, that assessment could only be made as a matter of judgment and degree on the basis of evidence that was current at the time of the trial. The unfortunate delay between that time and the present is long. It is likely that if the Court was updated with evidence of Michael Newton's earnings and employment circumstances, the Court would be better able to assess with greater surety the quantum of Michael Newton's loss because the assessment will more readily be able to be made on actual rather than assumed facts.
362 I am minded therefore, subject to hearing any objection if there be any, to receive evidence or preferably a statement of agreed facts which deals with Michael Newton's earnings and his employments since trial. It would be better still if on the basis of that updating and my findings, the parties were able to agree the damages and any interest payable under s 51A of the Federal Court of Australia Act 1976 (Cth). A Registrar of the Court can be made available to mediate if that would be of assistance.
363 This course will be facilitated by directions I intend to make.
General Damages
364 Lastly, Michael Newton also claims $50,000 in general damages for pain and suffering. The claim was based on Michael Newton's evidence that he had become withdrawn, had difficulty sleeping and suffered from isolation. I suspect that the claim was made principally in relation to Michael Newton's statutory causes of action which have not succeeded. Nevertheless, the claim for general damages was also made under the contractual claim.
365 The claim must be rejected because Michael Newton is not able to claim damages for distress in relation to his breach of contract claim.
366 The general rule in relation to contractual breaches is that damages for anxiety, disappointment and distress are generally not recoverable, save for certain exceptions: Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 361 (Mason CJ with whom Toohey and Gaudron JJ agreed). The rule in relation to those exceptions was detailed by Mason CJ in Dillon (at 365, with whom Toohey and Gaudron JJ agreed) as follows:
damages for disappointment and distress are not recoverable unless they proceed from physical inconvenience caused by the breach or unless the contract is one the object of which is to provide enjoyment, relaxation or freedom from molestation. In cases falling within the last-mentioned category, the damages flow directly from the breach of contract, the promise being to provide enjoyment, relaxation or freedom from molestation. In these situations the court is not driven to invoke notions such as 'reasonably foreseeable' or 'within the reasonable contemplation of the parties' because the breach results in a failure to provide the promised benefits.
367 It was not the object of the contract to provide Michael Newton peace of mind nor was Michael Newton physically inconvenienced. Even if I were to be satisfied that Michael Newton was distressed and that the distress flowed from the breach of contract, I would nevertheless find that no award for distress could be made. In support of his submission Michael Newton referred to Walker (at [91]), however, in that case the damage for distress was awarded in relation to Mr Walker's statutory claim and not his contractual claim.
conclusion
368 I have rejected all of Michael Newton's statutory claims and, in particular, his claimed contraventions of ss 348, 355 and 340 of the FW Act and associated claims of accessorial liability.
369 Of the two contractual claims made, one (a breach of cl 1.1 of the contract) has succeeded but the other (an asserted breach of cl 10.4 of the contract) has failed.
370 In relation to the contractual claim that has succeeded, I have rejected Michael Newton's claim of general damages for pain and suffering. I have upheld his claim of damages for loss of remuneration. The quantum of that loss is not yet fully assessed and I propose that the Court receive further evidence or an agreed proposal to enable that assessment to be finalised.
371 I will make orders to facilitate that course.
I certify that the preceding three hundred and seventy-one (371) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bromberg.
Associate:
Dated: 23 December 2019
SCHEDULE OF PARTIES
VID 876 of 2017
Respondents
Fourth Respondent: JAMES METCHER
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Gurung v Minister for Immigration and Border Protection [2014] FCA 478
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FEDERAL COURT OF AUSTRALIA
Gurung v Minister for Immigration and Border Protection [2014] FCA 478
Citation: Gurung v Minister for Immigration and Border Protection [2014] FCA 478
Appeal from: Gurung v Minister for Immigration & Anor [2013] FCCA 2009
Parties: CHITRA GURUNG and PRAKASH SUBBA v MINISTER FOR IMMIGRATION AND BORDER PROTECTION and MIGRATION REVIEW TRIBUNAL
File number: NSD 2584 of 2013
Judge: MARSHALL J
Date of judgment: 13 May 2014
Legislation: Migration Act 1958 (Cth) s 116
Migration Regulations 1994 (Cth) reg 2.43, as amended by Migration Legislation Amendment Regulation 2013 (No 1) (Cth)
Cases cited: Jagroop v Minister for Immigration and Border Protection [2013] FCA 1287
Date of hearing: 13 May 2014
Place: Sydney
Division: GENERAL DIVISION
Category: No Catchwords
Number of paragraphs: 27
Counsel for the appellants: JR Young
Solicitor for the appellants: G and S Law Group
Counsel for the first respondent: R Baird
Solicitor for the first respondent: Clayton Utz
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 2584 of 2013
ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA
BETWEEN: CHITRA GURUNG
First Appellant
PRAKASH SUBBA
Second Appellant
AND: MINISTER FOR IMMIGRATION AND BORDER PROTECTION
First Respondent
MIGRATION REVIEW TRIBUNAL
Second Respondent
JUDGE: MARSHALL J
DATE OF ORDER: 13 MAY 2014
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The appeal is dismissed.
2. The appellants pay the first respondent Minister's costs of the appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 2584 of 2013
ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA
BETWEEN: CHITRA GURUNG
First Appellant
PRAKASH SUBBA
Second Appellant
AND: MINISTER FOR IMMIGRATION AND BORDER PROTECTION
First Respondent
MIGRATION REVIEW TRIBUNAL
Second Respondent
JUDGE: MARSHALL J
DATE: 13 MAY 2014
PLACE: SYDNEY
REASONS FOR JUDGMENT
1 At the conclusion of the hearing this morning, the Court announced that it was in a position to pronounce its orders in the appeal. It informed the parties that it would publish its reasons for making those orders at 4.00 pm today. What follows are the Court's reasons for making those orders.
2 This proceeding is an appeal from the judgment of a judge of the Federal Circuit Court which dismissed the appellants' application for judicial review of a decision of the Migration Review Tribunal. The Tribunal had affirmed a decision of the delegate of the first respondent Minister to cancel the first appellant's student visa.
3 The first appellant, Ms Gurung, is a citizen of Nepal. She was enrolled in a Bachelor of Commerce (Accounting) course at the University of Ballarat, commencing on 11 July 2011. On 13 September 2012, the University certified that she had not achieved satisfactory progress in her course. One of the conditions of Ms Gurung's student visa ("Condition 8202") provided that if the education provider certifies that the visa holder is not achieving satisfactory course progress, the visa may be cancelled; see s 116(1) and (3) of the Migration Act 1958 (Cth) ("the Act") and reg 2.43 of the Migration Regulations 1994 (Cth), as amended by the Migration Legislation Amendment Regulation 2013 (No 1) (Cth) ("the Regulations").
4 Prior to cancelling a student visa, the Minister must be satisfied that "the non-compliance was not due to exceptional circumstances beyond the visa holder's control"; see r 2.43(2)(b)(ii).
5 Ms Gurung relied on what she said were the following exceptional circumstances:
her marriage to a person outside her caste and religion without the support of her family;
her brother's depression which caused him to leave Australia;
her grandfather's serious health problems in Nepal, which made it necessary for her to visit him between 10 September and 10 October 2011; and
her mother's illness in mid-May 2012.
6 A delegate of the Minister cancelled Ms Gurung's student visa on 24 October 2012. Ms Gurung, and her spouse Mr Subba, applied to the Tribunal for a merits review of the decision. Mr Subba applied as a member of Ms Gurung's family unit.
7 The Tribunal held that it had jurisdiction to review the delegate's decision concerning Ms Gurung but not concerning Mr Subba. Mr Subba's visa had been automatically cancelled upon the cancellation of Ms Gurung's visa. It was not cancelled as a result of any decision let alone any reasonable one.
8 The sole issue for determination was whether the Tribunal could be satisfied that Ms Gurung's non-compliance with Condition 8202 was not due to exceptional circumstances beyond Ms Gurung's control.
9 The Tribunal, relying on authority, considered that exceptional circumstances were unusual ones or those out of the ordinary, but depended on the context in which those words were used. The Tribunal considered Direction No. 38, which is a relevant guideline for the purpose of considering cancellation of visas for breach of Condition 8202. The Direction is made under s 499 of the Act. The status and relevance of directions made under the section is discussed in Jagroop v Minister for Immigration and Border Protection [2013] FCA 1287 at [82]-[96].
10 Factors relevant to a lack of compliance with Condition 8202 include whether political upheaval or a natural disaster has occurred in the home country of the visa holder and any failings in the recording systems of the education provider. These matters, however, are not exhaustive.
11 The Tribunal considered that Ms Gurung's claim concerning her need to travel to Nepal to visit her grandfather in 2011 for one month was not an exceptional circumstance. It held that it was not unusual or out of the ordinary and that many overseas students have family members at home who are elderly and ill.
12 The Tribunal also observed that the grandfather's condition was not serious and that he was discharged from hospital into the care of his spouse. Ms Gurung decided nevertheless to stay in Nepal an extra three weeks to spend time with her family.
13 The Tribunal next considered Ms Gurung's claims that her academic progress was affected by her mother's health condition, her brother's depression and her parents' opposition to her marriage.
14 As the health condition of Ms Gurung's mother and brother had been longstanding, it did not consider that these were exceptional circumstances in the context of r 2.43(2)(b)(ii). The Tribunal observed that there was no medical evidence produced by Ms Gurung to show that her family members' illnesses had caused her stress.
15 Finally, the Tribunal did not accept that the claimed objection to her marriage by Ms Gurung's family was an exceptional circumstance. It noted that she did not raise this issue at the oral hearing before it.
16 Ms Gurung and Mr Subba sought judicial review of the Tribunal's decision before the Court below. It is difficult to see how Mr Subba was a proper applicant as he did not challenge the decision of the Tribunal that it had no jurisdiction to hear his review application. The grounds of review related solely to Ms Gurung.
17 The primary judge dismissed the application in a somewhat unorthodox fashion. After setting out the statutory context and the relevant factors and reviewing the terms of the decision of the Tribunal, the Court below raised its concern about the Tribunal's concentration on what caused Ms Gurung to be unsuccessful in her examinations in considering what constituted "special circumstances".
18 Ultimately, as to the issue of the grandfather's illness, the Court below was satisfied that it could not interfere with a finding of fact that the illness did not constitute an exceptional circumstance.
19 The Court below considered that the Tribunal did not appear to give consideration to the issue of the grandfather's illness in respect of the reasons for Ms Gurung's unsatisfactory progress in 2012. However, as the Court below observed itself, read as a whole, the Tribunal did address that issue. In its conclusion at [17], the Court below said:
"β¦ the Tribunal was entitled to come to a finding that there was not sufficient evidence to satisfy it that the stress was exceptional, beyond her control and caused non-compliance with Condition 8202."
20 There are aspects of the judgment below which appear to raise issues with matters of expression in the Tribunal's reasons. However, as the Court below indicated at [22], to take these matters further would have caused it to engage in impermissible merits review.
21 On appeal, it is contended by the appellants that the Court below found jurisdictional error at [19] of its reasons by finding that "the Tribunal has conflated the reasons for the stress with the stress itself". At [22] the Court below reveals that on closer analysis and reflection, no such "conflation" occurred. At [22] it said:
A careful reading of [69] would indicate that up to the words "her non compliance with Condition 8202" the Tribunal is considering the stress and it is the stress to which the Tribunal refers in the second sentence. If, as the applicant would argue, the Tribunal is referring to the family's objection to her marriage, there would have been no need to repeat the view in the last sentence. What the Tribunal appears to be saying is that the applicant has not satisfied it because of the limited information provided both as to why the stress constituted an exceptional circumstance and how it caused her non-compliance. For the Court to engage with the Tribunal as to the adequacy of the information provided by the applicant would be to provide the applicant with impermissible merits review.
22 The other appeal grounds repeat matters put before the Court below which seek to impugn factual findings made by the Tribunal.
23 Ground 2 alleges that the primary judge erred by inferring that there was no differentiating factor suggested in the relationship between the first appellant and her grandfather. The first appellant contends that she was very close to her grandfather and that that should have been recognised by the Tribunal as a differentiating factor. The first appellant submits that it was insufficient for the Tribunal to say that many overseas students have elderly and ill family members. However, as the Minister contends, the first appellant did not identify, before the Tribunal, any differentiating factor to explain how her response to her grandfather's illness was exceptional. It is not uncommon or exceptional for grandchildren to be close to their grandparents.
24 Ground 3 takes issue with his Honour's conclusions at [22] of his judgment, which are set out at [20] above. Counsel for the appellants take issue with the approach of the primary judge as to the Tribunal's treatment of the claim concerning the objection of the first appellant's family to her marriage. The important point to consider in current discussion is that the Tribunal made a finding of fact that the objection to the marriage was not an exceptional circumstance. The Tribunal's failure to accept the contrary position did not amount to jurisdictional error.
25 The appellants were represented by lawyers from the afternoon before the appeal. Submissions were filed, out of time, without leave. Those submissions addressed the issues raised above except for Ground 4 of the notice of appeal. That ground contended that his Honour below erred in not finding jurisdictional error. That ground takes the arguments advanced above no further.
26 The respondent Minister filed a notice of contention which deals with an alleged "finding" by the primary judge concerning stress experienced by Ms Gurung, as distinct from the claimed reasons for it, as being capable of being exceptional circumstances. The notice suggests the precise finding the Court below should have made. Given that the appeal did not succeed, it was not necessary to deal with the notice of contention. However, it must be emphasised that it was not the task of the Court below to make factual findings. That was the role of the Tribunal. The Court below had a duty to consider whether the Tribunal's findings gave rise to jurisdictional error.
27 For the foregoing reasons, the appeal was dismissed with costs. It should be observed that the second appellant, Mr Subba, had no standing to be an appellant or indeed an applicant before the Court below as the Tribunal did not deal with any decision concerning him. His visa was cancelled automatically as a consequence of a decision to cancel Ms Gurung's visa.
I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall.
Associate:
Dated: 13 May 2014
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2019/2019fca1296
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2024-09-13T22:46:11.606862+10:00
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FEDERAL COURT OF AUSTRALIA
EJJ18 v Minister for Home Affairs [2019] FCA 1296
Appeal from: EJJ18 v Minister for Home Affairs [2019] FCCA 230
File number: NSD 263 of 2019
Judge: COLVIN J
Date of judgment: 15 August 2019
Catchwords: MIGRATION - appeal from decision of the Federal Circuit Court dismissing application for review of decision of Immigration Assessment Authority affirming delegate's decision not to grant a safe haven enterprise visa to the appellant - where leave sought to raise three new grounds - where no explanation as to why new grounds were not raised before the primary judge - where new grounds without merit - leave to raise new grounds refused - whether the Authority failed to consider the position of the appellant in the future - whether the Authority was bound to consider the position if it was wrong as to the factual findings concerning the appellant - where the Authority made clear findings about the aspects of the claim that were not accepted - appeal dismissed
Legislation: Migration Act 1958 (Cth) s 473DC, 473DD
Cases cited: BZD17 v Minister for Immigration and Border Protection [2018] FCAFC 94; (2018) 263 FCR 292
CDW18 v Minister for Home Affairs [2019] FCA 270
CHZ19 v Minister for Home Affairs [2019] FCA 914
DAO16 v Minister for Immigration and Border Protection [2018] FCAFC 2; (2018) 258 FCR 175
DGZ16 v Minister for Immigration and Border Protection [2018] FCAFC 12; (2018) 258 FCR 551
DPI17 v Minister for Home Affairs [2019] FCAFC 43
Minister for Immigration and Ethnic Affairs v Guo [1997] HCA 22; (1997) 191 CLR 559
Plaintiff M174/2016 v Minister for Immigration and Border Protection [2018] HCA 16
SZGHS v Minister for Immigration and Citizenship [2007] FCA 1572
Date of hearing: 15 August 2019
Registry: New South Wales
Division: General Division
National Practice Area: Administrative and Constitutional Law and Human Rights
Category: Catchwords
Number of paragraphs: 20
Counsel for the Appellant: The Appellant appeared in person with the assistance of an interpreter
Counsel for the First Respondent: Ms S Burnett
Solicitor for the First Respondent: Clayton Utz
Counsel for the Second Respondent: The Second Respondent filed a submitting notice save as to costs
ORDERS
NSD 263 of 2019
BETWEEN: EJJ18
Appellant
AND: MINISTER FOR HOME AFFAIRS
First Respondent
IMMIGRATIONN ASSESSMENT AUTHORITY
Second Respondent
JUDGE: COLVIN J
DATE OF ORDER: 15 AUGUST 2019
THE COURT ORDERS THAT:
1. The appeal is dismissed.
2. The appellant do pay the costs of the first respondent to be assessed if not agreed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
COLVIN J:
1 The appellant's application for a safe haven enterprise visa was refused by a delegate of the Minister in April 2018. A safe haven enterprise visa is a temporary protection visa that is sought by those seeking refugee protection. The appellant claims that he should be granted a visa rather than being returned to Sri Lanka.
2 The refusal of the appellant's visa application was affirmed by the Immigration Assessment Authority on 31 July 2018. The appellant brought an application in the Federal Circuit Court for review on the basis of alleged jurisdictional error. Counsel appeared on his behalf and confined the application to two grounds. The application for review was unsuccessful, and the appellant now brings an appeal in this Court against that decision. The appellant appeared on his own behalf in the appeal.
3 At the outset of the appeal, the appellant made a request for pro bono legal assistance. I indicated that I would consider a referral if a matter was raised in the course of the hearing that indicated a proper basis for a referral for pro bono assistance.
4 The appellant raises five grounds. The first two grounds are, in effect, claims that the primary judge was in error in rejecting each of the two grounds raised in the Federal Circuit Court. The other three grounds seek to raise new matters that were not argued below. Leave is required before those matters could be raised.
5 The appellant raised two matters in the course of oral submissions. First he said that the situation in his country, Sri Lanka, is not good and he has a fear of returning because of the matters raised in his claims that were before the Authority. The assessment of those factual claims was a matter for the Authority and they are not matters that raise a claim of jurisdictional error. Second, he said that he was a Christian and that his family are not at his home in Sri Lanka because they are scared and there are a lot of problems in Sri Lanka. To some extent the claim about problems again raises a factual matter that was a matter for the Authority. However, I note that no claim was raised before the Authority based upon an alleged fear arising from the appellant being a Christian. Rather, the claims made were based on alleged or suspected association with the Liberation Tigers of Tamil Eelam. So the second matter also does not raise a ground of review for jurisdictional error.
6 I dealt with the principles to be applied where leave is sought to raise a new ground of review in an appeal in the context of applications of the present kind in CHZ19 v Minister for Home Affairs [2019] FCA 914 at [31]-[39]. Where there is no adequate explanation for the failure to take the point before the primary judge and it seems to be of doubtful merit, then leave should generally be refused. Otherwise, there is a particular sensitivity in refugee cases where an adverse decision may have very serious consequences that supports the grant of leave. Where a ground has merit then leave is more likely to be granted as being in the interests of justice where it raises a legal argument on the basis of the materials that were before the primary judge.
7 Applying those principles, for the following reasons I refuse leave to raise the proposed new grounds. As to all three new grounds there is no real explanation as to why they were not raised by counsel before the primary judge.
8 Proposed ground 3 seeks to rely upon a report as to the circumstances that prevail in Sri Lanka that was prepared by the UN Rapporteur, Ben Emmerson QC. The report was dated 23 July 2018 so it appears that it was available shortly before the Authority made its decision. The report post-dated the decision of the Minister's delegate. No submission was made before the Authority to the effect that it should be taken into account as new information. It was not relied upon before the primary judge and there is no explanation as to why that was the case. In any event, as the report was not part of the material advanced to the Authority there can be no jurisdictional error arising only from the failure to consider the report. The Authority conducts a review based on the materials that are transmitted to the Authority together with new information received in accordance with the express statutory provisions that exhaustively state the natural justice requirements: DGZ16 v Minister for Immigration and Border Protection [2018] FCAFC 12; (2018) 258 FCR 551 at [69]. No breach of those provisions is alleged by proposed ground 3. I note that the Authority did consider updated country information in the form of a DFAT Country Information Report for Sri Lanka dated 23 May 2018.
9 I have considered whether the complaint made is, in substance, a complaint that it was unreasonable for the authority to proceed without considering whether to exercise its discretion under s 473DC of the Migration Act 1958 (Cth) to get new information that might have encompassed the report of the UN Rapporteur. Review on the basis of unreasonableness for a failure to consider the exercise of the power under s 473DC was upheld recently in DPI17 v Minister for Home Affairs [2019] FCAFC 43. However, the Authority did have regard to updated information in the form of the DFAT Country Information and there is no basis to conclude that the Authority was unreasonable in failing to consider whether to make additional inquiries.
10 In all those circumstances, it is not in the interests of justice to grant leave to raise proposed ground 3.
11 Proposed ground 4 alleges that the Authority erred in applying an unduly narrow understanding of 'exceptional circumstances' when applying s 473DD of the Migration Act. The section provides that the Authority must not consider new information unless, amongst other things, the Authority is satisfied that there are exceptional circumstances to justify considering the new information. The High Court considered the requirement in Plaintiff M174/2016 v Minister for Immigration and Border Protection [2018] HCA 16. To be exceptional, the circumstance must be one that is not regularly, or routinely, or normally encountered: at [30]. The ground provides no details as to any aspect of the decision by the Authority not to receive various documents that reflected any incorrect application or understanding of this aspect of s 473DD. The proposed ground is without merit and for that reason should be refused.
12 Proposed ground 5 alleges that the Authority failed to respond to the appellant's claim of fear of significant harm by reason of being imprisoned in remand detention if returned to Sri Lanka. The ground also alleges that there was a failure to consider, as part of the appellant's claim to complementary protection, the claim that the appellant would be exposed to torture whilst in remand detention if returned to Sri Lanka. These are allegations that claims were not considered. The Authority considered what was likely to happen if the appellant was returned. It found that he would be subject to a process of investigation and, based on the DFAT Information concluded that the process would take several hours and is conducted en masse so individuals cannot exist until all returnees have been processed. These findings amount to a rejection on the basis of within jurisdiction factual findings of any claim that the appellant would be subject to remand detention upon his return. The ground is therefore without merit and leave should be refused.
13 I will now consider the two grounds of review that were rejected by the primary judge and which the appellant says should have been upheld by the primary judge.
14 Ground 1 has two aspects. The first was a claim that the Authority failed to consider the position of the appellant well into the future as was required when evaluating the claim according to the relevant criteria, which involved the application of a 'real chance' test. It may be accepted that the real chance test is forward looking: SZGHS v Minister for Immigration and Citizenship [2007] FCA 1572. It requires a consideration of the reasonably foreseeable future: CDW18 v Minister for Home Affairs [2019] FCA 270 at [14].
15 However, the primary judge was correct to reject this claim. The Authority made an express finding to the effect that it was not satisfied that now or in the foreseeable future the appellant would be imputed with a Tamil pro-separatist profile (para 41). This was the main basis on which the appellant sought protection. The Authority found that there had been a significant change in the situation for Tamils in Sri Lanka since the appellant's departure from Sri Lanka (para 43). It found that the Country Information indicated that there had been a significant shift in the landscape in the recent years since the appellant was last questioned and mistreated in Sri Lanka in 2011 (para 46). As I have noted, the Authority dealt with what was likely to occur if the appellant was returned to Sri Lanka. There was some focus before the primary judge on a particular sentence where the Authority said (para 46) that:
For the reasons given above, I am not satisfied the applicant's ethnicity, his origins in the North, his personal and familial LTTE links, and his public activities in Australia will now give rise to a real chance of harm.
16 The primary judge was correct in finding that the use of the word 'now' in that context was contrasting the position that had pertained when the appellant was last in Sri Lanka and that which applies now (in the sense of presently and for the foreseeable future).
17 The second aspect of ground 1 was a claim that the Authority failed to consider a particular claim about the fluidity of the political and human rights situation in Sri Lanka. The submission made for the appellant to the Authority was, in substance, that the relevant situation in Sri Lanka was 'fluid' and therefore it is important to consider the situation for the applicant into the reasonably foreseeable future. Whilst the Authority did not use the term 'fluid' it did, for reasons I have given, adopt the requisite forward looking perspective. It considered the way matters had changed over time. It has not been demonstrated that there was error by the primary judge in rejecting this second aspect.
18 Ground 2 was a claim that the Authority failed to consider what may be the position if it was wrong as to the factual findings it had made concerning the appellant. The obligation arises because the criteria to be met for the visa sought by the appellant concerns whether there is a real risk that he will suffer significant harm if removed from Australia and returned to Sri Lanka. The nature of the criteria means that the Authority is bound to consider whether there was real doubt as to the matters the subject of its findings where they are the basis for its conclusions as to whether there is a real risk of significant harm. A low risk of harm may still be a real risk of harm. Therefore, a finding as to risk of harm that is not made with some certainty may not be a sufficient basis upon which to reach a conclusion that there was no real risk. If there are any real doubts, then they must be brought to account in evaluating whether there is a real risk: DAO16 v Minister for Immigration and Border Protection [2018] FCAFC 2; (2018) 258 FCR 175 at [36]; BZD17 v Minister for Immigration and Border Protection [2018] FCAFC 94; (2018) 263 FCR 292 at [39]. However, where the decision is reached with apparent confidence, then the Authority is not bound to consider whether its findings might be wrong: Minister for Immigration and Ethnic Affairs v Guo [1997] HCA 22; (1997) 191 CLR 559 at 576.
19 The ground relies upon two respects in which the language used by the Authority was said to indicate that it entertained the possibility that it could be wrong and therefore there was still a risk of harm. At one point, the Authority stated that it had 'concerns' about some aspects of the appellant's claims (para 20). At another it stated that it was 'unconvinced' that the appellant's claims were genuine (para 23). As to the second finding, it is not expressed in language that was uncertain or conditional. As to the first finding, the concerns to which the Authority referred were concerns that the severity of mistreatment had been exaggerated and aspects had been wholly fabricated. However, the Authority then went on to make clear findings as to the aspects that were not accepted, including, for example, express and unqualified findings that claims had been exaggerated and significantly overstated (para 22) and that the Authority was unconvinced that certain claims were genuine (para 23). It is those and other findings that provide the foundation for the conclusions as to the risk of harm and the rejection of any profile that would expose the appellant to being imputed with a Tamil pro-separatist profile. Those findings are not expressed in terms that indicate that there were real doubts entertained by the Authority in determining the factual matters that were advanced to support the claims to protection. It is therefore the rejection of those claims and the consequent conclusion that there was no profile that would expose the appellant to being imputed with a Tamil pro-separatist sympathy that provided the foundation for the conclusions by the Authority. Therefore the primary judge was correct to reject this second ground.
20 It follows that there is no basis for a pro bono referral and the appeal must be dismissed.
I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Colvin.
Associate:
Dated: 15 August 2019
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Strawbridge, in the matter of Animal Supplies (Wholesale) Pty Ltd (in liq) [2021] FCA 566
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2021/2021fca0566
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2024-09-13T22:46:14.102241+10:00
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Federal Court of Australia
Strawbridge, in the matter of Animal Supplies (Wholesale) Pty Ltd (in liq) [2021] FCA 566
File number(s): NSD 466 of 2021
Judgment of: CHEESEMAN J
Date of judgment: 26 May 2021
Date of publication of reasons: 31 May 2021
Catchwords: CORPORATIONS β insolvency - application to appoint joint and several liquidators where existing liquidator's resignation is imminent β uncontested application - replacement of liquidator is appropriate in the circumstances β application granted
Legislation: Corporations Act 2001 (Cth) ss 499(3), 532(2)
Corporations Act 2001 (Cth), Schedule 2βInsolvency Practice Schedule (Corporations), ss 90-15(1)
Cases cited: Re Arresso Consulting Pty Ltd [2019] NSWSC 997
Re Auscabs Payment Solutions Pty Ltd [2017] FCA 1626
Re Equiticorp Australia Ltd (in liq) [2017] NSWSC 1456
Re FGM Print Pty Ltd [2018] NSWSC 1478
Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Number of paragraphs: 14
Date of hearing: 26 May 2021
Date of last submissions: 24 May 2021
Counsel for the Plaintiffs Frank Tao
Solicitor for the Plaintiffs K & L Gates
ORDERS
NSD 466 of 2021
IN THE MATTER OF ANIMAL SUPPLIES (WHOLESALE) PTY LTD (IN LIQUIDATION)
VAUGHAN NEIL STRAWBRIDGE, IS HIS CAPACITY AS THE LIQUIDATOR OF ANIMAL SUPPLIES (WHOLESALE) PTY LTD (IN LIQUIDATION) ACN 058 258 870, AS CONSOLIDATED PTY LIMITED (IN LIQUIDATION) ACN 167 361 604, AUSTRALIAN SUPPLY AND DISTRIBUTION
SOLUTIONS PTY LTD (IN LIQUIDATION) ACN 167 361 775, ACN 094 221 913 PTY LTD (FORMERLY KNOWN AS PET BRANDS CONNECT PTY LTD) (IN LIQUIDATION) ACN 094 221 913, OCEANLINX LIMITED (IN LIQUIDATION) ACN 077 104 404, A.C.N. 052 316 579 PTY. LTD. (FORMERLY KNOWN AS PINNACLE DRILLING PTY LTD) (IN LIQUIDATION) ACN 052 316 579 (FORMERLY KNOWN AS PINNACLE DRILLING PTY LTD), AND RETAIL ADVENTURES PTY LIMITED (IN LIQUIDATION) ACN 135 890 845 (and others named in the schedule)
First Plaintiff
order made by: CHEESEMAN J
DATE OF ORDER: 26 MAY 2021
THE COURT ORDERS THAT:
1. Order pursuant to section 499(3) of the Corporations Act 2001 (Cth), upon the resignation of the First Plaintiff as liquidator of:
(a) Animal Supplies (Wholesale) Pty. Ltd. (in liquidation) ACN 058 258 870;
(b) AS Consolidated Pty Ltd (in liquidation) ACN 167 361 604;
(c) Australian Supply and Distribution Solutions Pty Ltd (in liquidation) ACN 167 361 775;
(d) ACN 094 221 913 Pty Ltd (formerly known as Pet Brands Connect Pty Ltd) (in liquidation) ACN 094 221 913;
(e) Oceanlinx Limited (in liquidation) ACN 077 104 404;
(f) A.C.N. 052 316 579 Pty. Ltd. (formerly known as Pinnacle Drilling Pty Ltd) (in liquidation) ACN 052 316 579; and
(g) Retail Adventures Pty Limited (in liquidation) ACN 135 890 845,
(together, the Companies), the Second and Third Plaintiffs be appointed the joint and several liquidators of each of the Companies.
2. Order that, to the extent necessary, leave be granted pursuant to section 532(2) of the Corporations Act 2001 (Cth), for the replacement of the First Plaintiff with the Second and Third Plaintiffs as joint and several liquidators of the Companies.
3. No order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(REVISED FROM TRANSCRIPT)
CHEESEMAN J:
1 These proceedings concern the replacement of the First Plaintiff, Mr Strawbridge, as the court appointed liquidator to seven companies, each the subject of a creditors' voluntary liquidation, in circumstances where Mr Strawbridge's retirement is imminent and the application is for the Court to appoint the Second and Third Plaintiffs, Messrs Tracy and Marsden, as joint and several liquidators upon Mr Strawbridge's resignation taking effect. The application is made pursuant to s. 499(3) of the Corporations Act 2001 (Cth) (Corporations Act), or alternatively section 90-15(1) of the Insolvency Practice Schedule (Corporations).
2 Each of the plaintiffs is a partner of Deloitte. Deloitte have outstanding claims for remuneration and disbursements against each of the relevant companies in respect of the conduct of the various liquidations to date. Messrs Tracy and Marsden seek leave, so far as it is necessary, pursuant to s. 532(2) of the Corporations Act, to act as joint and several liquidators in these circumstances.
3 For the reasons which follow, I make orders substantially in accordance the plaintiffs' proposed short minutes of order.
4 The application is supported by four affidavits, namely that of Mr Strawbridge of 21 May 2021, Mr Tracy of 21 May 2021, Mr Marsden of 21 May 2021 and Ms Smith, solicitor, of 25 May 2021, which demonstrate the following matters.
5 The Australian Securities and Investments Commission (ASIC) has been informed of the present application. By email dated 24 May 2021, ASIC informed the plaintiffs' solicitors that it does not propose to intervene and expressed the view that the matter is one properly left for the determination by the Court.
6 The seven companies that will be impacted by the resignation of Mr Strawbridge are identified in the opening paragraph of the Originating Process dated 21 May 2021 and filed 24 May 2021. I will refer to them collectively as the Companies.
7 The winding up of each of the Companies is at an advanced stage. All realisations have been completed and final dividends to creditors have been made or will be made shortly. Mr Strawbridge, an experienced liquidator, whose curriculum vitae is in evidence, estimates that the further time required to complete the winding up of each of the Companies, is between one to nine months.
8 In November 2020, Mr Strawbridge tendered his resignation from Deloitte, however, the effective date of his departure of 31 May 2021 was only agreed on 28 April 2021. It is a contractual condition of Mr Strawbridge's departure from Deloitte that he resign as a liquidator of each of the Companies by no later than 31 May 2021. As a registered liquidator, Mr Strawbridge is required to maintain adequate professional indemnity and fidelity insurance, which he has held through Deloitte. After 31 May 2021, Mr Strawbridge will not be covered by Deloitte's insurance. Thus the need to replace Mr Strawbridge as liquidator of the Companies prior to that date.
9 Mr Tracy and Mr Marsden, each a chartered accountant and registered liquidator, have consented to their proposed appointment as joint and several liquidators of the Companies upon Mr Strawbridge's resignation. Their written consents to act and declarations of independence, relevant relationships and indemnities are in evidence. Those confirmations indicate that no independence issues prevent Mr Tracy and Mr Strawbridge's acceptance of the proposed appointments.
10 The Deloitte employees with the day-to-day conduct of the relevant liquidations will continue to work on the liquidations under the supervision of Mr Tracy or Mr Marsden, thereby achieving a cost-effective transition of liquidators.
11 Since tendering his resignation, significant steps have been taken by Mr Strawbridge's staff to minimise the number of companies affected by the present application for replacement of liquidators. As a result of that work, this proceeding concerns only seven companies, rather than a larger number of insolvency appointments involving Mr Strawbridge.
12 In the event that the orders appointing Messrs Tracy and Marsden are not made, the alternative course would require each of the Companies to convene a meeting of creditors at an estimated cost of between $7,500 to $10,000 for each of the Companies in circumstances where three of the Companies have limited funds to meet such costs. By way of contrast, Deloitte agree to bear the costs and expenses associated with the present proceeding.
13 I am satisfied that it is appropriate and in the interests of the creditors of each company to make the order sought under s. 499(3) of the Corporations Act having regard to the following:
(1) the desirability, for reasons of continuity and efficiency, of retaining the appointments within the same firm, upon the resignation of Mr Strawbridge, particularly when Mr Tracy has had some previous involvement in the winding up of the Companies, and there will be some overlap between the staff working on the individual liquidations and Mr Strawbridge will facilitate an efficient transfer: Re Auscabs Payment Solutions Pty Ltd [2017] FCA 1626 at [7] (Yates J).
(2) the advantage going forward of a joint and several appointment in terms of logistics and continuity: Re Equiticorp Australia Ltd (in liq) [2017] NSWSC 1456 at [6] (Black J);
(3) the convenience and cost-effectiveness of the Court making the order to obviate the time and costs associated with arranging for and convening creditors' meetings, particularly when Deloitte will bear the costs of the present application: Re FGM Print Pty Ltd [2018] NSWSC 1478 at [10] (Black J); and
(4) the Companies' liquidations are at an advanced stage and the remaining tasks are generally of an administrative nature.
14 I am also satisfied that it is appropriate, if required, to grant Mr Tracy and Mr Marsden leave, pursuant to s. 532(2) of the Corporations Act, to be appointed as liquidators. Notwithstanding that Deloitte have outstanding claims for remuneration and disbursements exceeding $5,000 against the relevant Companies those claims are due to Deloitte in respect of work done in the various liquidations. Such leave is commonly granted in applications for replacement of liquidators for the reasons cogently expressed by Ward CJ in Equity in Re Arresso Consulting Pty Ltd [2019] NSWSC 997 at [6]-[11].
I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman .
Associate:
Dated: 31 May 2021
SCHEDULE OF PARTIES
NSD 466 of 2021
Plaintiffs
Second Plaintiff JASON MARK TRACY
Third Plaintiff SAM ANDREW MARSDEN
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Commissioner of Taxation v Grimaldi (No. 7) [2009] FCA 768
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2024-09-13T22:46:14.196066+10:00
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FEDERAL COURT OF AUSTRALIA
Commissioner of Taxation v Grimaldi (No. 7) [2009] FCA 768
COMMISSIONER OF TAXATION v PHILLIP GRIMALDI, GARRY BONACCORSO, IFTC BROKING SERVICES LTD and MGG CAPITAL PTY LIMITED AS TRUSTEE FOR WEBTEL MANAGEMENT SUPER FUND
NSD 407 of 2009
GRAHAM J
13 JULY 2009
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
gENERAL DIVISION NSD 407 of 2009
BETWEEN: COMMISSIONER OF TAXATION
Applicant
AND: PHILLIP GRIMALDI
First Respondent
GARRY BONACCORSO
Second Respondent
IFTC BROKING SERVICES LTD
Third Respondent
MGG CAPITAL PTY LIMITED AS TRUSTEE FOR WEBTEL MANAGEMENT SUPER FUND
Fourth Respondent
JUDGE: GRAHAM J
DATE OF ORDER: 13 JULY 2009
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The application for a stay of proceedings for recovery of monies due under the judgment given on 13 July 2009 against the first respondent be dismissed.
2. The application for a stay of proceedings for recovery of monies due under the judgment given on 13 July 2009 against the second respondent be dismissed.
3. The first respondent pay the costs of his application for a stay.
4. The second respondent pay the costs of his application for a stay.
5. The proceedings as against the fourth respondent stand over for directions at 9 am on Monday 3 August 2009.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
general division NSD 407 of 2009
BETWEEN: COMMISSIONER OF TAXATION
Applicant
AND: PHILLIP GRIMALDI
First Respondent
GARRY BONACCORSO
Second Respondent
IFTC BROKING SERVICES LTD
Third Respondent
MGG CAPITAL PTY LIMITED AS TRUSTEE FOR WEBTEL MANAGEMENT SUPER FUND
Fourth Respondent
JUDGE: GRAHAM J
DATE: 13 JULY 2009
PLACE: SYDNEY
REASONS FOR JUDGMENT
1 Earlier today judgments were given for the applicant against each of the first and second respondents in accordance with s 31A of the Federal Court of Australia Act 1976 (Cth). The judgment against the first respondent was for $36,341,461.73 and the judgment against the second respondent was for $3,552,577.81. In each case an application has been made for a stay of execution pending the resolution of other issues in relation to tax liability.
2 In Deputy Commissioner of Taxation v Warrick (No 2) (2004) 56 ATR 371 ('Warrick (No 2)'), French J, as his Honour then was, dealt with a generally similar application to those presently made by the first and second respondents. His Honour ordered, amongst other things, that there be judgment for the Deputy Commissioner of Taxation in that case, in the sum of $1,429,791.03, together with further general interest charges to be assessed. His Honour stayed the execution of the judgment until 28 January 2005, or such earlier date as may be ordered. That stay was ordered by His Honour on 13 July 2004; that is to say, he stayed the execution of the judgment for a period of a little over 6 months, subject to an earlier order shortening the period.
3 In his reasons for judgment at [105], his Honour set out factors relevant to the question of whether or not a stay of recovery proceedings should be ordered, which he drew from his judgment in Snow v Deputy Commissioner of Taxation (1987) 14 FCR 199. The relevant factors were as follows:
'1. The policy of the ITAA 1936 as reflected in its provisions gives priority to recovery of the revenue against the determination of the taxpayer's appeal against his assessment.
2. The power to grant a stay is therefore exercised sparingly and the onus is on the taxpayer to justify it.
3. The merits of the taxpayer's appeal constitute a factor to be taken into account in the exercise of the discretion.
4. Irrespective of the legal merits of the appeal a stay will not usually be granted where the taxpayer is party to a contrivance to avoid his liability to payment of the tax.
5. A stay may be granted in the case of abuse of office by the Commissioner or extreme personal hardship to the taxpayer called on to pay.
6. The mere imposition of the obligation to pay does not constitute hardship.
7. The existence of a request for reference of an objection for review or appeal is a factor relevant to the exercise of the discretion.'
4 Earlier today, in giving my reasons for judgment referable to the judgments mentioned earlier [see Commissioner of Taxation v Grimaldi (No. 5) [2009] FCA 765], I referred to passages from the judgment of Brennan J, as his Honour then was, in Deputy Commissioner of Taxation of the Commonwealth of Australia v Richard Walter Proprietary Limited (1995) 183 CLR 168 ('Richard Walter') at pages 201-202. As his Honour observed, as, indeed, did Dixon J, as his Honour then was, in Richardson v Federal Commissioner of Taxation (1932) 48 CLR 192 at 207, the coexistence of tax liabilities in two or more taxpayers in respect of the same income is attended with difficulty. Sometimes the difficulty will be removed by the objection, review and appeal procedures, where the taxpayer will establish the facts in order to establish that the assessment is excessive.
5 His Honour also observed that the appropriateness of alternative assessment to tax of two taxpayers in respect of the same item of income was recognised in a dictum of the High Court in Deputy Commissioner of Taxation v Moorebank Proprietary Limited (1988) 165 CLR 55 at 67. The courts, if not the Commissioner, can diminish the difficulty of concurrent assessments by ensuring that there is no double recovery of tax (see per Brennan J in Richard Walter at 201-202).
6 This is not a case of the coexistence of tax liabilities in two or more taxpayers in respect of the same income, although it is arguably the case that that would occur if a like judgment was entered against the fourth respondent as has been given against the first respondent. Sections 14ZZM and 14ZZR of the Taxation Administration Act 1953 (Cth) make it clear that recovery should not be delayed by outstanding decisions on applications for review or appeal. Section 14ZZM provides:
'The fact that a review is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no review were pending.'
A like provision in relation to an appeal to this court is to be found in s 14ZZR.
7 In Deputy Federal Commissioner of Taxation v Mackey (1982) 64 FLR 432, the Court of Appeal in New South Wales considered an application for leave to appeal, and if leave was granted, an appeal from an order of the primary judge in that matter (Deputy Federal Commissioner of Taxation v Mackey (1982) 82 ATC 4540) staying proceedings in respect of a claim for the recovery of tax assessed in respect of the year ended 30 June 1978 and interest, together with a small additional sum which constituted a penalty.
8 In that case Hutley JA said in his reasons for judgment at 437-438:
'β¦ there are only two cases where it is clear the court should exercise that [special] discretion. First, the comparatively rare case where the Commissioner abuses his position β¦ Second, in cases of extreme personal hardship to a taxpayer called upon to pay. The obligation to pay which has been cast upon him by law is not a hardship of itself and the mitigation of the effect of inflation and the burden of interest is a matter for the legislature, not for the court.'
9 At this stage no evidence has been tendered in support of the application for a stay to suggest any impecuniosity on the part of either of the first or second respondents. Whilst their assets may be affected by freezing orders there is no suggestion of extreme personal hardship founded upon the evidence which is presently before the Court. Neither of the judgment amounts has been paid pursuant to the assessments which have provided the basis for the judgments as given, nor has any part thereof been paid. In the case of the first respondent reference has been made to a decision of the Commissioner in his role as superannuation regulator that the fund of which the fourth respondent is trustee has been found to be non-compliant in the 2006 income year.
10 In such circumstances there is a possibility that the current assessments directed at the fourth respondent will be replaced by further amended assessments calling for the payment of a greater amount of tax. The suggestion is put by the first respondent that if the fourth respondent is subjected to a liability to tax then it may be inferred that any liability of the first respondent will abate accordingly. This does not necessarily follow.
11 It does not seem to me that this is a case where a stay of proceedings in respect of the recovery of the judgment sum should be ordered in relation to the first respondent on the evidence presently before the court having regard to the principles enunciated by French J in Warrick (No 2) and the terms of the relevant sections in the Taxation Administration Act.
12 In relation to the second respondent reliance is placed upon the fact that objections were lodged as recently as Friday, 10 July - that is to say, three days ago - which are awaiting objection decisions from the applicant. The suggestion is that there should be a stay pending the determination of those objections and, if they are brought, applications for review or appeals referrable to objection decisions that may be anticipated in due course. Warrick (No 2) was an unusual case in that objections had been lodged and a lengthy period of time had elapsed within which the Commissioner had failed to determine the objections. His Honour seems to have been influenced by the fact that a reasonable amount of time needed to be allowed for the Commissioner to make determinations or be deemed to have made a determination refusing the objections and a period within which a review process could then be instituted.
13 The second respondent's case for a stay presently before me does not, in my view, pass the test enunciated by French J in Warrick (No 2). Reference has also been made to an advice upon which it is said that the second respondent acted. There is no evidence that the advice was sought by and given to the second respondent nor is there any evidence that the second respondent acted strictly in accordance with the advice in conducting his affairs as he did. In my opinion, neither basis for a stay advanced by the second respondent has been made good.
I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham.
Associate:
Dated: 17 July 2009
Counsel for the Applicant: D B McGovern SC and A J O'Brien
Solicitor for the Applicant: Australian Government Solicitor
Counsel for the First and Fourth Respondents: B W Rayment QC, H R Sorensen and A G Diethelm
Solicitor for the First and Fourth Respondents: M J Woods & Co
Counsel for the Second Respondent: D E Baran
Solicitor for the Second Respondent: Michael Abboud & Co
Dates of Hearing: 13 July 2009
Date of Judgment: 13 July 2009
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Warner v Hung, in the matter of Bellpac Pty Limited (Receivers and Managers Appointed) (In Liquidation) (No 2) [2011] FCA 1123
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2011/2011fca1123
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FEDERAL COURT OF AUSTRALIA
Warner v Hung, in the matter of Bellpac Pty Limited (Receivers and Managers Appointed) (In Liquidation) (No 2) [2011] FCA 1123
Citation: Warner v Hung, in the matter of Bellpac Pty Limited (Receivers and Managers Appointed) (In Liquidation) (No 2) [2011] FCA 1123
Parties: ANTHONY JOHN WARNER AND STEVEN KUGEL IN THEIR CAPACITIES AS JOINT AND SEVERAL LIQUIDATORS OF BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017 and BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017 v KEN YUK KEE HUNG, AUSTCORP INTERNATIONAL LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 003 132 090, ALFRED CHI WAI WONG, DANNY KAM YUN AU-YEUNG and SHAN PEI INVESTMENT LIMITED
File number(s): NSD 34 of 2010
Judge: EMMETT J
Date of judgment: 30 September 2011
Catchwords: EQUITY β contested beneficial ownership of convertible bonds issued to a company β where liquidators sought declaratory relief against a defendant who was in possession of bond certificates and executed transfers, and who sought to become the registered holder of the bonds β whether an alleged series of undocumented assignments of equitable interest in the bonds was effective β whether the alleged assignments were made for valuable consideration
EQUITY β effect of the Conveyancing Act 1919 (NSW) on alleged assignments of the equitable interest in the bonds β whether s 23C(1)(c) was required to be complied with in order for the alleged assignments to be effective β whether s 23C(1)(c) applies to equitable dispositions of personalty
EVIDENCE β onus of proof β whether plaintiffs, as parties seeking declaratory relief and as the only parties seeking relief at all, bore the onus of disproving the chain of alleged assignments contended for by the defendants β whether defendants' allegations constituted denials of essential ingredient in the plaintiffs' cause of action or a defence of a prima facie claim β whether company's registration as bondholder gave rise to a presumption of equitable ownership β whether possession of bond certificates and transfers gave rise to competing presumption of equitable ownership
CORPORATIONS β whether company's alleged equitable assignment of the bonds was an insolvent, uncommercial or unreasonable director-related transaction within the meaning of the Corporations Act 2001 (Cth) β whether transaction voidable β whether s 588FG available as a defence β degree to which the chain of alleged assignments could be regarded as a single transaction of the company β whether alleged equitable assignment of the bonds involved breach of directorial and fiduciary duties
Legislation: Competition and Consumer Act 2010 (Cth) s 50
Conveyancing Act 1919 (NSW) ss 12, 23C, 23E
Corporations Act 2001 (Cth) ss 180, 181, 182, 588FB, 588FC, 588FDA, 588FE, 588FF, 588FG
Evidence Act 1995 (Cth) s 140
Cases cited: Adamson v Hayes (1973) 130 CLR 276
Australian Gas Light v Australian Competition and Consumer Commission (No 3) (2003) 137 FCR 317
Australian Kitchen Industries Pty Ltd v Albarran (2004) 51 ACSR 604
Baloglow v Konstantinidis [2001] NSWCA 451
Blanch v British American Tobacco Australia Services Ltd (2005) 62 NSWLR 653
Briginshaw v Briginshaw (1938) 60 CLR 336
Currie v Dempsey (1967) 69 SR (NSW) 116
Cussen v Sultan (2009) 74 ACSR 496
Grey v IRC [1960] AC 1
Jones v Dunkel (1959) 101 CLR 298
Kalls Enterprises Pty Ltd v Baloglow (2006) 58 ACSR 63
Massoud v NRMA Insurance Ltd (1995) 62 NSWLR 657
Peter Pan Management Pty Ltd v Capital Finance Corp (Aust) Pty Ltd (2001) 19 ACLC 1392
Powell v Fryer (2001) 37 ACSR 589
PT Ltd v Maradona Pty Ltd (No 2) (1992) 27 NSWLR 241
Russell v Wilson (1923) 33 CLR 538
Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Date of hearing: 16 and 17 August, 11, 12 and 13 October, 9 December 2010; 15 February, 4 and 5 April 2011
Date of last submissions: 9 June 2011
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 226
Counsel for the plaintiffs: N Cotman SC, SA Wells
Solicitor for the plaintiffs: Breene & Breene
Counsel for the first and second defendants: JE Lazarus
Solicitor for the first and second defendants: JT Law
Counsel for the third defendant: The third defendant was represented by the same counsel and solicitors as the fourth defendant until 16 September 2010; thereafter the third defendant appeared in person
Counsel for the fourth defendant: F Lever SC, LV Gyles SC, P Cutler
Solicitor for the fourth defendant: Willis & Bowring
Counsel for the fifth defendant: The fifth defendant was represented by the same counsel and solicitors as the fourth defendant until 16 September 2010; thereafter the fifth defendant did not appear
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 34 of 2010
IN THE MATTER OF BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017
BETWEEN: ANTHONY JOHN WARNER AND STEVEN KUGEL IN THEIR CAPACITIES AS JOINT AND SEVERAL LIQUIDATORS OF BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017
First Plaintiffs
BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017
Second Plaintiff
AND: KEN YUK KEE HUNG
First Defendant
AUSTCORP INTERNATIONAL LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 003 132 090
Second Defendant
ALFRED CHI WAI WONG
Third Defendant
DANNY KAM YUN AU-YEUNG
Fourth Defendant
SHAN PEI INVESTMENT LIMITED
Fifth Defendant
JUDGE: EMMETT J
DATE OF ORDER: 30 SEPTEMBER 2011
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. No later than 14 October 2011, the plaintiffs provide the Court with short minutes of orders required to give effect to these reasons.
2. No later than 28 October 2011, the defendants notify the plaintiffs and the Court of any objections to the proposed orders.
3. No later than 14 October 2011, each party make such written submissions as he or it may be advised as to the costs of the proceeding.
4. No later than 28 October 2011, each party make such written submissions in response as he or it may be advised as to the costs of the proceeding.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 34 of 2010
IN THE MATTER OF BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017
BETWEEN: ANTHONY JOHN WARNER AND STEVEN KUGEL IN THEIR CAPACITIES AS JOINT AND SEVERAL LIQUIDATORS OF BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017
First Plaintiffs
BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017
Second Plaintiff
AND: KEN YUK KEE HUNG
First Defendant
AUSTCORP INTERNATIONAL LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 003 132 090
Second Defendant
ALFRED CHI WAI WONG
Third Defendant
DANNY KAM YUN AU-YEUNG
Fourth Defendant
SHAN PEI INVESTMENT LIMITED
Fifth Defendant
JUDGE: EMMETT J
DATE: 30 SEPTEMBER 2011
PLACE: SYDNEY
REASONS FOR JUDGMENT
INTRODUCTION [1]
RELEVANT FACTUAL BACKGROUND [4]
The Bellpac Indebtedness [8]
The Convertible Bonds [22]
THE PROCEEDING [30]
The Issues [36]
The Onus [46]
ARRANGEMENTS INVOLVING SHAN PEI [57]
The Witnesses [62]
The Accounting Records [84]
Ownership of the Bellpac Indebtedness [100]
Assignment of Convertible Bonds in Reduction of the Bellpac Indebtedness [116]
Assignment by Shan Pei to Alfred Wong [120]
Operation of the Conveyancing Act [123]
Conclusion as to the Shan Pei Transactions [140]
ARRANGEMENTS INVOLVING ALFRED WONG, AUSTCORP AND KEN HUNG [145]
Alfred Wong and Austcorp [146]
Austcorp and Ken Hung [152]
Conclusion as to Subsequent Assignments [159]
THE ALTERNATIVE CASES [160]
Uncommercial, Insolvent or Unreasonable Director-Related Transaction [161]
Breach of Duty by Directors [181]
Good Faith Defences [191]
Consent of Secured Creditors [217]
CONCLUSION [223]
INTRODUCTION
1 This proceeding is concerned with the beneficial ownership of convertible bonds having a face value of $2,000,000. The convertible bonds were issued by Gujarat NRE Minerals Limited (Gujarat) to the second plaintiff, Bellpac Pty Limited (Bellpac), and are registered in the name of Bellpac. However, the first defendant, Mr Ken Hung, claims to be the beneficial owner of the convertible bonds by reason of a series of transactions said to have been entered into in 2008 and 2009. He has asked Gujarat to register him as the holder of the convertible bonds, having presented certificates in respect of the convertible bonds, together with transfers purportedly signed on behalf of Bellpac (the Impugned Transfers).
2 On 30 July 2009, the first plaintiffs, Messrs Anthony Warner and Steven Kugel (the Liquidators), were appointed as administrators of Bellpac. On 3 September 2009, they were appointed as liquidators of Bellpac. The Liquidators and Bellpac seek a declaration that Bellpac is the true owner of the convertible bonds, and an order that Ken Hung deliver up the transfers and certificates purporting to vest in him the beneficial ownership of the bonds. They assert that certain of the alleged transactions relied on by Ken Hung to divest Bellpac of beneficial ownership of the convertible bonds were ineffective. The transactions impugned by the Liquidators and Bellpac (the Impugned Transactions) were dealings involving Bellpac, Compromise Creditors Management Pty Limited (Compromise Creditors), Shan Pei Investment Limited (Shan Pei), Mr Alfred Wong, Austcorp International Limited (Austcorp), and Ken Hung.
3 In the alternative, the Liquidators and Bellpac say that certain of the Impugned Transactions, if they were effective, should be declared to be void or be set aside. The claim for avoidance of certain of the Impugned Transactions rests primarily on various provisions of the Corporations Act 2001 (Cth) (the Corporations Act), including provisions relating to directors' fiduciary obligations, uncommercial transactions, insolvent transactions, and unreasonable director-related transactions. The Liquidators and Bellpac also rely on provisions of the Conveyancing Act 1919 (NSW) (the Conveyancing Act), as well as on the general law of fiduciary obligations and the law of constructive trusts.
RELEVANT FACTUAL BACKGROUND
4 Alfred Wong is the founder of a group of companies known as the Great Pacific Financial Group. The group consists of various private companies owned by him and members of his family. Mr Wong is a director of Great Pacific Capital Limited (GPC), a public listed company. Subsidiaries of GPC include GPC Finance Pty Limited (GPC Finance), GPC No 8 (Bulli) Pty Limited (GPC No 8), GPC No 11 Pty Limited (GPC No 11), and GPC No 12 Pty Limited (GPC No 12). Bellpac is a wholly owned subsidiary of GPC No 8.
5 At relevant times, Alfred Wong was a director of Bellpac. He was also a director of GPC Finance, GPC No 8, GPC No 11, and GPC No 12.
6 From 11 May 2001 to 15 March 2010, the fourth defendant, Mr Danny Au-Yeung, was also a director of GPC, GPC Finance and each of GPC No 8, GPC No 11 and GPC No 12, and was chief executive officer of those companies. In that capacity, he was responsible for managing, and dealing with, the creditors of GPC and its subsidiaries. Danny Au-Yeung was a director of Bellpac from 23 April 2004 onward, and was also chief executive officer of Bellpac until early 2007. After he retired from his position as chief executive officer of Bellpac, Danny Au-Yeung remained as a director of Bellpac.
7 Before dealing with the issues raised in the proceeding, I shall say something about certain indebtedness of Bellpac (the Bellpac Indebtedness). Reduction of the Bellpac Indebtedness is asserted to form the consideration for one of the Impugned Transactions. I shall also say something about the issue of the convertible bonds and the subsequent alleged dealings with them.
The Bellpac Indebtedness
8 On 21 March 2003, Bellpac, which was at that time known as GPC Bellambi Pty Limited, acquired assets associated with a coal mine near Wollongong, New South Wales (the Mine). Bellpac's purchase of the Mine was financed by a number of loans. One of the loans, which was secured by first charge and mortgage over various assets of Bellpac, including the land and leases that constituted the Mine, was made by LM Investment Management Limited (LM Investment), through its custodian, Permanent Trustee Australia Limited.
9 Bellpac was also lent $9,000,000 by Ace Bond Capital Limited (Ace Bond) pursuant to a deed of loan dated 21 March 2003 (the Deed of Loan). Ace Bond entered into the Deed of Loan as trustee for GPC No 8, GPC No 11 and GPC No 12 (the GPC Subsidiaries), each of which apparently advanced part of the principal of the loan made to Bellpac by Ace Bond. The loan from Ace Bond under the Deed of Loan gave rise to the original Bellpac Indebtedness. By clause 6 of the Deed of Loan, the Bellpac Indebtedness was to be repaid no later than 20 March 2005. The Bellpac Indebtedness was secured by a fixed and floating charge over the assets of Bellpac, and a mortgage over the land and mining leases that constituted the Mine. That charge was inferior, in terms of priority, to the security held by LM Investment.
10 On 29 September 2004, by deed of transfer and acknowledgment (the Deed of Transfer), Ace Bond transferred its right, title and interest in and under the Deed of Loan, including the Bellpac Indebtedness, to the GPC Subsidiaries as tenants in common, in shares that were apparently equal to the amounts of principal respectively advanced by them. The effect of the Deed of Transfer was that the Bellpac Indebtedness became owing to the GPC Subsidiaries in those shares. By deed of variation of 14 July 2005, made between Bellpac and the GPC Subsidiaries, the date for repayment of the Bellpac Indebtedness was extended to 13 July 2008 and the amount of the Bellpac Indebtedness was increased to approximately $22.4 million.
11 In July or August 2007, a deed of compromise (the Deed of Compromise) was executed by Compromise Creditors, Bellpac, GPC, GPC Finance, the GPC Subsidiaries and five other creditors of GPC and GPC Finance (the GPC Creditors). The GPC Creditors and the debts owing to them were described in schedule 1 to the Deed of Compromise. The Deed of Compromise recited that GPC and GPC Finance were indebted to the GPC Creditors and that the GPC Creditors had agreed to compromise their rights in relation to that indebtedness. The GPC Creditors and the debts owing to them, as shown in schedule 1 to the Deed of Compromise, were as follows:
Burnaby Investment Pty Limited (Burnaby) $1,179,897.29
Shan Pei $1,671,855.10
Pioneer States Investment Limited (Pioneer) $323,757.64
Mr Hollis Ho $217,938.33
Sausalito (Nominees) Pty Limited (Sausalito) $2,997,198.62
The debts of the GPC Creditors amounted to $6,390,646.98 in total. While there is some evidence before the Court concerning Shan Pei and Hollis Ho, there is no evidence concerning Burnaby, Pioneer or Sausalito.
12 The pivotal provisions of the Deed of Compromise were clauses 4, 5 and 6. By clause 4, the GPC Creditors released and discharged GPC and GPC Finance from all liability with respect to the debts owing to them. By clause 5, the GPC Subsidiaries assigned to Compromise Creditors all right, title and benefit in and to the Bellpac Indebtedness. By clause 6, Bellpac acknowledged that the Bellpac Indebtedness, together with interest and other fees payable under the Deed of Loan, was owed to Compromise Creditors. The amount of the Bellpac Indebtedness was not specified in the Deed of Compromise. Clauses 4, 5 and 6 of the Deed of Compromise were conditional upon members of GPC in general meeting approving the transactions that were the subject of the Deed of Compromise.
13 The Deed of Compromise stated that Compromise Creditors entered into it as trustee of a trust (the GPC Creditors Trust) constituted by a deed dated 16 July 2007 (the Compromise Trust Deed) made between Fuwin No 2 Pty Limited (Fuwin) and Compromise Creditors. By the Compromise Trust Deed, Compromise Creditors acknowledged receipt of the sum of $100 from Fuwin, which entitled Fuwin to be entered into the register of unit holders under the Compromise Creditors Trust as the holder of 100 units. Compromise Creditors agreed that it held the initial sum of $100, and all other moneys paid to it in respect of the issue of units, on the trusts of the Compromise Trust Deed. By clause 3, the beneficial interest in the trust fund of the GPC Creditors Trust, as existing from time to time, was vested in the unit holders for the time being, and, if more than one unit holder existed, in proportion to the number of units each held. However, clause 3 provided that a unit did not entitle the holder of the unit to any particular asset comprised in, or any particular part of, the trust fund. By clause 4, Compromise Creditors was empowered to create and issue additional units to such persons as it might determine. Clause 5 of the Compromise Trust Deed required Compromise Creditors to maintain an up-to-date register of the unit holders.
14 A document purporting to be the unit register of the GPC Creditors Trust was admitted into evidence. The document records that 100 units were issued to Fuwin on 16 July 2007, and that those units were cancelled on 18 July 2007. On the same day, 100 units were issued to Shan Pei. The unit register contains a notation that the certificate issued to Fuwin was cancelled in accordance with notification of an assignment from Fuwin to Shan Pei and that the certificate was replaced in accordance with that assignment notification. No party drew attention to any other evidence concerning the owner of units in the GPC Creditors Trust.
15 As contemplated by the Deed of Compromise, an extraordinary general meeting of the members of GPC was convened by GPC. The meeting was convened for 9 November 2007 by notice dated 9 October 2007. The business of the meeting was to consider two resolutions, as follows:
β’ that GPC, for itself and the GPC Subsidiaries and GPC Finance, be authorised to complete and give effect to the Deed of Compromise; and
β’ that GPC be authorised to issue and allot 29,327,944 fully paid ordinary shares to Shan Pei to satisfy debts of $2,639,515 owed by GPC to Shan Pei.
An explanatory memorandum attached to the notice of meeting provided further information in relation to each of the two resolutions.
16 In relation to the first resolution, the explanatory memorandum stated that, under the Deed of Compromise, the GPC Subsidiaries were to assign to the GPC Creditors all right, title and benefit in and to their entitlements to the Bellpac Indebtedness, in consideration for which the GPC Creditors would release GPC and GPC Finance from liability with respect to the debts due to them. The explanatory memorandum also stated that all of the directors of GPC, consisting of Alfred Wong, Danny Au-Yeung and Mr Ivan Wong, Alfred Wong's brother, considered that the proposal was in the best interests of the shareholders of GPC and recommended that the shareholders vote in favour of the first resolution. The explanatory memorandum stated that no directors had any interest in the passing of the first resolution, other than in their capacity as shareholders of GPC.
17 In relation to the second resolution, the explanatory memorandum stated that Fuwin had provided to GPC an unsecured loan totalling $1,993,599 and that, by deed of assignment dated 18 July 2007, Fuwin had assigned that unsecured loan to Shan Pei. The explanatory memorandum said that Shan Pei intended to work with GPC's existing directors and management to develop GPC's business and therefore had agreed to convert the existing debt, together with interest accrued of $645,916, into equity in GPC. The explanatory memorandum stated that Shan Pei was an investment company registered in Anguilla, British West Indies, that its sole director was Mr Siu Kai Ng, that its issued capital was one fully paid ordinary share and that the sole shareholder was Siu Kai Ng. Siu Kai Ng is known as Eric Ng.
18 The deed of assignment of loan of 18 July 2007 between Fuwin and Shan Pei, which is referred to in the explanatory memorandum, is in evidence. The deed of assignment of loan states that the assignment was made in consideration of the payment of $150,000 by Shan Pei to Fuwin.
19 The relationship between Shan Pei, the other GPC Creditors and the record of unit holdings in the GPC Creditors Trust is not satisfactorily explained by the evidence in the proceeding. Thus, there is no evidence to indicate whether, and in what circumstances, Compromise Creditors held the benefit of the Bellpac Indebtedness on trust for all five of the GPC Creditors, or on trust for Shan Pei alone. The natural inference to be drawn from the terms of the Deed of Compromise is that Compromise Creditors held the Bellpac Indebtedness on trust for the five GPC Creditors in the proportions that their respective debts, as stated in schedule 1 to the Deed of Compromise, bear to each other. However, as I have said, the unit register of the GPC Creditors Trust records Shan Pei as the only unit holder.
20 Likewise, the relationship, if any, between the deed of assignment of loan of 18 July 2007, on the one hand, and the transfer of units in the GPC Creditors Trust, on the other hand, is quite obscure. Still more obscure is the relationship, if any, between the transfer of units in the GPC Creditors Trust and any entitlement to the Bellpac Indebtedness. I consider that it is more likely than not that the transfer of units was connected in some way with the deed of 18 July 2007, rather than with any entitlement of Shan Pei to the Bellpac Indebtedness.
21 As will appear below, those questions are of some importance to the proceeding. Ken Hung and Austcorp contend that Shan Pei, pursuant to an agreement with Compromise Creditors, became exclusively entitled to the Bellpac Indebtedness in September 2007. That entitlement underpins the chain of transactions upon which Ken Hung relies in his assertion of beneficial ownership of the convertible bonds.
The Convertible Bonds
22 Bellpac sold assets associated with the Mine to Gujarat. On 3 December 2004, Bellpac and Gujarat entered into a remediation licence deed (the Remediation Deed) in connection with that sale. In late 2006 a dispute arose between Bellpac and Gujarat concerning Gujarat's obligations under the Remediation Deed. The disputes became the subject of proceedings in the Supreme Court of New South Wales and the Warden's Court of New South Wales.
23 Bellpac and Gujarat settled the dispute concerning Gujarat's remediation obligations, and a deed of settlement was executed on 12 September 2007 (the 2007 Settlement Deed). However, the terms of the 2007 Settlement Deed were not acceptable to LM Investment, in its capacity as chargee and mortgagee. Accordingly, negotiations for new terms of settlement were undertaken. The negotiators included Alfred Wong on behalf of Bellpac, and the executive chairman of Gujarat, Arun Kumar Jagatramka.
24 Mr Eduard Alcordo is a director of First Pacific Capital Underwriters Pty Limited, which he describes as a boutique financial services company. Mr Alcordo has known Alfred Wong for approximately ten years, during which time Alfred Wong has been Mr Alcordo's client in respect of a number of projects. In April 2008, Alfred Wong sought Mr Alcordo's advice in respect of the complex settlement negotiations that were taking place. The negotiations involved, among other things, the prospective issue of convertible bonds by Gujarat. Alfred Wong asked for Mr Alcordo's professional opinion as to what would make such convertible bonds marketable.
25 On 1 May 2008, Mr Alcordo attended a meeting at Alfred Wong's office with Alfred Wong, together with representatives of Gujarat and representatives of LM Investment. The purpose of the meeting was to discuss the proposed new terms of settlement of the dispute between Bellpac and Gujarat. Mr Alcordo said that Alfred Wong said to those attending the meeting that Bellpac would apply the convertible bonds proposed to be issued by Gujarat to reduce other secured creditors' debts ranking behind the debt owed to LM Investment. Mr Alcordo said that, after some discussion of the terms of settlement outlined by Alfred Wong, the representatives of LM Investment expressed support in principle for the proposal.
26 On 23 July 2008, a restated settlement deed (the 2008 Settlement Deed) was entered into by Bellpac and Gujarat. By the 2008 Settlement Deed, the parties settled the disputes arising out of the Remediation Deed. Clause 2.1 of the 2008 Settlement Deed provided for a payment of $1,000,000 in cash by Gujarat to or to the order of Bellpac. By clause 2.2, Gujarat agreed to issue in favour of Bellpac, and deliver to Bellpac, certificates in respect of convertible bonds evidencing a debt totalling $10,000,000. The delivery of convertible bonds and the payment of $1,000,000 were in consideration of the surrender by Bellpac of rights to receive royalty payments from Gujarat.
27 On 5 August 2008, Gujarat issued $10,000,000 of convertible bonds to Bellpac pursuant to the 2008 Settlement Deed. The convertible bonds were in denominations of $50,000. The terms and conditions of issue of the convertible bonds included a provision that the holder would have the right to convert the bonds into fully paid ordinary shares in the capital of Gujarat at any time during the months of July and January, on or after 1 July 2011. The conversion price was to be determined in accordance with a formula stated in the terms and conditions. The shares issued to a holder upon conversion were to be held in escrow for six months, after which time Gujarat was to apply to list the shares. The convertible bonds were to mature on 1 July 2028 unless previously redeemed, converted or purchased and cancelled.
28 The terms and conditions on which the convertible bonds were issued also included a provision that title to a convertible bond was vested absolutely in the person entered in the register as the holder of the bond, and would pass by transfer and registration. Under the terms and conditions, a convertible bond was to be freely transferable. Application for the transfer of a bond was to be made by the lodgment with Gujarat of a duly completed transfer form.
29 Upon issue of the $10,000,000 of convertible bonds, Bellpac was recorded as the holder of the convertible bonds in the register maintained by Gujarat. On 6 August 2008, certificates in respect of $10,000,000 of convertible bonds were delivered by Gujarat to Bellpac's office, where they were received by Alfred Wong. Alfred Wong gave the certificates to Ms Wai Kim Kok, the in-house counsel of the Great Pacific Financial Group, with instructions for the certificates to be handed to Ivan Wong for safe custody. Wai Kim Kok delivered the certificates to Ivan Wong in accordance with those instructions.
THE PROCEEDING
30 On 20 October 2009, the solicitors for the Liquidators wrote to Gujarat, enquiring as to details of the current holder of the convertible bonds that had been issued to Bellpac on 5 August 2008. By letter of 3 November 2009, Gujarat's solicitors replied, furnishing particulars of the state of the register of bond holders. The particulars showed that Bellpac remained the registered holder of $4,000,000 of convertible bonds, $2,000,000 of which are the bonds in issue in the present proceeding. The remaining $6,000,000 of convertible bonds had been transferred to various parties. The ultimate destination and ownership of that $6,000,000 of convertible bonds is not in issue in the present proceeding, and has not been the subject of any evidence. However, since the transactions involving those bonds may have some bearing on any orders that should be made, I shall say something about the transfer of those convertible bonds.
31 The letter of 3 November 2009 from Gujarat's solicitors enclosed two schedules specifying particulars of the transferred bonds, and particulars of the current registered bond holders. The schedules disclosed that there had been transfers of convertible bonds by Bellpac, as follows:
$1 million on 5 December 2008 to Good Team Investments Limited;
$1 million on 16 December 2008 to Great Investments Limited;
A further $1 million on 16 December 2008 to Great Investments Limited;
$1 million on 1 May 2009 to Mr Hong Xu;
$2 million on 1 May 2009 to Mr Osmond Tze Leung Kwok.
The particulars furnished by Gujarat's solicitors indicate that each of those transferees was still registered as the holder of those convertible bonds as at 3 November 2009. However, none of them has been joined as a party to the proceeding. For reasons that I shall later explain, that may affect whether and in what circumstances orders should be made.
32 On 18 December 2009, Gujarat's solicitors wrote to the Liquidators' solicitors, indicating that Ken Hung was seeking to have $2,000,000 of the convertible bonds that remained registered in the name of Bellpac transferred into his name. Gujarat's solicitors attached copies of the Impugned Transfers, being four transfers of convertible bonds signed by Alfred Wong on behalf of Bellpac, together with a copy of a power of attorney granted by Bellpac to Alfred Wong on 7 May 2008, under which the Impugned Transfers were signed. Gujarat's solicitors said that Gujarat held the original certificates in respect of the $2,000,000 of convertible bonds.
33 The receipt of the letter from Gujarat's solicitors of 18 December 2009 prompted the commencement of this proceeding by originating process. The plaintiffs are the Liquidators, in their capacity as liquidators of Bellpac, and Bellpac. Initially, Ken Hung was the only defendant. Subsequently, Austcorp, Alfred Wong, Danny Au-Yeung and Shan Pei were joined as defendants. Ken Hung is a director of Austcorp and was its founding shareholder.
34 By interlocutory process filed on 18 January 2010, an application was made for an injunction restraining Gujarat from registering any transfer of convertible bonds from Bellpac to Ken Hung. On 18 January 2010, a judge of the Court made an order restraining Gujarat from registering the Impugned Transfers. Subsequently, accommodation was reached between the parties, whereby Gujarat undertook to give at least 14 days' written notice of any proposed transfer or other dealing with the convertible bonds. A possible complicating matter, which has not received any real attention in this proceeding, is the fact that there is apparently further litigation on foot in the Supreme Court of New South Wales between Bellpac and Gujarat touching upon the circumstances surrounding the issue of the convertible bonds. There is nothing before the Court as to the present state of that litigation.
35 The final hearing was, unfortunately, somewhat disjointed. It was originally intended that the proceeding would be disposed of, as a matter of urgency, before 30 June 2010. The urgency was said to arise as a result of an undertaking given by Ken Hung to assign the $2,000,000 of convertible bonds, before that date, in connection with a deed of company arrangement entered into by Austcorp Group Limited (Austcorp Group), a subsidiary of Austcorp. However, because of the unavailability of witnesses, the hearing could not be completed before that time. In addition, once it had commenced, the hearing was adjourned on several occasions because of the unavailability of witnesses.
The Issues
36 The principal issue for determination in the proceeding concerns the effectiveness of the Impugned Transactions and the Impugned Transfers. As I have said, the primary relief sought by the Liquidators and Bellpac is a declaration that Bellpac is the true owner of the $2,000,000 of convertible bonds, and an order that Ken Hung deliver up the transfers and certificates purporting to vest in him the beneficial ownership of the bonds. The Liquidators and Bellpac deny that Ken Hung, or any person other than Bellpac, is entitled to be registered as the owner of the convertible bonds, and deny that Bellpac has been a party to any transaction by which it has disposed of the convertible bonds either legally or beneficially.
37 In their amended statement of claim of 28 July 2010 (the Statement of Claim), the Liquidators and Bellpac assert the following:
Pursuant to the 2008 Settlement Deed, convertible bonds evidencing a debt totalling $10,000,000 were issued by Gujarat to Bellpac.
It was an express term of the convertible bonds that title thereto is vested absolutely in the person entered in the register as the holder of the convertible bonds, and passes by transfer and registration.
Upon issue of the convertible bonds, Bellpac was recorded in the register as the holder of the convertible bonds.
Since the issue of the convertible bonds, there has been no transfer of the relevant $2,000,000 of convertible bonds recorded in the register.
In the premises, Bellpac has been since their issue, and remains, the holder absolutely of the convertible bonds.
The documents before me variously state the date of issue of the convertible bonds to have been 23 July 2008, 5 August 2008 and 6 August 2008. I do not understand anything to turn on the determination of the exact date. In these reasons, I will take the convertible bonds to have been issued on 5 August 2008.
38 Ken Hung and Austcorp are in the same interest in the proceeding, and were represented by the same solicitors and counsel. It is common ground that Bellpac remains the legal owner of the $2,000,000 of convertible bonds. However, in their defence, Ken Hung and Austcorp assert that Ken Hung is the beneficial owner of the $2,000,000 of convertible bonds as a result of the following transactions, all of which are Impugned Transactions:
On or about 6 August 2008, Bellpac assigned its interest in $10,000,000 of convertible bonds to Shan Pei.
On or about 6 August 2008, Shan Pei assigned its interest in $10,000,000 of convertible bonds to Alfred Wong.
On or about 17 October 2008, Alfred Wong assigned his interest in the relevant $2,000,000 of convertible bonds to Austcorp.
Austcorp held the beneficial ownership in the $2,000,000 of convertible bonds from about 17 October 2008 to 17 November 2009.
On or about 17 November 2009, Austcorp assigned its interest in the $2,000,000 of convertible bonds to Ken Hung.
Ken Hung and Austcorp further assert that, as at 6 August 2008, when the $10,000,000 of convertible bonds are alleged to have been assigned to Shan Pei, Shan Pei was exclusively entitled to the Bellpac Indebtedness, and that the consideration for the assignment of the convertible bonds to Shan Pei was the reduction of the Bellpac Indebtedness by $10,000,000. The transactions pursuant to which Shan Pei is said to have become exclusively entitled to the Bellpac Indebtedness constitute the balance of the Impugned Transactions.
39 Danny Au-Yeung was also represented by solicitors and counsel. Danny Au-Yeung's primary position was to support the contentions of the Liquidators and Bellpac that there was no effective transfer or assignment of the convertible bonds by Bellpac to Shan Pei. Defences were originally filed by a single firm of solicitors acting on behalf of Alfred Wong, Danny Au-Yeung and Shan Pei. Subsequently, those solicitors withdrew their representation on behalf of Alfred Wong and Shan Pei. Alfred Wong thereafter participated in the proceeding in person. Shan Pei did not thereafter participate in the proceeding.
40 The principal focus of the proceeding, accordingly, is on the question of whether, at some time after the convertible bonds were issued by Gujarat, and prior to the signature of the Impugned Transfers, there was an effective assignment of the $10,000,000 of convertible bonds from Bellpac to Shan Pei and then from Shan Pei to Alfred Wong. If there was no effective assignment from Bellpac to Shan Pei and from Shan Pei to Alfred Wong, Ken Hung has no entitlement to have the Impugned Transfers registered, and has no entitlement to retain possession of the certificates in respect of the $2,000,000 of convertible bonds.
41 In the Statement of Claim, the Liquidators and Bellpac refer to the allegation of Ken Hung and Austcorp concerning the assignment of the convertible bonds by Bellpac to Shan Pei. While the Liquidators and Bellpac do not admit that a transaction to that effect occurred, their alternative position is that, to the extent that such a transaction did occur, the transaction should be declared void or set aside. In support of that position, the Liquidators and Bellpac advance several arguments, which are secondary issues for determination in the proceeding. They assert that the transaction:
was an uncommercial transaction within the meaning of s 588FB of the Corporations Act;
was an insolvent transaction within the meaning of s 588FC of the Corporations Act;
was an unreasonable director-related transaction within the meaning of s 588FDA of the Corporations Act; and
involved a breach of the fiduciary and statutory duties owed to Bellpac by its directors, Alfred Wong and Danny Au-Yeung.
42 Ken Hung and Austcorp deny that any transfer of convertible bonds by Bellpac to Shan Pei was an uncommercial, insolvent or unreasonable director-related transaction. They also deny that any such transfer involved a breach of the fiduciary or statutory duties owed to Bellpac by its directors. Danny Au-Yeung denies any breach of statutory or fiduciary duty on his part.
43 Some time after the hearing and addresses ended, in response to an enquiry from the Court, the Liquidators and Bellpac sought leave to file an amended reply raising ss 12 and 23C of the Conveyancing Act. No explanation was offered as to why questions as to the effect of those sections were not raised earlier. Nevertheless, Ken Hung and Austcorp accepted that they were not unfairly prejudiced as a result of the fact that the questions were raised after final submissions had ended. Accordingly, leave was given to file the amended reply.
44 The amended reply asserts that if, it be found that the Impugned Transactions involving the assignments of the convertible bonds did in fact take place, then:
the transactions purported to be dispositions of an equitable interest within the meaning of s 23C of the Conveyancing Act;
the dispositions were not in writing signed by the person disposing of the same, as required by either s 23C or s 12 of the Conveyancing Act;
express written notice of the purported assignments was not given to Gujarat; and
accordingly, the Impugned Transactions did not validly assign any legal or equitable interest in the convertible bonds and were ineffective, by reason of the operation of ss 12 and 23C of the Conveyancing Act.
45 The amended reply also asserts that, if it be found that the Bellpac Indebtedness was assigned by Compromise Creditors to Shan Pei, then, to the extent that that Impugned Transaction took place:
the transaction purported to be a disposition of a legal interest within the meaning of s 12 of the Conveyancing Act, or an equitable interest within the meaning of s 23C of the Conveyancing Act;
the alleged disposition was not in writing signed by the person disposing of the same as required by either s 12 or s 23C of the Conveyancing Act;
express written notice of the purported assignment was not given to Bellpac; and
accordingly, the alleged disposition did not validly assign any legal or equitable interest in the Bellpac Indebtedness and was ineffective, by reason of the operation of ss 12 and 23C of the Conveyancing Act.
The Onus
46 As a general rule, the burden of proof of a fact that is an essential element in a claimant's cause of action lies on the claimant. A party who seeks relief has the burden of satisfying the Court of facts that, in the absence of proof of other facts, would justify the grant of that relief. What those facts might be will depend on the nature of the relief sought and the operation of any relevant presumptions. In the case of relief by declaratory order, the precise terms of the declaration sought assume particular significance. Thus, the party seeking a declaratory order has the burden of proof of any matter that is a necessary element of the declaration sought, even if, in a proceeding by that party for relief of another kind, or in a proceeding by the other party, that matter would not arise unless raised, and the burden of proof consequently assumed, by that other party (see Massoud v NRMA Insurance Ltd (1995) 62 NSWLR 657 at 660).
47 Putting it another way, when a person commences a declaratory proceeding, that person bears the legal onus of proof. That is so even though the majority of the facts that are relevant may be in the opposing camp. It is for the claimant to establish the ambit of the rights to be declared, and to prove all the facts necessary to enable the declaration to be made (see Blanch v British American Tobacco Australia Services Ltd (2005) 62 NSWLR 653 at 655). When a party seeks a negative declaration, such as, for example, a declaration that an acquisition will not contravene s 50 of the Competition and Consumer Act 2010 (Cth), that party bears the onus of proving that negative proposition (see Australian Gas Light v Australian Competition and Consumer Commission (No 3) (2003) 137 FCR 317 at [355]-[356]).
48 Under s 140(2) of the Evidence Act 1995 (Cth) (the Evidence Act), the Court must, in deciding whether it is satisfied that a case has been proved to the requisite standard, take into account:
the nature of the cause of action or defence;
the nature of the subject matter of the proceeding; and
the gravity of the matters alleged.
When proof of any fact is required, the Court must feel an actual persuasion of the occurrence or existence of that fact before it can be found. Mere mechanical comparison of probabilities, independent of any belief in reality, cannot justify the finding of a fact. Actual persuasion is achieved where the affirmative of an allegation is made out to the reasonable satisfaction of the Court. However, reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequences of the fact to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, and the gravity of the consequences flowing from a particular finding are considerations that must affect whether the fact has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony or indirect inferences (see Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-2).
49 In the present proceeding, the Liquidators and Bellpac are the only parties seeking relief from the Court. Ken Hung and Austcorp contend that, in circumstances where the Liquidators and Bellpac claim a declaration that Bellpac is the true owner of the convertible bonds in question, the Liquidators and Bellpac have the burden of positively satisfying the Court that Bellpac remains the beneficial owner of the convertible bonds, and that it has not disposed of them for value.
50 However, if an allegation made by a defendant is not a denial of an essential ingredient in the cause of action, but is one that, if established, would constitute a good defence, being an avoidance of the claim that the plaintiff might prima facie appear to have, the burden of proof of that allegation is on the defendant (see Currie v Dempsey (1967) 69 SR (NSW) 116 at 125). The Liquidators and Bellpac contend that Ken Hung and Austcorp bear the burden of proving that the Impugned Transactions involving the convertible bonds did in fact occur. They rely on the fact that Bellpac is registered as the holder of the convertible bonds as giving rise to a presumption that it is beneficially entitled to them, which presumption offers prima facie support for the claim for declaratory relief. That, they say, is the effect of the terms and conditions on which the convertible bonds were issued.
51 Ken Hung and Austcorp also contend that, since the Liquidators and Bellpac in effect allege that the Impugned Transactions were fraudulent, they bear a still heavier onus. They say that, since the Liquidators and Bellpac assert that the alleged transactions did not occur, they must be taken to be asserting that the evidence of the Impugned Transactions given by Alfred Wong was fabricated. They contend that the evidence before the Court does not satisfy the necessary requirements for such a finding to be made.
52 However, the Liquidators and Bellpac have not made a submission that Alfred Wong fabricated evidence. Rather, they say that the state of the evidence does not support a positive finding, if that is necessary, that the transactions alleged on behalf of Austcorp and Ken Hung were effective to vest exclusive entitlement to the Bellpac Indebtedness in Shan Pei or to effect an assignment of an equitable interest in the convertible bonds from Bellpac to Shan Pei or from Shan Pei to Alfred Wong. Such a positive finding would be necessary in order for Ken Hung and Austcorp successfully to resist the claims made by the Liquidators and Bellpac, if the Liquidators and Bellpac are correct in their primary contention as to the onus of proof.
53 Possession of goods gives rise to a presumption of ownership (see Russell v Wilson (1923) 33 CLR 538 at 546-7). Thus, actual possession may be sufficient to found an immediate right to possession that, in turn, could be the basis for an action in detinue. Ken Hung and Austcorp say that, since Ken Hung is in possession of the transfers and certificates in respect of the convertible bonds, he is presumed to be the owner of the convertible bonds, unless Bellpac can prove a better title.
54 However, the possession of goods is clearly distinguishable from the circumstances of the present case. Ken Hung may be in possession of transfers and certificates, which are chattels, but he cannot have possession of incorporeal property such as convertible bonds. Possession of a chattel is very much different from entitlement to a chose in action, such as the convertible bonds. For as long as Ken Hung is in possession of the transfers and certificates in relation to the convertible bonds, there may be a presumption that he is entitled to possession of the transfers and certificates. However, that does not necessarily say anything about his entitlement to the beneficial ownership of the underlying convertible bonds. His position is comparable to that of a financier holding a mortgage over shares to secure a loan. That financier would ordinarily have possession of the mortgagor's share certificates, but such possession would not give rise to any presumption of title. Accordingly, no presumption arising from possession operates in favour of Ken Hung and Austcorp in the present case.
55 If the existence of a fact alleged is a condition precedent to a plaintiff's right to maintain a cause of action, or if the fact is otherwise an essential element in the cause of action, then the burden of proof of that fact will be on the plaintiff (see Currie v Dempsey at 125). The non-disposition for value of the convertible bonds by Bellpac is certainly a condition precedent to the right of the Liquidators and Bellpac to maintain their claim for declaratory relief in respect of the convertible bonds. However, as I have said, the terms on which the convertible bonds were issued included a provision that title to the convertible bonds is vested absolutely in the person entered in the register as the holder of the bond, and passes by transfer and registration. One effect of that provision is to raise a presumption that the registered holder of a bond is its owner at law and, assuming that there can be a separate beneficial interest in equity, the owner of that beneficial interest. That is to say, in the absence of something further, the fact that Bellpac is the registered holder of the convertible bonds in question gives rise to a presumption substantiating a prima facie case that Bellpac is the true owner of those convertible bonds.
56 Ken Hung and Austcorp have sought to challenge Bellpac's entitlement to the beneficial ownership of the convertible bonds by proving the execution of the Impugned Transfers by Alfred Wong, as attorney of Bellpac, and by endeavouring to prove the Impugned Transactions pursuant to which Alfred Wong purported to sign the Impugned Transfers on behalf of Bellpac. The transactions on which Ken Hung and Austcorp rely would, if established, constitute good defences to the prima facie claim of the Liquidators and Bellpac. Accordingly, and in the light of what I have set out above, I consider that Ken Hung and Austcorp bear the onus of establishing that Bellpac has disposed of its beneficial ownership of the convertible bonds. It follows that I do not consider that it is necessary to make a finding of fraud on the part of Alfred Wong in order for the Liquidators and Bellpac to succeed in their contentions.
ARRANGEMENTS INVOLVING SHAN PEI
57 The case advanced on behalf of Ken Hung and Austcorp raises three questions as to the Impugned Transactions involving Shan Pei. They are:
Did Shan Pei become exclusively entitled to the Bellpac Indebtedness at some point prior to 6 August 2008?
Was there an effective assignment of the beneficial interest in the $10,000,000 of convertible bonds by Bellpac to Shan Pei on 6 August 2008?
Was there a subsequent effective assignment of the beneficial interest in the $10,000,000 of convertible bonds by Shan Pei to Alfred Wong?
Ken Hung and Austcorp contend that each of those three questions should be answered in the affirmative. They assert that, by 6 August 2008, when Bellpac received the certificates for the convertible bonds, the whole of the Bellpac Indebtedness was owing to Shan Pei and that, at that time, Bellpac assigned the $10,000,000 of convertible bonds to Shan Pei, in consideration of a reduction of the amount of the Bellpac Indebtedness by $10,000,000. At the same time, they say, Shan Pei agreed to assign the $10,000,000 of convertible bonds to Alfred Wong in exchange for a promise by him to pay the face value of the convertible bonds when they became eligible for conversion.
58 Those arrangements, involving a subsidiary of a public company and one of its directors, seem somewhat unlikely. One would expect there to be some documentation evidencing the transactions by which they were given effect. However, Ken Hung and Austcorp do not rely on any written evidence of the transactions. There does not appear to be a single piece of paper passing between Bellpac and Shan Pei, or between Shan Pei and Alfred Wong, concerning any aspect of the alleged assignments of convertible bonds. Nor does there appear to be a single piece of paper evidencing any communication between Shan Pei and either Compromise Creditors or the GPC Creditors concerning entitlement to the Bellpac Indebtedness.
59 Ken Hung and Austcorp did adduce certain documentary evidence in support of their contentions as to the arrangements involving Shan Pei. That evidence included:
entries in the books of Bellpac; and
entries in a set of documents purporting to be accounting records of Shan Pei (the Shan Pei Documents).
I shall say something further about that evidence below.
60 Save what was apparent from the books and records of Bellpac, the Liquidators have no personal knowledge of the Impugned Transactions relied upon by Ken Hung and Austcorp. Accordingly, the case of the Liquidators and Bellpac was essentially a documentary one. The directors of Bellpac who were responsible for the alleged transactions were Alfred Wong and Danny Au-Yeung, both of whom are defendants. The Liquidators, in that regard, may be thought to suffer a disadvantage. However, as I have said, I consider that the onus of establishing the effectiveness of the arrangements involving Shan Pei rests upon Ken Hung and Austcorp, notwithstanding that it is the Liquidators and Bellpac who seek declaratory relief from the Court.
61 I shall deal separately with each of the alleged transactions involving Shan Pei. I shall then deal with the operation of the Conveyancing Act in relation to the alleged assignments and the entitlement to the Bellpac Indebtedness. First, however, I shall describe the evidence that was given orally and by affidavit, and the relevant accounting records, including the Shan Pei Documents.
The Witnesses
62 Evidence in chief was given by affidavit. That course was adopted substantially because English is not the first language of most of the witnesses. The principal evidence as to the alleged arrangements involving Shan Pei was adduced from:
Alfred Wong;
Hollis Ho, who is the sole director of Compromise Creditors, having been appointed on 11 October 2006; and
Thomas Lo, who is the only current director of Shan Pei, having been appointed on 23 November 2009.
Alfred Wong was not an impressive witness. I would not be disposed to accept his evidence if it were contradicted, unless that evidence were corroborated by independent contemporaneous documents. Apart from certain accounting records described below, some of which should be given little, if any, weight, there was no corroboration of his evidence as to critical matters.
63 Alfred Wong was called to give evidence on behalf of Ken Hung and Austcorp. He did not otherwise offer evidence in the proceeding.
64 Ken Hung and Austcorp say that the absence of documentary records of the arrangements involving Shan Pei does not mean that the transactions giving effect to those arrangements did not take place. They rely upon Alfred Wong's evidence that there are cultural differences between East and West when it comes to the documentation of transactions between businessmen who have a long business association. Alfred Wong accepted that there was no document brought into existence to evidence the relevant Impugned Transactions, and that, by Western standards, the evidencing of the alleged transactions was "sloppy". He asserted, however, that it was a quite normal way of doing things for Chinese. He also said that he never sees a few million dollars as significant.
65 There are no accounting records of Compromise Creditors and there is no other record of Compromise Creditors reflecting upon any of the Impugned Transactions. Hollis Ho said that no accounts have been prepared because of lack of funds. That assertion was not disputed by the Liquidators and Bellpac.
66 Both Hollis Ho and Alfred Wong gave evidence of conversations they said they had had with Danny Au-Yeung, in which Danny Au-Yeung reported discussions that he said he had had with Eric Ng. Hollis Ho gave hearsay evidence of discussions between Danny Au-Yeung and Eric Ng on the topic of the assignment of the Bellpac Indebtedness to Shan Pei. He said in an affidavit that, in about September 2007, he had a conversation with Danny Au-Yeung, in which Danny Au-Yeung told him that the owner of Shan Pei was proposing that Shan Pei take over the benefit of all of the Bellpac Indebtedness, in return for which Shan Pei would undertake to pay Hollis Ho and the other GPC Creditors, within five years, the full amount of the debts owing to them. Hollis Ho said that Danny Au-Yeung told him that he did not know Shan Pei's financial position but did know that, once a restructure of GPC's debt was complete, Shan Pei would own 70 per cent of GPC. Hollis Ho said that, since Danny Au-Yeung recommended that he accept Shan Pei's proposal, he told Danny Au-Yeung that he could tell Shan Pei that Compromise Creditors, as trustee for the GPC Creditors, accepted Shan Pei's proposal.
67 The evidence I have just described was admitted only as evidence concerning discussions between Hollis Ho and Danny Au-Yeung. It was not admitted as evidence of the fact of any discussion between Danny Au-Yeung and Eric Ng.
68 Alfred Wong gave oral evidence that he considered Shan Pei and Compromise Creditors to be, in effect, the same entity. He said that, once he had been told by Danny Au-Yeung and Hollis Ho of internal arrangements as between Compromise Creditors and Shan Pei, whereby Shan Pei effectively became the creditor of Bellpac in respect of the Bellpac Indebtedness, that was sufficient for him to conclude that Shan Pei and Compromise Creditors were the same.
69 Alfred Wong gave hearsay evidence of discussions between Danny Au-Yeung and Eric Ng on the topic of the assignment of the convertible bonds in consideration for a reduction of the Bellpac Indebtedness. He said in an affidavit that, in late July or early August 2008, Danny Au-Yeung told him that he had spoken to Eric Ng and Hollis Ho, and that they had agreed for Bellpac to transfer all of the convertible bonds to Shan Pei by way of partial payment, in the amount of $10,000,000, of Bellpac's indebtedness to Shan Pei and the other GPC Creditors. Alfred Wong said that he and Danny Au-Yeung, as directors of Bellpac, resolved that the proposed transfer of convertible bonds to Shan Pei, in return for the reduction of the Bellpac Indebtedness by $10,000,000, was favourable to Bellpac, and resolved to accept and proceed with the proposal. Alfred Wong said that he told Danny Au-Yeung to tell Eric Ng that, once Gujarat issued the convertible bonds, they would be Shan Pei's.
70 There was no evidence of any minute of any such resolution, and Alfred Wong's affidavit was not admitted as evidence of the fact of the alleged resolution. It was admitted only as evidence of the fact of the discussion between Alfred Wong and Danny Au-Yeung, to the extent that that bore relevantly upon Alfred Wong's state of mind, and not as evidence of the fact of any discussion between Danny Au-Yeung and Eric Ng or between Danny Au-Yeung and Hollis Ho.
71 Alfred Wong also said that he had a discussion with Danny Au-Yeung, in which he asked Danny Au-Yeung to put a proposal to Eric Ng for Shan Pei to transfer the convertible bonds to him, Alfred Wong, in return for which he, Alfred Wong, would undertake to pay Shan Pei the face value of the convertible bonds and all accrued interest, as and when each of the convertible bonds became eligible for conversion. Alfred Wong said that, some time later, Danny Au-Yeung told him that he had spoken with Eric Ng and submitted Alfred Wong's proposal to Shan Pei. Alfred Wong said that Danny Au-Yeung told him that Eric Ng accepted the proposal on Shan Pei's behalf, and that Shan Pei would transfer the $10,000,000 of convertible bonds to Alfred Wong on the basis proposed.
72 Alfred Wong gave oral evidence that he himself had had discussions from time to time with Hollis Ho and Eric Ng. However, that evidence was highly generalised, and Ken Hung and Austcorp did not make any submissions concerning that evidence. The evidence does not appear to have any probative value.
73 Alfred Wong said that he intended to apply the convertible bonds to discharge debts to his private creditors, including Austcorp, and it is Ken Hung and Austcorp's case that he in fact did so. As I have said, the Liquidators and Bellpac contend that, if there was an effective assignment of convertible bonds by Bellpac to Shan Pei, the assignment involved a breach of fiduciary and statutory duties on the part of Danny Au-Yeung and Alfred Wong as directors of Bellpac. Alfred Wong's belief as to the alleged discussions involving Eric Ng may have some relevance in relation to that alternative case. Accordingly, his hearsay evidence was admitted for that limited purpose, although, as I have said, it was not admitted as evidence of the fact of any discussion between Danny Au-Yeung and Eric Ng.
74 The alleged discussions between Eric Ng and Danny Au-Yeung deposed to by Alfred Wong and Hollis Ho, if they actually took place, would clearly enough be of critical importance to the question of the arrangements involving Shan Pei. However, while Danny Au-Yeung was represented in the proceeding, and affidavits by him were filed, none of those affidavits was read, and none of the principal protagonists in the proceeding called him to give evidence. There was no evidence of the fact of any discussion concerning assignment of the Bellpac Indebtedness to Shan Pei, between Eric Ng, or any other person acting with the authority of Shan Pei, on the one hand, and Hollis Ho, or any other person acting with the authority of Compromise Creditors, on the other hand. Further, there was no evidence of the fact of any discussion concerning transfer or assignment of convertible bonds or the reduction of the Bellpac Indebtedness, between Eric Ng, or any other person acting with the authority of Shan Pei, on the one hand, and any person acting with the authority of Bellpac, on the other hand.
75 Eric Ng, who was the only director of Shan Pei from 10 July 2007 until 23 November 2009, the period in which the Impugned Transactions involving Shan Pei are alleged to have taken place, was also not called to give evidence. There was no evidence of any discussion with Eric Ng that was admissible as to the truth of whether the discussion occurred and what its terms were. While the Liquidators took steps at a very late stage in the conduct of the proceeding to tender hearsay evidence from Eric Ng, in the form of an email apparently sent by Eric Ng, that attempted tender was ultimately unsuccessful. Although allegations are made in the proceeding that Shan Pei knowingly participated and assisted in breaches of fiduciary and statutory duties on the part of Alfred Wong and Danny Au-Yeung, Shan Pei did not offer any evidence in defence of those allegations.
76 The failure of any party to call evidence from Danny Au-Yeung or Eric Ng is of some significance. As I have said, their evidence would be critical in establishing the arrangements involving Shan Pei contended for by Ken Hung and Austcorp. The gist of Alfred Wong's evidence is that he was informed that Danny Au-Yeung had spoken to Eric Ng and Hollis Ho and that, in the course of those conversations, Danny Au-Yeung entered into the agreements for Bellpac to transfer the convertible bonds to Shan Pei and then for Shan Pei to transfer the convertible bonds to Alfred Wong. Alfred Wong does not say that he, Alfred Wong, entered into the agreements or made the relevant Impugned Transactions.
77 The failure to call a witness cannot give rise to an inference that will fill a gap in the evidence. Nor can it be used to convert conjecture and suspicion into inference. On the other hand, if an inference is open to be drawn, the inference can be the more easily drawn if a witness who could give evidence inconsistent with the inference is available to give evidence and is not called (see Jones v Dunkel (1959) 101 CLR 298 at 308, 312 and 320-1).
78 The explanation provided by Ken Hung and Austcorp for their failure to call Danny Au-Yeung or Eric Ng is that neither could be said to be in their camp. Ken Hung and Austcorp claim to be mere downstream purchasers for value without notice. However, Ken Hung and Austcorp had no difficulty in calling Alfred Wong. There is nothing to suggest that Danny Au-Yeung declined to assist Ken Hung and Austcorp in the case that they advanced. While Danny Au-Yeung indicated in the course of final address that he did not support the case advanced by Ken Hung and Austcorp, he had taken no step in the proceeding adverse to their interests. He filed a defence in which there was virtually no joinder of issue in relation to the Impugned Transactions involving Shan Pei. Danny Au-Yeung was the very person who could prove all of the Impugned Transactions. It was open to Ken Hung and Austcorp to adduce evidence from him, yet they do not appear to have attempted to do so. Likewise, there is no reason to conclude that Eric Ng would have been antagonistic towards the case advanced by Ken Hung and Austcorp. In all of those circumstances, there is a strong basis for concluding that the evidence of Danny Au-Yeung and Eric Ng may not have assisted that case.
79 Thomas Lo gave evidence both by an affidavit dated 10 August 2010 and by videolink from Hong Kong. The need to call Thomas Lo was one of the occasions for adjourning the hearing.
80 Thomas Lo is a qualified chartered accountant, and is employed in a senior executive capacity by a large private group in Hong Kong. He said that Alfred Wong has been one his best friends for over 23 years, and that he knew Danny Au-Yeung as a longtime business partner of Alfred Wong. He first heard of Shan Pei in late November 2009, when Danny Au-Yeung asked him whether he could act as a director of a company registered in Anguilla. Danny Au-Yeung told him that he was looking for someone to succeed a director of the company. Danny Au-Yeung did not say who the director was that Thomas Lo was to replace, but told him that the director was about to leave the position because he foresaw a possible conflict of interest. Danny Au-Yeung told Thomas Lo that Faith Corporate Services Limited would contact him about secretarial services for the company. Subsequently, Ms Claudia Chen of Faith Corporate Services Limited telephoned Thomas Lo to say that there were some documents for him to sign concerning the change of directorship. Thomas Lo subsequently signed a form of acceptance as appointment as a director of Shan Pei.
81 Thomas Lo said that he has absolutely no idea who the owner or shareholders of Shan Pei are. He said that he understood that the shareholding is by means of a bearer certificate. Claudia Chen told him that he should speak with Eric Ng for information about Shan Pei. Thomas Lo obtained Eric Ng's telephone number from Danny Au-Yeung and spoke to Eric Ng. He asked Eric Ng for the financial records of Shan Pei. Several days later, Thomas Lo received by mail the Shan Pei Documents. The Shan Pei Documents consist of 36 pages, 17 of which relate to the year ended 30 June 2008, and 19 of which relate to the year ended 30 June 2009. Thomas Lo's recollection is that he received them towards the end of November 2009. They are the only accounting documents concerning Shan Pei that he has. He has no electronic version of the Shan Pei Documents.
82 Thomas Lo said that he did not know how the Shan Pei Documents had been prepared, or when they had been prepared. He agreed that, in order to know whether or not the Shan Pei Documents were properly prepared, and the time of the transactions that they purport to record, he would need to look at the cash books and journals. Thomas Lo does not have a complete ledger for Shan Pei. Nor does he have any cash books or journals. He has no documents recording or evidencing any of the transactions or events that the Shan Pei Documents purportedly record.
83 Thomas Lo said that, in order to prepare accounts for the year ended 30 June 2010, he would need to know what the transactions of Shan Pei were during that period. He said that nobody has told him of any transactions in relation to the payment of secretarial or record keeping fees. He said that he might try his luck and contact the former director of Shan Pei, Eric Ng. There is no evidence that he made any further effort to do so.
The Accounting Records
84 The accounting records and related documents that are in evidence cannot be said to present a clear picture. It is difficult to extract a cogent history of transactions from them, let alone a persuasive one. I found much of the evidence given by witnesses about the accounting records to be unhelpful, and some of it to be almost incomprehensible.
85 The Bellpac accounting records that are in evidence were amongst the financial records produced to the Liquidators upon their appointment as liquidators. The records that are in evidence consist of detail from Bellpac's general ledger, a copy of which is set out in Appendix 1 to these reasons (the General Ledger Extract), and an account in the name of Compromise Creditors, a copy of which is set out in Appendix 2 to these reasons (the Compromise Account). Those appear to be the only formal records of Bellpac that contain any reference to either the convertible bonds issued by Gujarat or the Bellpac Indebtedness.
86 The General Ledger Extract deals with an account numbered 2-5101, in the name of Compromise Creditors, between the dates 1 July 2007 and 18 May 2009. It begins with an opening credit balance of $9,093,955.82 and ends with a credit balance of $23,246,386.76. That balance is arrived at after substantial credits for interest and three minor debits, in addition to a debit of $10,000,000 on 1 July 2008 with the narration "release of royal", and a further debit entry of $4,700,000 with the narration "correct prev tfr j".
87 Alfred Wong asserts that he instructed Ivan Wong and the clerical staff of Bellpac to record the transfer of the convertible bonds to Shan Pei in the manner in which the debit entry of $10,000,000 of 1 July 2008 appears in the General Ledger Extract. He also says that he gave instructions for the narration "release of royal" to be recorded in order to provide an explanation for the consideration moving from Bellpac to Gujarat, namely, the release by Bellpac of Gujarat's royalty payment obligations to Bellpac. That contention by Alfred Wong is puzzling, and the explanation it offers does not appear to be satisfactory, since there is no obvious reason why entries in an account in the name of Compromise Creditors should be concerned with transactions involving the convertible bonds. Alfred Wong's evidence was inconsistent in drawing a distinction between Compromise Creditors and Shan Pei, a matter about which I have already said something, and about which I shall say something further below.
88 There is no mention of Shan Pei in the General Ledger Extract. The General Ledger Extract is quite equivocal as to any question of the assignment of the convertible bonds.
89 There is a handwritten note, dated 17 October 2008, that deals with the transfer of the $2,000,000 of convertible bonds to Austcorp, which was amongst the records produced to the Liquidators. That document appears to deal with delivery of the Impugned Transfers and certificates to Austcorp. There is nothing in the document to suggest any involvement of Shan Pei or Bellpac with the convertible bonds. The document does, however, contain the word "Alfred". In the course of cross-examination, Alfred Wong agreed that, on 17 October 2008, he intended to engage in a personal dealing with Austcorp in connection with the convertible bonds. However, he said that he had not seen the note before, and that he was unable to identify its author by the handwriting. The significance of the notation "Alfred" is not and has not been otherwise explained.
90 The Compromise Account apparently records the Bellpac Indebtedness. It shows a balance owing, as at 30 June 2007, of $26,940,240.33. On that day, interest of $343,211.28 was charged, giving a balance of $27,283,451.61. Repayments of $2,000,000 on 22 October 2007 and $2,700,000 on 26 October 2007, made by cheque, are also recorded. Bank records that are in evidence show that the sum of $2,000,000 was for an overseas telegraphic transfer, the beneficiary of which was View Plan Enterprises Limited. The sum of $2,700,000 was also for an overseas telegraphic transfer, the beneficiary of which was All Seasons Resources Inc. The Bellpac books originally showed those payments as being made for the benefit of Austcorp. However, the corrected entry in the General Ledger Extract shows Compromise Creditors as the beneficiary of those payments.
91 Alfred Wong said in an affidavit that the two cheques that I have just described were drawn on funds advanced by Gujarat under the 2007 Settlement Deed. However, the reasons for those payments and the circumstances of the correction are quite unexplained. There is nothing to connect the payments to Shan Pei. Further, Hollis Ho gave evidence that View Plan Enterprises Limited and All Seasons Resources Inc were not part of the Compromise Creditors group, that he was unfamiliar with those companies, and that he had not authorised the payment of moneys to those companies that might otherwise have been payable to Compromise Creditors. I am unable to draw with confidence any conclusions concerning how the two cheques, or the payments effected by them, may have borne upon or related to any of the Impugned Transactions.
92 Entries for interest appear in the Compromise Account for successive months down to 30 May 2008, when the balance owed is shown as $26,079,011.01. There is an entry of $10,717.40 for interest on 30 June 2008, to give a balance owing of $26,089,728.41. There is then a repayment of $10,000,000 recorded as at 1 July 2008, giving a balance of $16,089,728.41 on 1 July 2008. Successive monthly debits of interest are then shown in the account, which ends with a balance, as at 30 April 2009, of $18,206,503.34.
93 The balance of the account in the name of Compromise Creditors as at 30 April 2009, as shown in the Bellpac General Ledger Extract, is $23,246,386.76. On the other hand, the balance shown in the Compromise Account is $18,206,503.34. Alfred Wong said that the difference of $5,039,883.42 represented a guarantee fee payable by Bellpac to GPC as part of the Bellpac Indebtedness. I interpose here that figures in other documents, such as the Shan Pei Documents, indicate that the Bellpac Indebtedness may have risen as high as approximately $28.3 million by the date of the purported assignment of the convertible bonds. It is virtually impossible to be certain of the precise quantum of the Bellpac Indebtedness at relevant times. However, nothing appears to turn on that detail.
94 Bellpac's balance sheets as of June 2007, June 2008, April 2009 and June 2009 are also in evidence. Each of those documents records borrowings from "Compromise Creditors Mngt" under the heading "Non Current Liabilities". None of the documents makes reference to Shan Pei.
95 The Shan Pei Documents include balance sheets of Shan Pei as at 30 June 2008 and 30 June 2009. The balance sheet as at 30 June 2009 records, as an asset of Shan Pei, a loan to Bellpac of $18,996,787.34. The balance sheet as at 30 June 2008 records, as an asset of Shan Pei, a loan to Bellpac of $26,361,849.81. Both documents also make reference to a loan called "Bellpac Guarantor Fee", in the amounts of $4,499,986.25 and $3,504,986.25 respectively.
96 The balance sheets as at 30 June 2008 and 30 June 2009 show, as liabilities, loans as follows:
Burnaby $1,179,897.29
Pioneer $323,757.64
Sausalito $2,997,198.62
Hollis Ho $237,575.35
The first three amounts are identical to the amounts shown in schedule 1 to the Deed of Compromise. The amount shown for Hollis Ho is similar to the amount shown in schedule 1 to the Deed of Compromise.
97 The Shan Pei Documents include several extracts from the general ledger of Shan Pei for the period 1 July 2007 to 30 June 2008. One extract, in respect of an account called "Bellpac P/L", shows a debit entry of $28,224,586.66, dated 30 September 2007, with the narration "Assignment of", and credit entries, dated 22 October 2007 and 26 October 2007, of $2,000,000 and $2,700,000 respectively, with the narration "Repayment for". The Shan Pei Documents also include extracts in respect of accounts in the names of the GPC Creditors other than Shan Pei, showing credits in the amounts shown in the balance sheets. Each has the narration "Settlement Clea".
98 The Shan Pei Documents also include several extracts from the general ledger of Shan Pei for the period 1 July 2008 to 30 June 2009. One extract, in respect of an account called "Gujarat Bond", records two entries on 6 August 2008. One is a debit of $10,000,000, with the narration "Repayment Guj". That appears to be a reference to Gujarat. The other is a credit of $10,000,000, with the narration "Loan to AW". That appears to be reference to Alfred Wong. A second extract, in respect of an account called "Bellpac P/L", shows a credit of $10,000,000, on 6 August 2008, with the narration "Repayment Guj" and a debit, on 30 June 2009, of $2,634,937.53, with the narration "Interest income". A third extract, in respect of an account called "Alfred Wong", shows a debit of $10,000,000, on 6 August 2008, with the narration "Loan to AW", and three debits, on 1 October 2008, 1 January 2009 and 1 April 2009, each with the narration "Interest income", and each of approximately $200,000.
99 In the light of the matters I have just set out, the most that can be said is that there are entries in the books of Bellpac, apparently authorised by Alfred Wong, and entries in the Shan Pei Documents, the authority for which has not been the subject of evidence, that may be consistent with the Impugned Transactions having occurred. However, under Australian law, unlike the situation under the obligatio litterarum of Roman law (see Gaius, Institutes 3.128-130 and Justinian, Institutes 3.21), a mere book entry cannot by itself give rise to indebtedness or its discharge. A book entry can do no more than record the effect of a transaction that has otherwise taken effect according to law.
Ownership of the Bellpac Indebtedness
100 As I have said, there is no instrument of assignment of the Bellpac Indebtedness to Shan Pei by either Compromise Creditors or the GPC Creditors. There is no admissible evidence as to any communication between Shan Pei, on the one hand, and Compromise Creditors or the other GPC Creditors, on the other, as to the assignment of the Bellpac Indebtedness to Shan Pei. I am not persuaded that the transfer of units in the GPC Creditors Trust is relevantly connected to any entitlement to the Bellpac Indebtedness. The lack of formality and documentation in relation to the circumstances in which Shan Pei is alleged to have become entitled to the Bellpac Indebtedness is in stark contrast to the formality with which the Bellpac Indebtedness was assigned to the GPC Subsidiaries by Ace Bond and by the GPS Subsidiaries to Compromise Creditors.
101 There is no mention of Shan Pei in the books of Bellpac. There is no record in the books of Bellpac consistent with the proposition that, by 2008, the Bellpac Indebtedness was owed exclusively to Shan Pei, as Ken Hung and Austcorp contend, rather than to Compromise Creditors. There is nothing in the books of Bellpac to suggest that the Bellpac Indebtedness was owed to any entity other than Compromise Creditors. As I have said, no accounting records have been prepared for Compromise Creditors.
102 The Shan Pei Documents are consistent with the Bellpac Indebtedness being owed to Shan Pei as at 30 June 2008, and with Shan Pei being indebted to the GPC Creditors in amounts the same as, or substantially the same as, the amounts owing to the GPC Creditors by GPC and GPC Finance as shown in schedule 1 to the Deed of Compromise. The entries in the Shan Pei Documents are consistent with the Bellpac Indebtedness having been assigned to Shan Pei in consideration of Shan Pei undertaking to pay to the GPC Creditors the amounts shown as owing to them in schedule 1 to the Deed of Compromise.
103 However, as I have said, Thomas Lo played no part in the preparation of the Shan Pei Documents. His involvement with Shan Pei commenced entirely after the Impugned Transactions involving Shan Pei are alleged to have taken place. Thomas Lo had no knowledge of the accuracy of the Shan Pei Documents or the circumstances in which they were created, and there was no other evidence as to those questions. The Shan Pei Documents were tendered well after the hearing began. They are manifestly incomplete. In those circumstances, it is difficult to accord any weight to the Shan Pei Documents.
104 Ken Hung and Austcorp rely on the evidence of Hollis Ho, the sole director of Compromise Creditors, to support the conclusion that Shan Pei and Compromise Creditors made an agreement pursuant to which Shan Pei took over the right to the Bellpac Indebtedness, in return for which Shan Pei agreed to pay Hollis Ho and the other GPC Creditors, within five years, the full amount of the debts owing to them. They say that Danny Au-Yeung, as chief executive officer and a director of Bellpac, was a party to those discussions and that, accordingly, Bellpac consented to the assignment of the Bellpac Indebtedness from Compromise Creditors to Shan Pei.
105 There is no explanation as to why Shan Pei might put a proposal in the terms deposed to by Hollis Ho when recounting his conversation with Danny Au-Yeung. There is no evidence that Danny Au-Yeung had authority to act on behalf of Shan Pei or make any agreement on behalf of Shan Pei. There is also nothing to indicate that any of the GPC Creditors, other than Hollis Ho and Shan Pei, knew anything of the alleged proposal, let alone that they consented to it.
106 There was also no record of such an assignment in the books of Bellpac. The only evidence to which attention has been drawn, apart from the Shan Pei Documents, is quite inconsistent with there having been an assignment of the Bellpac Indebtedness by Compromise Creditors or the GPC Creditors to Shan Pei.
107 The proposition that Compromise Creditors or the other GPC Creditors assigned the Bellpac Indebtedness is inconsistent with later actions of Compromise Creditors. On 6 August 2009, a formal proof of debt in the winding up of Bellpac was lodged with the Liquidators on behalf of Compromise Creditors. The proof of debt was for the sum of $6,390,646.98, the total of the debts due to the GPC Creditors as shown in schedule 1 to the Deed of Compromise, and stated that that sum was owing by Bellpac under the Deed of Compromise. A copy of the Deed of Compromise was annexed to the proof of debt. The proof of debt was signed by Hollis Ho on behalf of Compromise Creditors. If there had been an assignment of the Bellpac Indebtedness to Shan Pei, it is curious in the extreme that Hollis Ho would lodge a proof of debt in the name of Compromise Creditors in respect of the Bellpac Indebtedness. No proof of debt has been lodged on behalf of Shan Pei. In the course of cross-examination, Hollis Ho agreed that he lodged the proof of debt in the name of Compromise Creditors on the basis that there had been no transfer or assignment of the Bellpac Indebtedness to Shan Pei.
108 Further, no explanation was offered as to why the proof of debt that Hollis Ho lodged was for the amount originally owed to the GPC Creditors, rather than for the current amount of the Bellpac Indebtedness, whatever that might have been. The GPC Creditors accepted an assignment of the Bellpac Indebtedness as consideration for the extinguishment of the amounts shown in schedule 1 to the Deed of Compromise as owing to them. Accordingly, their entitlement to prove would extend to the full amount of the Bellpac Indebtedness. I consider that Hollis Ho's actions in connection with the proof of debt, insofar as they are cogent at all, are completely inconsistent with the case that is put by Ken Hung and Bellpac.
109 Ken Hung and Austcorp say that the continued involvement of Hollis Ho and Compromise Creditors with the Bellpac Indebtedness is explained by reference to the fact that it was Alfred Wong's understanding that Compromise Creditors remained the mortgagee in respect of the Bellpac Indebtedness. They rely on Alfred Wong's evidence that he was concerned to deal with the person who "made the decisions and called the shots". They say that Eric Ng, who was the sole director of Shan Pei until 23 November 2009, was the person who made the decisions and called the shots on behalf of Shan Pei at the relevant time. They rely on the Shan Pei Documents as corroborating the assignment of the Bellpac Indebtedness to Shan Pei in the sum of $28,224,586.66.
110 However, Ken Hung and Austcorp say that, in any event, the question of whether Shan Pei or Compromise Creditors was the creditor of Bellpac is not to the point. They say that Bellpac received a substantial benefit from its creditor, namely a reduction in the Bellpac Indebtedness in the sum of $10,000,000, in return for which it transferred or assigned its interest in the convertible bonds to Shan Pei. Ken Hung and Austcorp say that, even if Shan Pei did not become legally entitled to the Bellpac Indebtedness, that would not affect the validity of any transaction concerning the convertible bonds between Shan Pei and Bellpac. There is no reason, they say, why Bellpac could not agree to transfer property to Shan Pei in return for a reduction in indebtedness owed by Bellpac to Compromise Creditors.
111 However, there is no evidence to suggest that Compromise Creditors, or the GPC Creditors other than Shan Pei, agreed to any such reduction of the Bellpac Indebtedness. The evidence is quite to the contrary. Bellpac could not, by an entry in its own books, unilaterally affect the quantum of its indebtedness to a creditor. It would be necessary to show that that creditor had actually accepted that there was a reduction in the amount of the Bellpac Indebtedness. The fact that Compromise Creditors lodged a proof of debt with the Liquidators is solid evidence that it regarded the Bellpac Indebtedness as still owing to it. As I have said, there is no admissible evidence of any assignment of the Bellpac Indebtedness to Shan Pei by either Compromise Creditors or the GPC Creditors.
112 The fact that Hollis Ho said that he told Danny Au-Yeung that Danny Au-Yeung could tell Shan Pei that Compromise Creditors would accept the proposal allegedly made by Shan Pei is not evidence of an agreement between Compromise Creditors and Shan Pei. Danny Au-Yeung was not a representative of Shan Pei, the other party to the alleged agreement. Further, even if Hollis Ho's discussions with Danny Au-Yeung did give rise to a contract for the assignment of the Bellpac Indebtedness, in consideration of a promise by Shan Pei to make a payment within five years, that contract remains entirely executory. Clearly, Shan Pei has not performed its side of the bargain, in that no payment has been made to Compromise Creditors or any of the other GPC Creditors. In the absence of any written assignment by Compromise Creditors or the GPC Creditors, neither side has performed any obligation under that contract. The mere making of a contract to assign for a consideration to be paid in the future does not effect an equitable assignment of a chose in action. Ownership of a chattel could have been transferred by delivery, but no ownership in the Bellpac Indebtedness could have been assigned by mere agreement. I am not persuaded that there was an effective assignment to Shan Pei of either a legal or equitable interest in that part of the Bellpac Indebtedness that was not already vested in it in its capacity as one of the GPC Creditors.
113 The case advanced on behalf of Ken Hung and Austcorp is that the consideration for the assignment of the convertible bonds has been paid in the form of a reduction of the amount owing by Bellpac in respect of the Bellpac indebtedness. Accordingly, the identity of the creditor in respect of the Bellpac Indebtedness is of critical significance, since, in the absence of consideration in the form of a reduction in the Bellpac Indebtedness moving from Shan Pei to Bellpac, no beneficial interest in the convertible bonds can have been assigned by Bellpac to Shan Pei.
114 I am not persuaded, on the balance of probabilities, that there was an arrangement whereby Shan Pei became entitled to the whole of the Bellpac Indebtedness. I consider that the Bellpac Indebtedness was, as at 6 August 2008, owed either to Compromise Creditors or, perhaps, to the GPC Creditors. I do not consider that it was owed to Shan Pei. The debt is held by Compromise Creditors on trust for the GPC Creditors, in the proportions that their respective debts bear to the total amount of the indebtedness owing to the GPC Creditors, as shown in schedule 1 to the Deed of Compromise. Shan Pei is simply one of the GPC Creditors. As such, it is entitled to a proportionate part of the Bellpac Indebtedness, being the proportion that the debt due to it from GPC or GPC Finance bears to the whole of the indebtedness owing to the GPC Creditors. That proportion is slightly more than 26 per cent. Shan Pei could not release Bellpac from $10,000,000 of the total liability, which exceeded $20,000,000.
115 The release of the interest that I have just described, namely the equitable part interest in the Bellpac Indebtedness that Shan Pei has by virtue of its being one of the GPC Creditors, would have been capable of constituting consideration for an assignment of the $10,000,000 of convertible bonds by Bellpac. However, it has never been put that the release of that interest constituted the consideration. Such a contract has never been alleged, and there is no evidence of it. Ken Hung and Austcorp have placed complete reliance on Shan Pei's having become exclusively entitled to the Bellpac Indebtedness prior to any assignment of the convertible bonds by Bellpac on 6 August 2008.
Assignment of Convertible Bonds in Reduction of the Bellpac Indebtedness
116 There is no instrument of assignment of an interest in the convertible bonds from Bellpac to Shan Pei. Further, there was no admissible evidence as to the fact of any communication, either written or oral, between Bellpac and Shan Pei as to the assignment of convertible bonds from Bellpac to Shan Pei.
117 The only evidence relied on by Ken Hung and Austcorp that is capable of supporting the alleged assignment of the convertible bonds in reduction of the Bellpac Indebtedness consists of the entries in the books of Bellpac and Shan Pei. Those entries are consistent with the loan to Bellpac having been reduced during the year ended 30 June 2009. Thus, the account of Compromise Creditors in the books of Bellpac appears to record a reduction, on 1 July 2008, of the amount of the Bellpac Indebtedness owing to Compromise Creditors of $10,000,000. I have described above the entry, in the general ledger of Bellpac, of a debit of $10,000,000 on 1 July 2008 with the narration "release of royal", made at the direction of Alfred Wong. I have also described the entry in the general ledger of Shan Pei of a $10,000,000 credit on 6 August 2008, with the narration "repayment Guj". A corresponding debit on 6 August 2008 relating to Alfred Wong also appears in the Shan Pei documents. Ken Hung and Austcorp contend that, in the light of those entries, there is evidence that Bellpac was given credit for the sum of $10,000,000, which they say was the consideration for the transfer of the convertible bonds.
118 The Liquidators and Bellpac have not suggested that Alfred Wong's evidence that he gave instructions for entries to be made in the books of Bellpac should not be accepted, and it was not put to Alfred Wong in cross-examination that those entries were fabricated. Ken Hung and Austcorp highlight the fact that the Liquidators and Bellpac have not attempted to provide any hypothesis that would explain the entries in Bellpac's books that apparently record a reduction in the Bellpac Indebtedness by $10,000,000. Ken Hung and Austcorp say that the only explanation consistent with the facts is that Bellpac received a benefit in the form the reduction. Accordingly, they contend, the Court should conclude that the amount owed by Bellpac in respect of the Bellpac Indebtedness was reduced by $10,000,000, with effect on 1 July 2008. That would be sufficient consideration for an assignment of some proprietary interest in the convertible bonds.
119 However, the entries in the books could not, of themselves, effect the reduction. It may be that Alfred Wong had a genuine belief that the convertible bonds had been assigned to Shan Pei in reduction of the Bellpac Indebtedness. Nevertheless, the fact that there was a relevant intention to assign the convertible bonds does not mean that the convertible bonds were effectively assigned. I am not persuaded that there was an effective assignment of the beneficial interest in the $10,000,000 of convertible bonds by Bellpac to Shan Pei on 6 August 2008.
Assignment by Shan Pei to Alfred Wong
120 There is also no instrument of assignment of an interest in the convertible bonds from Shan Pei to Alfred Wong. Further, there was no admissible evidence as to the fact of any communication, either written or oral, between Shan Pei and Alfred Wong as to the assignment of convertible bonds from Shan Pei to Alfred Wong.
121 The only evidence relied on by Ken Hung and Austcorp that is capable of supporting the alleged assignment from Shan Pei to Alfred Wong consists of the entries in the books of Bellpac and Shan Pei. The balance sheet of Shan Pei as at June 2009 shows the same liabilities to the GPC Creditors as are shown in the June 2008 balance sheet. The 30 June 2009 balance sheet shows as an asset, a loan to Alfred Wong of $10,612,649.44. That is consistent with a loan having been made to Alfred Wong during the year ended 30 June 2009.
122 As I have already said, it is impossible to give any weight to the Shan Pei Documents in the light of the uncertainties surrounding their creation. In any event, accounting records could not, of themselves, effect transactions concerning the beneficial interest in the convertible bonds. I am not persuaded that there was an effective assignment of beneficial ownership of the $10,000,000 of convertible bonds from Shan Pei to Alfred Wong.
Operation of the Conveyancing Act
123 Section 12 of the Conveyancing Act relevantly provides that any absolute assignment by writing under the hand of the assignor of any debt or other legal chose in action, of which express notice in writing has been given to the debtor or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action, is and is deemed to have been effectual in law to pass and transfer the legal right to such debt or chose in action from the date of such notice.
124 Section 23C(1)(c) of the Conveyancing Act relevantly provides that, subject to the provisions of the Conveyancing Act with respect to the creation of an interest in land by parol, a disposition of an equitable interest or trust subsisting at the time of the disposition must be in writing signed by the person disposing of the same or by the person's agent lawfully authorised in writing for that purpose. However, under s 23E(d) of the Conveyancing Act, nothing in s 23C is to affect the operation of the law relating to part performance.
125 As I have said, the Liquidators and Bellpac belatedly filed an amended reply concerning the effect of the Conveyancing Act. They contended that both the assignment of the Bellpac Indebtedness to Shan Pei and the assignments of the convertible bonds from Bellpac to Shan Pei and from Shan Pei to Alfred Wong, to the extent that they took place at all, were ineffective for want of compliance with ss 12 and 23C of the Conveyancing Act.
126 The Bellpac Indebtedness is a debt or other legal chose in action within the meaning of s 12. In the absence of compliance with s 12, there could be no legal assignment of the Bellpac Indebtedness. Since there has clearly been no compliance with s 12, it follows that there was no assignment, effective at law, of the Bellpac Indebtedness from Compromise Creditors to Shan Pei.
127 However, s 12 is not a precondition to the validity of an assignment of an equitable interest in a chose in action. Ken Hung and Austcorp, although their submission is not clear on the point, must therefore be taken to contend that the purported assignment of the Bellpac Indebtedness to Shan Pei was effective in equity only. Likewise, it is common ground that Bellpac retains legal title to the $2,000,000 of convertible bonds, by reason of its being the registered holder of the bonds. Ken Hung and Austcorp contend that the various alleged assignments of the convertible bonds were assignments of the equitable interest in the bonds. Thus, they say, s 12 did not apply to any of the Impugned Transactions.
128 Ken Hung and Austcorp advance five arguments in support of their contention that none of the transactions giving effect to the arrangements involving Shan Pei is rendered ineffective for want of compliance with s 23C. First, they contend that the requirements of s 23C(1)(c) apply only to real property, and not to personalty such as the Bellpac Indebtedness and the convertible bonds. They point to the context in which s 23C appears. Thus, the introduction to s 23C refers expressly to the creation of interests in land by parol. Further, s 23C is found in Division 3 of Part 2 of the Conveyancing Act, which is entitled Assurances of Land. Ken Hung and Austcorp contrast that with Division 4 of Part 2, which is entitled Property Generally.
129 However, headings are not decisive in relation to the question of construction. There are countervailing considerations that indicate that s 23C(1)(c) is not limited to real property. First, there is no compelling rationale for distinguishing between the disposition of an equitable interest in real property and the disposition of an equitable interest in personalty. But for the context of s 23C, there would be no reason to draw any such distinction. Secondly, in contrast to s 23C(1)(a) and s 23C(1)(b), which refer respectively to the creation or disposition of an interest in land and to a declaration of trust respecting any land or any interest therein, s 23C(1)(c) refers merely to an equitable interest or trust subsisting at the time of the disposition. Thirdly, both the High Court and the House of Lords have indicated that provisions equivalent to s 23C(1)(c) extend to equitable dispositions of personalty, although those equivalent provisions were not to be found under headings relating to land (see, for example, Adamson v Hayes (1973) 130 CLR 276 and Grey v IRC [1960] AC 1). For those reasons, I consider that s 23C(1)(c) applies to such dispositions, including dispositions of any beneficial interest in choses in action such as the Bellpac Indebtedness or the convertible bonds (see PT Ltd v Maradona Pty Ltd (No 2) (1992) 27 NSWLR 241 at 250-252).
130 Secondly, Ken Hung and Austcorp raise the issue of constructive trusts. They say that, assuming that there was an agreement between Shan Pei and Compromise Creditors in respect of the Bellpac Indebtedness, that agreement constituted a contract for valuable consideration to assign the Bellpac Indebtedness. Accordingly, they say, it gave rise to a constructive trust in favour of Shan Pei in respect of the Bellpac Indebtedness. Ken Hung and Austcorp further say that any agreement between Bellpac and Shan Pei to assign the convertible bonds was supported by valuable consideration, and was therefore specifically enforceable. Thus, they say, Bellpac promised to assign the convertible bonds to Shan Pei in consideration for a reduction in the Bellpac Indebtedness. They say that, upon such reduction being effected, a constructive trust was created in favour of Shan Pei in respect of the convertible bonds. They say that, accordingly, the requirements of s 23C were displaced in respect of both alleged transactions.
131 Ken Hung and Austcorp advance the same contentions in relation to the alleged agreement between Shan Pei and Alfred Wong. That is to say, upon Alfred Wong's promising to provide the agreed consideration, they assert that a constructive trust was created in his favour, under which Shan Pei held an equitable interest in the convertible bonds on trust for him. They say that Alfred Wong purported to transfer the convertible bonds to Austcorp and thereby irrevocably committed himself to the terms of the agreement with Shan Pei, including the promise to pay Shan Pei the face value of the convertible bonds and all accrued interest on each of the dates as and when the bonds became eligible for conversion.
132 Each of the constructive trusts for which Ken Hung and Austcorp contend ultimately depends on the proposition that there was an agreement by which Shan Pei became exclusively entitled to the Bellpac Indebtedness. As I have indicated, I am not persuaded that that is so. If there was no such agreement, Shan Pei could not have given any valuable consideration for the assignment of the convertible bonds, because the Bellpac Indebtedness would not have been owed to it in its entirety. There is no evidence that Compromise Creditors assigned the legal title to the Bellpac Indebtedness. Accordingly, Shan Pei's entitlement to the Bellpac Indebtedness would have been, at most, an equitable share of the Bellpac Indebtedness in the proportion that $1,671,855.10 bears to $6,390,646.98.
133 However, even if the agreement to assign the convertible bonds from Bellpac to Shan Pei was supported by valuable consideration, and was therefore capable of specific performance, that does not mean that Bellpac became a trustee of the convertible bonds upon the making of the agreement, but before the payment of the consideration (see for example Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [53]). As there has been no payment of the consideration by Shan Pei, no constructive trust can have arisen in its favour. No interest in the bonds could subsequently have passed, therefore, from Shan Pei to Alfred Wong or from Alfred Wong to any other person.
134 Thirdly, Ken Hung and Austcorp say that the requirements of s 23C(1)(c) were displaced, in respect of the assignment of the convertible bonds, by acts of part performance on the part of Shan Pei. They say that Shan Pei reduced the amount owed to it by Bellpac in its books by the face value of the convertible bonds, namely $10,000,000, and thereby performed its part of the contract with Bellpac. That contention also assumes that Shan Pei became exclusively entitled to the Bellpac Indebtedness, and, accordingly, is untenable. Further, in order for acts of part performance to operate in the way contended for by Ken Hung and Austcorp, those acts must be unequivocally and of their own nature referable to some such agreement as is alleged (see Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 432). I do not consider that that requirement is satisfied in relation to the alleged assignment by Bellpac to Shan Pei, since the entries in the Shan Pei Documents do not have any dispositive effect, but, rather, at their highest, do no more than record some other juridical act.
135 In any event, there has been no part performance by Alfred Wong that could operate to displace the requirements of s 23C(1)(c) in respect of the alleged assignment of convertible bonds from Shan Pei to him. Alfred Wong has merely made a promise, which is still executory, to pay the amount of the convertible bonds in the future. Similar considerations would apply to any agreement between Shan Pei, on the one hand, and Compromise Creditors or the other GPC Creditors, on the other hand, in respect of the Bellpac Indebtedness. That agreement, too, must be regarded as wholly executory, since the promise by Shan Pei, if it was made at all, was to pay the amounts owing to the GPC Creditors by GPC and GPC Finance within five years.
136 Fourthly, Ken Hung and Austcorp contend that the assignment of the Bellpac Indebtedness to Shan Pei was not a disposition of property at all. No reasons are advanced in support of that submission, which I reject.
137 Fifthly, Ken Hung and Austcorp say that s 23C(1)(c) can have no application to any equitable assignment of the convertible bonds from Bellpac to Shan Pei, because that transaction did not involve a disposition of an equitable interest. Rather, they say, Bellpac created out of its legal and beneficial ownership an equitable interest that did not previously exist. The argument runs as follows. It appears to be wrong to say that the legal and beneficial owner of property has two estates in the property, one legal and the other equitable, and that when that owner equitably assigns the property while retaining the legal title, there is a disposition of the equitable estate. Rather, it seems correct to say that the owner creates in the assignee an equitable estate distinct from the estate held by the owner prior to the transaction. That is, the owner does not, by the equitable assignment, dispose of an equitable interest subsisting at the time of the disposition. Accordingly, there can be no application of s 23C(1)(c) (see Baloglow v Konstantinidis [2001] NSWCA 451 at [116]-[117]).
138 However, in the circumstances of the present case, that argument begs the question. The allegation made by Ken Hung and Austcorp is that the Impugned Transactions involved promises to transfer the convertible bonds themselves, rather than to assign any equitable interest in the convertible bonds. In other words, the Impugned Transactions involved promises to place the intended assignees of the convertible bonds in a position whereby they could become registered as the owners of the convertible bonds. In the absence of payment of the consideration, any agreement between Shan Pei and Bellpac remained wholly executory. Accordingly, there can have been no equitable assignment capable of engaging the analysis considered in Baloglow
139 In the light of the matters I have set out above, I consider that the requirements of s 23C(1)(c) of the Conveyancing Act were applicable to all of the transactions giving effect to the arrangements involving Shan Pei that are relied upon by Ken Hung and Austcorp. I consider that there was no compliance with s 23C(1)(c) in respect of any of those transactions. I am not persuaded by the available evidence that the requirements of s 23C(1)(c) have been displaced by acts of part performance or the creation of any constructive trust. It follows that s 23C(1)(c) would operate to render ineffective any of the arrangements involving Shan Pei that might otherwise be effective. In particular, s 23C(1)(c) would mean that no consideration passed from Shan Pei to Bellpac for the assignment in equity of the convertible bonds, since Shan Pei could have acquired no exclusive entitlement, in equity or otherwise, to the Bellpac Indebtedness.
Conclusion as to the Shan Pei Transactions
140 The Liquidators and Bellpac contend that the Impugned Transactions involving Shan Pei, leading up to the execution of the Impugned Transfers by Edgar Hung as attorney for Ken Hung on 17 November 2009, are no more than a contrivance pieced together in an attempt to justify a transfer of property of Bellpac to Ken Hung in November 2009, after Bellpac had gone into liquidation. Not only was there no writing recording the relevant Impugned Transactions, there was no evidence of the fact of any oral communication effecting those transactions. No step was taken to execute a transfer of either the Bellpac Indebtedness or the convertible bonds in favour of Shan Pei. The certificates for the convertible bonds remained in the custody of Ivan Wong. There is no evidence that Ivan Wong was given the certificates to hold on behalf of any person other than Bellpac. Certainly, no attempt was made to deliver the certificates to the custody of any person on behalf of Shan Pei. The highest that the evidence rises in support of the Impugned Transactions is that there are entries in the books of Bellpac and in the Shan Pei Documents that are consistent with the transactions, and that may be inconsistent with there having been no dealing with the convertible bonds or the Bellpac Indebtedness.
141 However, in the absence of any admissible evidence of juridical acts that are capable of constituting them, it is not possible to conclude that any of the Impugned Transactions involving Shan Pei occurred. In particular, there was no juridical act that was effective to vest in Shan Pei either a legal or an equitable interest in the Bellpac Indebtedness. Further, there is no evidence of any writing that would satisfy s 23C(1)(c) of the Conveyancing Act in respect of any of the Impugned Transactions involving Shan Pei.
142 Having regard to the matters specified in s 140(2) of the Evidence Act, I consider that the case advanced on behalf of Ken Hung and Austcorp is far from having been proved to the requisite standard. I am not actually persuaded that the Impugned Transactions involving Shan Pei took place. In the light of the available evidence, I consider that it is unlikely that they took place, or, to the extent that there was an attempt to effect the Impugned Transactions, that it is unlikely that the attempt was effective.
143 It follows that no consideration has been given by Shan Pei to Bellpac for the transfer or assignment of any interest in the convertible bonds. Accordingly, there was no transfer of any equitable interest in the convertible bonds by Bellpac. Alfred Wong therefore acquired no interest in the convertible bonds. Alfred Wong therefore could not transfer any interest in the convertible bonds to Austcorp. Austcorp therefore had no interest to transfer to Ken Hung. Accordingly, subject to a possible question of hearing from non-parties, the Liquidators and Bellpac are entitled to declarations and orders in the terms claimed in their amended originating process.
144 While it is not strictly necessary to do so, I shall say something about the subsequent transactions relied on by Ken Hung and Austcorp. I shall also say something about the alternative cases mounted by the Liquidators and Bellpac.
ARRANGEMENTS INVOLVING ALFRED WONG, AUSTCORP AND KEN HUNG
145 In asserting his entitlement to be registered as the owner of the $2,000,000 of convertible bonds, Ken Hung relies on two further purported assignments of the bonds. The first assignment is from Alfred Wong to Austcorp. The second is from Austcorp to Ken Hung. I shall deal with each purported assignment separately.
Alfred Wong and Austcorp
146 As at about 1999, Austcorp and Alfred Wong were the principals and effective controllers of entities engaged in the development of a resort at The Entrance, New South Wales (the Resort Development). By 2001, the Resort Development was completed, all apartments had been sold and the profits from the venture had been distributed to those entitled. However, in August 2006, 49 purchasers of apartments commenced a proceeding in the Federal Court claiming damages against Austcorp and other parties involved in the Resort Development. By deed made between Austcorp and Alfred Wong on 16 July 2008 (the Indemnity Deed), Alfred Wong agreed to indemnify Austcorp in respect of 50 per cent of all legal costs and damages that Austcorp might be held liable to pay in that Federal Court proceeding.
147 Edgar Hung is Ken Hung's son. He is an executive director of Austcorp, having been appointed in 1992. He is the deputy executive chairman of Austcorp Group. In August 2008, Alfred Wong had conversations with Edgar Hung in which he said that his personal financial situation was very tight, and that he could not contribute his share of the legal costs under the Indemnity Deed. He told Edgar Hung about the $10,000,000 of convertible bonds that Gujarat had issued to Bellpac, and said that Bellpac had used the convertible bonds to reduce a debt due to Shan Pei, one of its investors, for the full amount of their face value of $10,000,000. He said that that had been helpful to him, since he subsequently reached agreement with Shan Pei for all of the convertible bonds to be transferred to him, so that he could apply them to discharge his personal liabilities. He said that a number of his creditors were happy to accept a transfer of convertible bonds in discharge of his liabilities to them, and that he would like to make such an arrangement with Austcorp. He offered to transfer to Austcorp convertible bonds having a face value of $2,000,000, in return for a release from his liability under the Indemnity Deed.
148 Subsequently, Edgar Hung told Alfred Wong that Austcorp agreed to take a transfer of the $2,000,000 of convertible bonds, in consideration for which Austcorp would release Alfred Wong from his liability under the Indemnity Deed. Alfred Wong then said that he would arrange for Wai Kim Kok to deliver transfers and certificates to Edgar Hung.
149 On 17 October 2008, Alfred Wong, as attorney of Bellpac, signed the four Impugned Transfers in blank. He gave instructions to Wai Kim Kok to deliver the signed transfers to Austcorp. On 21 October 2008, Wai Kim Kok completed details, including details relating to the convertible bonds and the transferor, on the four Impugned Transfers, and, on 22 October 2008, sent them, together with the relevant certificates, to Edgar Hung at Austcorp.
150 Ken Hung and Austcorp say that the circumstances of the signature of the transfers on behalf of Bellpac, rather than by Alfred Wong in his personal capacity, are explained by the evidence. Thus, as I have said, Alfred Wong received the certificates from Gujarat on 6 August 2008, when he gave them to Wai Kim Kok, with instructions that she give them to Ivan Wong for safe custody. Wai Kim Kok did so. The form of transfer required by Gujarat was not provided to Bellpac until 17 October 2008, when Alfred Wong signed the four Impugned Transfers in blank, in his capacity as attorney for Bellpac. He gave instructions to Ms Kok to obtain the certificates from Ivan Wong and to complete the transfer forms, leaving the transferee details blank. On 22 October 2008, Ms Kok sent the four signed Impugned Transfers, together with the relevant certificates for the convertible bonds, to Edgar Hung by express post. Edgar Hung then filled out the transferee details at a later time.
151 Ken Hung and Austcorp say that Alfred Wong was seeking to wrap up several transactions in single transfer forms, rather than arrange for separate transfers from Bellpac to Shan Pei, from Shan Pei to himself personally, and from himself personally to his creditors, including Austcorp. Accordingly, it was necessary for Alfred Wong to sign the Impugned Transfers as Bellpac's attorney. Ultimately, as a result of the matters I shall describe shortly, Ken Hung was named as the transferee in the Impugned Transfers. In effect, Ken Hung and Austcorp say that there was a transfer from Bellpac to Ken Hung by direction of the various intermediate transferees in that chain.
Austcorp and Ken Hung
152 Since 1998, Ken Hung has from time to time provided loans to Austcorp to assist it with its capital requirements. As at 16 October 2009, the outstanding balance owing by Austcorp to Ken Hung was $2,872,650. In about May 2000, the loan arrangements between Austcorp and Ken Hung were formalised with legal documentation that included provision, as security for the loans, of a charge over all of Austcorp's assets in favour of Ken Hung.
153 On 6 May 2009, administrators were appointed to Austcorp Group, and, on 16 October 2009, administrators were appointed to Austcorp itself. In about November 2009, Ken Hung had a conversation with Edgar Hung in relation to a proposal that the indebtedness of Austcorp to Ken Hung be reduced by a transfer of the convertible bonds to Ken Hung, and the subsequent transfer of those convertible bonds by Ken Hung to Austcorp Group, in order to satisfy one of the conditions of a deed of company arrangement that was then being proposed concerning Austcorp Group. Edgar Hung said that, in connection with the proposed deed of company arrangement, it was necessary to provide to the administrators a sum of between $5 million and $10 million over a period of five years. He said that one way of achieving that would be to transfer to Austcorp Group the $2,000,000 of convertible bonds owned by Austcorp. He said that such a transfer could not take place unless Ken Hung, as the holder of a charge over the assets of Austcorp, gave his consent.
154 Edgar Hung told his father that it was proposed that the convertible bonds be transferred in part satisfaction of Ken Hung's loan to Austcorp, to the extent of $2,000,000. Ken Hung would then transfer the convertible bonds to the administrators of Austcorp Group to be held for the purposes of the deed of company arrangement. Ken Hung would then become a creditor of Austcorp Group in the sum of $2,000,000, which would be a debt payable after completion of the deed of company arrangement. The debt of $2,000,000 would be owed by Austcorp Group, but would be guaranteed by Austcorp.
155 Edgar Hung told Ken Hung that it was best for Ken Hung and all the shareholders of Austcorp that the proposal be implemented. Following Edgar Hung's explanation of the proposal, Ken Hung decided to proceed with it. He considered that, as a shareholder of Austcorp, and given his position as the holder of a charge from Austcorp in respect of its indebtedness to him, it was incumbent upon him for the benefit of Austcorp and its shareholders to assist Austcorp Group to satisfy the condition of its proposed deed of company arrangement. Accordingly, Ken Hung instructed Edgar Hung to sign documents and do all other things necessary on his behalf, under a general power of attorney that he had previously granted to Edgar Hung, in order to give effect to the proposal.
156 On 17 November 2009, Edgar Hung signed the four Impugned Transfers on behalf of his father, as transferee. The Impugned Transfers are in evidence. Each transfer is in respect of $500,000 of convertible bonds. The transfers are from Bellpac to Ken Hung. They are executed on behalf of Bellpac by Alfred Wong, under a power of attorney executed on 7 May 2008, and are signed on behalf of Ken Hung by Edgar Hung, under a power of attorney made on 6 February 2006. The signature on behalf of Bellpac is dated 17 October 2008. Under cover of a letter dated 17 November 2009, Edgar Hung submitted the four transfers to Gujarat, and requested that the transfers be registered. That prompted the letter of 18 December 2009 from Gujarat's solicitors to the Liquidators' solicitors, to which I have referred above.
157 Edgar Hung gave affidavit evidence concerning a controversy as to the effectiveness of the 2006 power of attorney. However, I do not understand there to be any issue as between the parties regarding that matter.
158 On 23 December 2009, Austcorp Group entered into a deed of company arrangement and, on 17 February 2010, Austcorp also entered into a deed of company arrangement. On 20 January 2010, Edgar Hung, as attorney of Ken Hung, executed a deed of assignment (the Austcorp Assignment) of $2,000,000 of convertible bonds, under which Ken Hung assigned all his legal and equitable right, title and interest in the convertible bonds to the administrators of the Austcorp Group deed of company arrangement. The Austcorp Assignment provided that completion was to take place on 30 June 2010. On 23 April 2010, a deed of acknowledgement was executed on behalf of Ken Hung, under which he agreed not to take any steps to enforce his rights under the charge given to him by Austcorp until completion of the Austcorp Group deed of company arrangement. Finally, in consideration of the transfer by Austcorp to Ken Hung of the convertible bonds, Ken Hung accepted a reduction of $2,000,000 in the amount owing to him by Austcorp under the Austcorp deed of company arrangement.
Conclusion as to Subsequent Assignments
159 If Alfred Wong had acquired beneficial ownership of the $2,000,000 of convertible bonds, I would be satisfied that the evidence establishes that that beneficial ownership passed to Austcorp, and then from Austcorp to Ken Hung. However, I have concluded that Alfred Wong did not become the owner of the bonds, either legally or beneficially, because Shan Pei did not acquire any interest in them: nemo dat quod non habet.
THE ALTERNATIVE CASES
160 As I have already indicated, the Liquidators and Bellpac assert that any transaction by which the convertible bonds were assigned by Bellpac to Shan Pei was an insolvent transaction, an uncommercial transaction, and an unreasonable director-related transaction within the meaning of the Corporations Act, as well as involving breaches of statutory and fiduciary duty on the part of Alfred Wong and Danny Au-Yeung. They therefore contend that the transaction, to the extent that it took place at all, is voidable. In the light of the conclusions reached above, it is not strictly necessary to deal with those alternative cases. Nevertheless, it is desirable to say something about the issues that they raise.
Uncommercial, Insolvent or Unreasonable Director-Related Transaction
161 Part 5.7B of the Corporations Act deals with the recovery of property or compensation for the benefit of creditors of an insolvent company. Division 2 of Part 5.7B, which consists of s 588FA to s 588FJ inclusive, deals with voidable transactions. Relevantly, s 588FE(3) provides that a transaction of a company is voidable if it is an insolvent transaction and also an uncommercial transaction of the company, and it was entered into during the two years ending on the relation-back day. Section 588FE(6A) provides that a transaction of a company is voidable if, relevantly, it is an unreasonable director-related transaction of the company and it was entered into during the four years ending on the relation back day. For present purposes, the relation-back day is 30 July 2009, the day on which the Liquidators were appointed as administrators of Bellpac.
162 The Liquidators and Bellpac assert in the Statement of Claim that the alleged assignment of convertible bonds from Bellpac to Shan Pei on 6 August 2008 is voidable under s 588FE. Accordingly, they say, the Court is empowered to make one or more of the orders set out in s 588FF(1) of the Corporations Act. They say that the Court should make an order declaring that the transfer of convertible bonds was void ab initio, as well as other restitutional orders.
163 Section 588FB of the Corporations Act deals with uncommercial transactions. Under s 588FB(1), a transaction of a company is an uncommercial transaction of the company if, and only if, it may be expected that a reasonable person in the company's circumstances would not have entered into the transaction, having regard to:
the benefits, if any, to the company of entering into the transaction;
the detriment to the company of entering into the transaction;
the respective benefits to other parties to the transaction of entering into it; and
any other relevant matter.
164 Section 588FC deals with insolvent transactions. Under s 588FC, a transaction of a company is an insolvent transaction of the company if, relevantly, it is an uncommercial transaction of the company, and the transaction is entered into at a time when the company is insolvent.
165 Section 588FDA deals with unreasonable director-related transactions. Under s 588FDA, a transaction of a company is an unreasonable director-related transaction if, relevantly, the transaction is a disposition by the company of property of the company, the disposition is to a director of the company, and it would be expected that a reasonable person in the company's circumstances would not have entered into that transaction, having regard to:
the benefits, if any, to the company of entering into the transaction;
the detriment to the company of entering into the transaction;
the respective benefits to other parties to the transaction of entering into it; and
any other relevant matter.
166 By the deed of variation of 14 July 2005 made between Bellpac and the GPC Subsidiaries, the Bellpac Indebtedness fell due for payment on 13 July 2008. The Liquidators and Bellpac assert in the Statement of Claim that, from 13 July 2008, Bellpac was unable to pay its debts as and when they fell due and, accordingly, was insolvent, and that, therefore, the transaction involving the assignment of convertible bonds to Shan Pei by Bellpac took place while Bellpac was insolvent, thereby satisfying one limb of s 588FC. They rely on the following matters as supporting the conclusion that Bellpac was insolvent by 6 August 2008:
Bellpac incurred a loss of $4,765,176.23 for the year ended 30 June 2007.
As at 30 June 2007, Bellpac had negative equity of $51,601,601.97 and its current liabilities exceeded its current assets.
Bellpac incurred a loss of $8,141,957.93 for the year ended 30 June 2008.
As at 30 June 2008, Bellpac had negative equity of $59,743,559.90 and its current liabilities exceeded its current assets.
As at 30 April 2009, Bellpac had negative equity of $56,978,594.37 and its current liabilities exceeded its current assets.
Bellpac failed to pay the amount of the Bellpac Indebtedness when it fell due for repayment on 13 July 2008.
167 Under s 95A of the Corporations Act, a person who is not solvent is deemed to be insolvent. A person is solvent if, and only if, the person is able to pay all the person's debts as and when they become due and payable. Whether a company is insolvent at a particular time is a question of fact, to be determined by proper consideration of the company's financial position, in its entirety, based on commercial reality. Regard must be had not only to the cash resources immediately available to the company, but also to moneys that it can procure by realisation of its assets or by borrowing. It is the inability of a company, using such resources as are realistically available to it to raise funds, to meet debts as and when they fall due, that indicates insolvency (see Powell v Fryer (2001) 37 ACSR 589 at [75]).
168 While a company's balance sheet is a relevant consideration, a company's solvency is ultimately determined by reference to its ability to pay its debts as and when they fall due. The fact that a company's liabilities at a given time exceed its assets at that time does not necessarily indicate that the company is insolvent. For example, its income may be such that it will in fact be in a position to meet its liabilities when they become due for payment. Thus, the Court must look at all of the liabilities of a company and make a finding as to when those liabilities fall due for payment. It is then necessary to assess what moneys will become available to the company to meet those liabilities at the relevant times.
169 Ken Hung and Austcorp dispute that Bellpac was insolvent at any relevant time. Ken Hung and Austcorp say that the substantial liabilities of Bellpac as at 30 June 2008 were not all owing at that time. LM Investment had agreed on 11 July 2008, less than a month before the alleged transfer of convertible bonds to Shan Pei, to vary the existing loan to LM Investment by capitalising the interest previously payable. That resulted in an increase in the loan from $16,000,000 to $37,000,000. In those circumstances, they say, there could be no suggestion that LM Investment was pressing for payment as at 6 August 2008.
170 Ken Hung and Austcorp also say that, while it is correct that Shan Pei, assuming it was the other major creditor on Bellpac's balance sheet at the relevant time, was pressing for repayment in early July 2008, the bargain that was struck was that the convertible bonds would be transferred to Shan Pei. Thus, they say, there was an agreement to extend the payment terms in respect of the Bellpac Indebtedness, and thereafter no demand was made for repayment of the balance.
171 Finally, Ken Hung and Austcorp point to the fact that Bellpac derived a profit in the period to 30 April 2009. However, there is nothing to suggest that that profit was such as to make a difference as to whether Bellpac could meet its liabilities as and when they fell due.
172 Bellpac's balance sheet as at June 2008 suggests that it did not have cash available to meet interest payments that continued to accrue in respect of the loan from LM Investment. Further, even allowing for a reduction in the Bellpac Indebtedness, a substantial majority of the Bellpac Indebtedness remained owing, in respect of which Bellpac was in default as at August 2008. There was no suggestion that Shan Pei or Compromise Creditors agreed that the time for repayment of the balance of the Bellpac Indebtedness was to be deferred. In the circumstances, I would be disposed to conclude that Bellpac was insolvent as at August 2008.
173 In order to be an insolvent transaction under s 588FC, a transaction must also be uncommercial within the meaning of s 588FB. The Liquidators and Bellpac say that it would be expected that a reasonable person in Bellpac's circumstances would not have entered into the transaction by which the convertible bonds were purportedly assigned to Shan Pei, in circumstances where, inter alia:
there were no benefits to Bellpac;
Bellpac was divested of an asset with a face value of $10,000,000, and suffered detriment from entering into the transaction; and
other parties, including Shan Pei and Alfred Wong, derived a benefit from the transaction.
The Liquidators and Bellpac say that Alfred Wong derived a significant personal benefit because the purported transfer was part of an arrangement whereby, upon Shan Pei's acquisition of the convertible bonds, Shan Pei would immediately transfer them to Alfred Wong, purportedly in consideration of a promise that he would pay Shan Pei their face value, together with interest, on their respective conversion dates. Thus, they say, Alfred Wong obtained the convertible bonds merely by promising to pay their face value at a future time, without making any payment at the time of acquisition. They say that the purported transfer was an uncommercial transaction of Bellpac.
174 Ken Hung and Austcorp say that the relevant transaction was not uncommercial, since Bellpac received a reduction of $10,000,000 in its liability to Shan Pei in respect of the Bellpac Indebtedness, in return for the transfer of an asset of dubious value. There was no evidence indicating the value of the convertible bonds, aside from opinions, albeit unchallenged ones, proffered by Alfred Wong, and no evidence to indicate whether or not a market existed for the convertible bonds, such that they could be realised prior to their conversion into shares in Gujarat. Nevertheless, it is at least arguable that the alleged transaction between Shan Pei and Bellpac was not uncommercial, since, although Bellpac lost the benefit of an asset having a face value equal to $10,000,000, it also received a reduction in that sum owing to an unsecured creditor. Ken Hung and Austcorp contend that undervalue is at the heart of s 588FB, and that the relevant transaction was plainly not conducted at an undervalue. There may be a rational basis for concluding that a company in the circumstances of Bellpac may have wished to have the certainty of such a reduction in its liabilities that were immediately due and payable, in exchange for an asset that may not have been immediately realisable.
175 Further, Ken Hung and Austcorp assert, there is evidence that LM Investment was informed that the convertible bonds, once issued, would be used to satisfy other creditors of Bellpac, and that LM Investment raised no objections to that suggestion. They say that any question of priority as between LM Investment and either Compromise Creditors or Shan Pei is an irrelevant distraction. They further say that the assignment of the convertible bonds cannot be said to be uncommercial on the basis of an alleged reversal of priority in circumstances where LM Investment effectively approved the paying down of the Compromise Creditors debt.
176 However, I accept that, if the arrangements involving Bellpac, Shan Pei and Alfred Wong were given effect in the manner contended for by Ken Hung and Austcorp, notwithstanding that there is minimal evidence to support those contentions, then they could fairly be characterised as a single tripartite transaction whereby Bellpac transferred the interest in the convertible bonds to Alfred Wong at the direction of Shan Pei, in consideration for which Shan Pei reduced the indebtedness of Bellpac under the Bellpac Indebtedness by $10,000,000. On that characterisation, Shan Pei agreed to give such direction to Bellpac in consideration of Alfred Wong's promise to pay the face value of the convertible bonds as and when they became eligible for conversion.
177 In assessing whether a transaction is uncommercial, it is appropriate for the Court to look to the totality of the business relationship between the parties, to what was intended to be effected under that relationship, and to how the transaction, in whole or in part, effected that intention (see Cussen v Sultan (2009) 74 ACSR 496 at [23]). There is some merit in the submissions advanced by Ken Hung and Austcorp as to uncommerciality. However, in all of the circumstances, I would be disposed to view the arrangements involving Bellpac, Shan Pei and Alfred Wong as a single transaction, as just described. Having regard to the obvious benefit derived by Alfred Wong, a director of Bellpac, I have considerable reservations about the propriety of that transaction. Alfred Wong's benefit was, in my view, such as could not be explained by normal commercial practice (see Peter Pan Management Pty Ltd v Capital Finance Corp (Aust) Pty Ltd (2001) 19 ACLC 1392 at [43]). I would be disposed to conclude that the tripartite transaction was an uncommercial transaction of Bellpac.
178 Section 588FDA of the Corporations Act narrows the scope of the concept of transaction compared with the scope of that concept elsewhere in Division 2. Relevantly for present purposes, in order for a transaction to be an unreasonable director-related transaction under s 588FDA(1)(a), the transaction must be a disposition by a company of property of the company, and the disposition must be to a director of the company. Ken Hung and Austcorp say that there was no disposition by Bellpac of any interest in the convertible bonds to Alfred Wong, and, accordingly, that the terms of s 588FDA are not engaged.
179 However, if the arrangements involving Bellpac, Shan Pei and Alfred Wong together constituted a single tripartite transaction, the terms of s 588FDA would be satisfied. Accordingly, I would be disposed to conclude that the purported assignment of the convertible bonds by Bellpac on 6 August 2008 was also an unreasonable director-related transaction of Bellpac.
180 For the reasons given above, I would be disposed to uphold the alternative cases advanced by the Liquidators and Bellpac in reliance upon Division 2 of Part 5.7B of the Corporations Act. That conclusion would empower the Court to make an order under s 588FF, subject to the possible operation of s 588FG, about which I shall say something below.
Breach of Duty by Directors
181 The Liquidators and Bellpac contend that Alfred Wong and Danny Au-Yeung misused their respective positions as directors of Bellpac, breached ss 180(1), 181(1) and 182(1) of the Corporations Act and breached the fiduciary duties that they owed to Bellpac. The duties alleged to have been owed by Alfred Wong and Danny Au-Yeung to Bellpac were:
a duty under s 180(1) of the Corporations Act to exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if that person was a director of Bellpac and occupied the office held by, and had the responsibilities within Bellpac of, Alfred Wong and Danny Au-Yeung;
a duty under s 181(1) of the Corporations Act to exercise their powers and discharge their duties in good faith in the best interests of Bellpac and for a proper purpose;
a duty under s 182(1) of the Corporations Act not to use their positions improperly to gain advantage for themselves or someone else or cause detriment to Bellpac;
a fiduciary duty to account for any benefit or gain they obtained in circumstances where there was conflict or potential conflict between their duty to Bellpac and their personal interest in the pursuit or possible receipt of such a benefit or gain;
a fiduciary duty to account for any benefit or gain obtained or received by use or by reason of their respective positions, or by use or by reason of opportunities or knowledge resulting from their positions;
a fiduciary duty to keep confidential information and knowledge they obtained in the course of exercising their responsibilities relating to the operation of the business of Bellpac; and
a fiduciary duty to act in the best interests of Bellpac.
182 The Liquidators and Bellpac say that the vice in the purported transfer of the convertible bonds to Shan Pei, assuming that it was a creditor of Bellpac, is that the transfer was undertaken in circumstances where Alfred Wong was a direct beneficiary of the transfer, by reason of the arrangement that he made with Shan Pei that the convertible bonds would be at his personal disposal, and could then be used to satisfy his personal creditors. They contend that reasonable directors in the position of Alfred Wong and Danny Au-Yeung would not have used a substantial asset of Bellpac in order to satisfy part of a debt owed by Bellpac to an unsecured creditor, being a debt that was incapable of being paid from the assets of Bellpac if those assets were administered according to its (Bellpac's) commercial arrangements, in circumstances where that unsecured creditor was prepared to make an arrangement with one of the directors involved in making the corporate decision, being an arrangement that benefited that director.
183 The Liquidators and Bellpac, therefore, contend that any decision made by Alfred Wong and Danny Au-Yeung to transfer convertible bonds to Shan Pei, assuming Shan Pei was an unsecured creditor in respect of the Bellpac Indebtedness, in partial satisfaction of that indebtedness, was motivated by an improper purpose, namely the benefit obtained by Alfred Wong as a result of his arrangement with Shan Pei. They say that the improper purpose was to benefit Alfred Wong by reason of the arrangement made between Alfred Wong and Shan Pei for Shan Pei to transfer the convertible bonds to Alfred Wong to enable him to discharge his own personal obligations. That arrangement was very favourable to Alfred Wong, in that it involved no more than a mere promise by him to pay the face value of the convertible bonds when they became eligible for conversion in the future.
184 As I have said, the hearsay evidence of conversations between Danny Au-Yeung and Eric Ng that both Alfred Wong and Hollis Ho gave was not admitted as evidence of the fact of those conversations. It was admitted only as evidence of the discussions in which the witnesses were told of the conversations, and of the witnesses' state of mind. However, that evidence, even so restricted as to admissibility, may have some bearing on the question of breach of fiduciary duty by Alfred Wong and Danny Au-Yeung.
185 Thus, Alfred Wong asserted in an affidavit that, shortly after 13 July 2008, when the Bellpac Indebtedness was due for payment, Danny Au-Yeung told him that Eric Ng and Bellpac's other creditors had been asking for payment of the Bellpac Indebtedness. Alfred Wong said that he told Danny Au-Yeung that Bellpac could offer Eric Ng and Bellpac's other creditors the convertible bonds by way of reduction of the Bellpac Indebtedness. From that, it may be open to conclude that Alfred Wong reasonably believed that entry into the Impugned Transactions involving the convertible bonds was in the best interests of Bellpac, and that his actions, accordingly, were done in good faith and for a proper purpose.
186 The reference to Eric Ng as a creditor of Bellpac was, it may be inferred, a reference to Shan Pei in respect of the Bellpac Indebtedness. Alfred Wong gave no admissible evidence as to how, as he understood the position, Shan Pei had become the only creditor of Bellpac in respect of the Bellpac Indebtedness. It is significant that Alfred Wong said in affidavit evidence that, at that time, Danny Au-Yeung referred to the GPC Creditors as including Shan Pei, amongst others. That is not consistent with Shan Pei having become exclusively entitled to the Bellpac Indebtedness. Alfred Wong drew a clear distinction in his affidavit evidence between Shan Pei and Eric Ng, on the one hand, and Compromise Creditors and Hollis Ho, on the other, despite his subsequent oral evidence that he considered them to be in effect the same entity once he had been told by Danny Au-Yeung of agreements having been made between them.
187 In all of the circumstances, I do not consider that the hearsay evidence given by Alfred Wong bears significantly on the question of breach of duty as a director. As I have indicated, I did not find Alfred Wong to be an impressive witness.
188 Ken Hung and Austcorp submit that the fact that the purpose of the transfer of the convertible bonds was to enable Alfred Wong to pay off certain of his personal creditors does not matter in circumstances where Bellpac received good consideration for the transfer of the convertible bonds. That contention is unsupported, and it appears to me to be somewhat obscure. I am not disposed to give it any weight, particularly since, as I have indicated, I am inclined to regard the arrangements involving Bellpac, Shan Pei and Alfred Wong as a single tripartite transaction.
189 There is no admissible evidence as to Danny Au-Yeung's state of mind concerning the Impugned Transactions. Danny Au-Yeung contends that there has been no breach of statutory or fiduciary duty on his part. He asserts that he stood to gain nothing from the Impugned Transactions, and points out that he was joined as a defendant more than six months after the proceeding had commenced. He asserts that Alfred Wong's involvement in downstream transactions after the purported transfer of the convertible bonds to Shan Pei cannot be visited upon him, Danny Au-Yeung, in his capacity as a director of Bellpac. Further, he asserts that there is no evidence that any misconduct on his part, which it is his primary position to deny, caused Bellpac to suffer any loss or damage, given that the convertible bonds do not mature until 1 July 2028, and that there is no certainty that Gujarat's shares will have any value on the relevant conversion dates.
190 On the assumption that the transactions allegedly effecting the assignment of the convertible bonds on 6 August 2008 should properly be characterised as a tripartite arrangement involving Bellpac, Shan Pei and Alfred Wong, I consider that there are strong grounds for concluding that the arrangements involved a breach of fiduciary duty and a breach of statutory duty, at least on the part of Alfred Wong, who was instrumental in proposing the arrangements. The clear effect of the arrangements was that Alfred Wong was put in a position whereby he had substantial assets, having a face value of $10,000,000, at his disposal for the purposes of discharging his own personal liabilities, having given no more than an unsecured promise to pay the face value of the convertible bonds at some time in the future. The fact that Alfred Wong was prepared to take the convertible bonds, and was in a position to discharge his personal indebtedness by assigning the convertible bonds, might suggest that the convertible bonds could have provided a similar benefit to Bellpac. I would be disposed to conclude that the transaction involved a breach of ss 180, 181 and 182 of the Corporations Act, as well as of general fiduciary duties, on the part of Alfred Wong and Danny Au-Yeung.
Good Faith Defences
191 In the event that the alleged transfer of convertible bonds from Bellpac to Shan Pei were found to be voidable under s 588FE of the Corporations Act, the Court would be empowered to make an order under s 588FF. Ken Hung and Austcorp place reliance on s 588FG of the Corporations Act in arguing that such an order ought not be made.
192 Section 588FG(1) provides that the Court may not make an order under s 588FF that materially prejudices a right or interest of a person other than a party to the transaction, if certain matters are proved. Thus, the Court may not make such an order if the person whose right or interest is prejudiced received no benefit because of the transaction. Alternatively, the Court is not to make such an order if it is proved that, in relation to each benefit that the person received because of the transaction, the person received the benefit in good faith and, at the time when the benefit was received, the person had no reasonable grounds for suspecting that the company whose transaction was voidable was insolvent, as that term is defined in s 588FC, and a reasonable person would have had no reasonable grounds for suspecting that the company was insolvent.
193 It is clear enough that Ken Hung will be materially prejudiced if orders are made declaring the arrangements involving Bellpac, Shan Pei and Alfred Wong to be void. He has accepted a reduction in the amount owing to him by Austcorp. He may be also exposed to a claim for a breach of contract under the Austcorp Assignment.
194 There can be no suggestion that Ken Hung received a benefit because of the Impugned Transactions involving Bellpac, Shan Pei and Alfred Wong. There is no suggestion that any of those parties contemplated a transfer of convertible bonds to Ken Hung. It is clear that Alfred Wong contemplated a transfer of some of the convertible bonds to his personal creditors, one of which was Austcorp. Nevertheless, even if there was a single tripartite transaction, as I have found, Austcorp was not a party to that transaction. Accordingly, I also do not consider that it could be said that Austcorp received a benefit because of the transaction.
195 It may be that, but for the Impugned Transactions involving Shan Pei, Alfred Wong would not have been in a position to strike the bargain that he made with Austcorp, whereby he would assign $2,000,000 of convertible bonds to Austcorp as consideration for a release of his obligations under the Indemnity Deed. Further, if Austcorp had not acquired the convertible bonds, it could not have assigned them to Ken Hung. Nevertheless, I do not consider that either Austcorp or Ken Hung received a benefit because of the Impugned Transactions involving Bellpac, Shan Pei and Alfred Wong, howsoever characterised.
196 However, the Liquidators and Bellpac contend that the entire series of transactions by which the convertible bonds were allegedly assigned from Bellpac to Shan Pei, from Shan Pei to Alfred Wong, from Alfred Wong to Austcorp, and from Austcorp to Ken Hung, is capable of constituting a transaction within the meaning of s 588FB of the Corporations Act. They say that each of the several purported dealings with the convertible bonds is part of that transaction, which, by reason of the arguments I have already set out, is voidable under s 588FE, and because of which, they say, Austcorp and/or Ken Hung obtained a benefit.
197 The Liquidators and Bellpac assert, although the facts underlying the assertion are not described in the submission, that Austcorp was a joint venturer with, and a secured creditor of, Bellpac, ranking behind LM Investment. Austcorp had securities owing for indebtedness of about $5,000,000 as at August 2008. Austcorp knew of the prior securities, by reason of registration of its inferior securities. The Liquidators and Bellpac point to Alfred Wong's deposition that he told LM Investment that Austcorp was to be paid by the use of the convertible bonds and that, before settlement and the issue of the convertible bonds, he told LM Investment that he had for some time told the recipients of the convertible bonds that they would be secured by second mortgages over land of Gujarat. The Liquidators and Bellpac say that the only parties who could be told that were Compromise Creditors and Austcorp, they being the subsequent ranking creditors not being paid cash by Gujarat. That submission is difficult to follow. If, however, it is correct, then it appears that it would be possible to conclude that Austcorp was told that convertible bonds would be issued to Bellpac and that it would be paid its debt by Bellpac through the use of the convertible bonds.
198 The concept of transaction is very broad. Thus, a series of steps over a period, involving several parties, can constitute a transaction. A transaction includes an arrangement giving rise to an estoppel under which one party may not resile from a position. Further, a transaction may be unilateral in character (see Australian Kitchen Industries Pty Ltd v Albarran (2004) 51 ACSR 604 at [24]). A number of separate dealings may together be regarded as constituting one transaction. Nevertheless, in every case, it is vital that, however the transaction is constituted, it must be able to be characterised as a transaction of the company (see Kalls Enterprises Pty Ltd v Baloglow (2006) 58 ACSR 63 at [27]).
199 If the Impugned Transactions took effect, then Austcorp in fact received convertible bonds issued to Bellpac, and may even have been told, as the Liquidators and Bellpac suggest, that it would receive those bonds prior to their issue. However, it did not receive those convertible bonds from Bellpac, but from Alfred Wong, who was known to be a director of Bellpac. It received the convertible bonds in payment of Alfred Wong's personal debt to Austcorp, not in satisfaction of Bellpac's debt. Ken Hung's taking of an interest in the convertible bonds had nothing to do with the dealings of Bellpac and Alfred Wong with Shan Pei.
200 The transactions involving Austcorp and Ken Hung in November 2009 were entirely separate and distinct from the transactions involving Shan Pei and Alfred Wong in August 2008. Ken Hung and Austcorp say that it could not possibly have been contemplated, at the time of the Impugned Transactions involving Shan Pei, that the convertible bonds would subsequently be assigned to Ken Hung in November 2009 as a result of Austcorp's deteriorating financial position. Ken Hung's evidence is that he was unaware of Bellpac's existence until May 2010. Further, they say, the internal transaction involving Austcorp, one of its directors, namely Ken Hung, and Austcorp Group could not conceivably be characterised as a transaction of Bellpac.
201 I consider that it is not possible to characterise the transactions involving Austcorp and Ken Hung as part of a single transaction involving the transfer of convertible bonds by Bellpac to Shan Pei and the transfer by Shan Pei to Alfred Wong. Accordingly, I do not consider that the chain of assignments of the convertible bonds can be said to have constituted a single transaction from which Ken Hung derived a benefit, as the Liquidators and Bellpac contend.
202 Alternatively, Ken Hung and Austcorp say that, to the extent that Ken Hung received any benefit because of a transaction of Bellpac, he received the benefit in good faith and that at the time he received the benefit, namely 17 November 2009, he had no reasonable grounds for suspecting that Bellpac was insolvent or that it would become insolvent. They say that a reasonable person in Ken Hung's circumstances would have had no grounds for so suspecting and, accordingly, that Ken Hung can rely on the alternative defence afforded by s 588FG.
203 Ken Hung and Austcorp rely on a number of matters in support of that aspect of their defence, some of which I have already mentioned. For instance, the transactions to which Ken Hung agreed were suggested by his son, Edgar Hung, and Ken Hung placed complete reliance on what Edgar Hung told him, in circumstances where Edgar Hung was a very experienced, knowledgeable and responsible senior executive of Austcorp and Austcorp Group. Ken Hung and Austcorp contend that Ken Hung gave good consideration for the transfer of the convertible bonds, in that the debt owed to him by Austcorp was reduced by $2,000,000. Further, Ken Hung bound himself to transfer the convertible bonds to Austcorp Group, in consideration for which he would be treated as a creditor of Austcorp Group for the amount of $2,000,000. Ken Hung considered, as I have said, that it was incumbent upon him to assist Austcorp Group to satisfy its deed of company arrangement. He believed at all times that Austcorp was the owner of the convertible bonds, and he says that, had he been aware of any claim by Bellpac over the convertible bonds, it is unlikely that he would have accepted and proceeded with the proposal that was put to him. He said that at no time in the course of his dealings in relation to the convertible bonds was he aware of any claim or potential claim relating to the convertible bonds by Bellpac.
204 Ken Hung and Austcorp say that, in those circumstances, Ken Hung acted in good faith in agreeing to the proposal put to him by Edgar Hung. They say that he could not have had any reasonable grounds for suspecting that Bellpac was insolvent, given that he was not even aware of Bellpac's existence until about six months after he agreed to the proposal. They claim that there is no reason for Edgar Hung to have made any enquiries at all in relation to Bellpac's solvency, given that there was no suggestion that Bellpac maintained any legal or beneficial interest in the convertible bonds. They say that, so far as Ken Hung and Edgar Hung were concerned, Bellpac had nothing to do with the transactions pursuant to which Austcorp and Ken Hung took title.
205 Edgar Hung says that, at all times during his dealings with Alfred Wong on behalf of Austcorp in relation to the convertible bonds, he believed that Alfred Wong, and not Bellpac, was the beneficial owner of the convertible bonds. He says that nothing came to his knowledge, and nothing was said to him by Alfred Wong during the course of their discussions, that caused him any doubt in that belief. He also says that he did not have any concerns that Bellpac's solvency might be such as would potentially have an adverse impact upon the effectiveness of Austcorp's acquisition of the convertible bonds. Edgar Hung says that he considered Bellpac to be in a sound financial position. He believed that Bellpac was receiving financial support from LM Investment. He says that the first time he became aware that Bellpac had financial difficulties was in about mid-2009, following the appointment of receivers and managers.
206 Ken Hung conducted his negotiations in relation to the convertible bonds through Edgar Hung. Edgar Hung made no inquiry as to why Bellpac was the registered holder of the convertible bonds or as to whether Alfred Wong had any documentation to show that he could deal with the convertible bonds as his own. Edgar Hung said that, although he understood that his father, Ken Hung, would be taking a transfer of bonds from Alfred Wong, he did not turn his mind to the question of whether Alfred Wong would be the transferor. Edgar Hung said that he thought that Alfred Wong was the owner of the convertible bonds, but did not turn his mind to the question of whether there ought to be something recording a transfer of the bonds from Bellpac to Shan Pei and then from Shan Pei to Alfred Wong.
207 Edgar Hung said that he never doubted things that Alfred Wong said to him. He did not make any inquiry as to what Shan Pei was. Nor did he make any inquiry as to whether Shan Pei had any entitlement to receive money or property from Bellpac. Edgar Hung said that he trusted Alfred Wong's word.
208 Ken Hung and Austcorp further say that, even if Edgar Hung had grounds for suspecting that Bellpac might have been insolvent (which they deny), Edgar Hung was not Ken Hung's agent for all purposes. Where there is no duty for an agent to communicate knowledge to the agent's principal, the principal is not bound by any knowledge acquired by the agent if, at the time when the knowledge was acquired, the agent was not acting on behalf of the principal. Accordingly, they say, whatever knowledge Edgar Hung acquired as to Bellpac's insolvency (and they deny that there was any) was irrelevant to whether Ken Hung had knowledge of Bellpac's insolvency. They say that any knowledge that Edgar Hung had as to Bellpac's insolvency was acquired in the course of his activities as a senior executive of Austcorp, not as attorney for Ken Hung, and that Edgar Hung had no obligation to communicate that knowledge to his father.
209 In any event, Ken Hung and Austcorp say, the fact that Edgar Hung made no enquiries as to the extent of Bellpac's liabilities is a far cry from his being put on notice about potential insolvency. Edgar Hung said that, as at October 2008, he thought there were no solvency problems with Bellpac because, so far as he was aware, none of the other significant creditors of Bellpac, such as LM Investment, had taken any action against Bellpac.
210 Austcorp, independently of Ken Hung, also relies on s 588FG of the Corporations Act. Thus, Ken Hung and Austcorp say, Austcorp received no benefit from any transaction of Bellpac involving the assignment of the convertible bonds. Alternatively, they say, the executive of Austcorp who had carriage of the matter on its behalf, Edgar Hung, had no suspicions as to the possible insolvency of Bellpac, and, in the light of what Alfred Wong had told Edgar Hung about the continuing support of Bellpac by LM Investment, Austcorp had no reasonable grounds for suspecting that Bellpac was insolvent. LM Investment did not appoint the Liquidators as receivers and managers of Bellpac until 13 May 2009, more than six months later. Ken Hung and Austcorp say that Austcorp was simply a good faith assignee of the convertible bonds, which it accepted in return for the release of Alfred Wong's liability under the Indemnity Deed.
211 To the extent that a finding were made that Edgar Hung had reason to suspect Bellpac's insolvency, Austcorp's knowledge would be the same. Austcorp could not raise the argument concerning agency that was raised by Ken Hung.
212 In all of the circumstances, I consider that neither Ken Hung nor Austcorp received a benefit from the transaction whereby the convertible bonds were allegedly assigned by Bellpac. Accordingly, s 588FG would be an answer to a claim by the Liquidators and Bellpac for orders under s 588FF that the Impugned Transactions be avoided. I did not find Edgar Hung to be an impressive witness. Nevertheless, I would also be disposed to find, assuming that Ken Hung or Austcorp did in fact receive a benefit, that the benefit was received in good faith and in circumstances where there were no reasonable grounds for believing that Bellpac was insolvent.
213 The Liquidators and Bellpac invite the Court to infer that, even assuming that Shan Pei did acquire some proprietary interest in the convertible bonds, contrary to their primary contention, Shan Pei was nevertheless a knowing participant in breaches of statutory and fiduciary duty committed by Alfred Wong and Danny Au-Yeung and, accordingly, received the convertible bonds as constructive trustee for Bellpac. Shan Pei has not provided any evidence in response to the allegation of knowing participation, despite having been given the opportunity to do so and having indicated that it wished to do so.
214 Receipt from Alfred Wong, as seller, of a transfer of convertible bonds registered in the name of Bellpac, and signed by him as attorney for Bellpac, of which he was a director, would be sufficient to put the recipient of the transfer on notice of enquiry as to the circumstances in which Alfred Wong came to be beneficial owner of those convertible bonds. In the light of the evidence I have described above, the Liquidators and Bellpac contend that Ken Hung, through the knowledge of his attorney, Edgar Hung, knew of the relevant obligations, and of the misapplication of the assets of Bellpac, by reason of one or other of the following circumstances:
Edgar Hung had actual knowledge of the constructive trust and the misapplication of the trust property;
Edgar Hung deliberately shut his eyes to those things;
Edgar Hung abstained, in a calculated way, from making the enquiries that an honest and reasonable person would make about the constructive trust and the misapplication of the trust property; or
Edgar Hung knew of facts that would indicate to an honest and reasonable person the existence of a constructive trust in favour of Bellpac and the misapplication of the trust property.
215 Therefore, the Liquidators and Bellpac say, Austcorp and Ken Hung received a transfer of the convertible bonds subject to the constructive trust that had arisen in favour of Bellpac. Accordingly, they say, Ken Hung is liable to restore the convertible bonds to Bellpac. Ken Hung and Austcorp say, in response, that they received the convertible bonds as bona fide purchasers without notice of any claim by Bellpac.
216 It is by no means clear whether or not Shan Pei knowingly participated in breaches of statutory and fidicuiary duty committed by the directors of Bellpac. However, even assuming that it did, I would be disposed, in the light of what I have already set out, to find that Ken Hung and Austcorp were bona fide purchasers for value without notice of the convertible bonds, and, accordingly, that they were not bound by any constructive trust that had previously arisen in favour of Bellpac.
Consent of Secured Creditors
217 The 2008 Settlement Deed refers to Bellpac's entitlement to receive royalties from Gujarat in connection with the Mine. The Liquidators and Bellpac contend that that right was an asset of Bellpac within the terms of the securities that had been granted by Bellpac to LM Investment. Under clause 2.2 of the 2008 Settlement Deed, that right was compromised and converted into the right to receive the convertible bonds from Gujarat. The Liquidators and Bellpac accordingly contend that, at the time of the purported transfer of the convertible bonds to Shan Pei, the convertible bonds, being property in conversion of the royalty interest of Bellpac, constituted real property that was secured by mortgages in favour of LM Investment. By reason of the failure of Bellpac to pay its debts as they fell due and the breach of the terms of securities granted by Bellpac for the payment of the Bellpac Indebtedness, they say, the securities in favour of LM Investment crystallised. Accordingly, the Statement of Claim alleges, the right to receive the convertible bonds was property of Bellpac and the subject of the securities in favour of LM Investment, which had priority over the securities granted to Ace Bond in respect of the Bellpac Indebtedness. Thus, the Liquidators and Bellpac say, at the time of any purported dealing with the convertible bonds by Bellpac, the convertible bonds were charged with the repayment of the debt owing to LM Investment, and therefore could not be dealt with without the written consent of LM Investment.
218 Further, the Bellpac Indebtedness was conditionally assigned to Compromise Creditors as trustee for the GPC Creditors, who included Shan Pei, Burnaby, Sausalito, Pioneer and Hollis Ho. It was an express term of the Deed of Compromise that the operative provisions would not take effect unless and until certain conditions precedent were fulfilled. Those conditions precedent included the receipt of consents in a form reasonably acceptable to Compromise Creditors as trustee. The term consent was defined to mean such written consent as may be required from prior security holders to permit Compromise Creditors to receive the full benefit of the Deed of Compromise. LM Investment did not give any written consent for Bellpac to enter into the Deed of Compromise or the assignment of securities to Compromise Creditors.
219 The Liquidators and Bellpac contend that, in the absence of such consent, the purported assignment of the Bellpac Indebtedness to Compromise Creditors was ineffectual to pass any title to Compromise Creditors or any other person, including any beneficial title to the GPC Creditors. Accordingly, they say, Compromise Creditors did not become a creditor in law or in equity of Bellpac. The Impugned Transactions rest upon Compromise Creditors having become a creditor of Bellpac. If the Liquidators and Bellpac are correct, therefore, Compromise Creditors was not a competent assignor of the Bellpac Indebtedness to Shan Pei, and Shan Pei could not, on any version of the transaction, have become a creditor of Bellpac for $10,000,000, or even for the lesser amount specified in schedule 1 to the Deed of Compromise.
220 Ken Hung and Austcorp contend, on the other hand, that the argument I have just described is misconceived, and that it proceeds on a misconstruction of the provisions of the Deed of Compromise, and of the charge in favour of LM Investment. They claim that the phrase as may be required, which appears in the definition of consent in the Deed of Compromise, makes it clear that the Deed of Compromise did not itself require any consent to be obtained from prior security holders, including LM Investment. They further say that the charge in favour of LM Investment says nothing about whether consent would be required to a document that assigned moneys owed by Bellpac from one entity, namely the GPC Subsidiaries, to another, namely Compromise Creditors. Thus, they say, no property of Bellpac was affected by dint of the Deed of Compromise.
221 Ken Hung and Austcorp further contend that the Liquidators and Bellpac bear the onus of proving the alleged lack of consent on the part of LM Investment. They say that there is no evidence of that lack of consent, and, furthermore, that the available evidence, including the notice for the extraordinary general meeting of GPC, supports an inference that LM Investment in fact gave the relevant consent.
222 Those submissions on the part of Ken Hung and Austcorp carry some weight. I would not be disposed to find that the case of the Liquidators and Bellpac is strengthened by the arguments they have advanced as to lack of consent on the part of LM Investment. However, in the light of the other conclusions I have reached, it is not necessary to express a firm view on that question.
CONCLUSION
223 It follows from the conclusions reached above that I am not persuaded that Ken Hung became entitled to a beneficial interest in the $2,000,000 of convertible bonds in question. The Liquidators and Bellpac would therefore be entitled to a declaration that Bellpac is the true owner of the convertible bonds. They would also be entitled to an order that the certificates and the transfers signed by Alfred Wong be delivered up to them. The parties should be directed to bring in short minutes of orders giving effect to these reasons, and to make any submissions as they are advised on the question of costs.
224 However, there is a question as to whether the making of such declarations and orders as I have just foreshadowed could bear upon the position of the holders of the remaining convertible bonds. As I have set out above, the schedules provided by Gujarat's solicitors on 3 November 2009 disclosed that $6,000,000 of the original $10,000,000 of convertible bonds had been registered in the name of various other parties. The conclusion I have reached is that, on the evidence presently before the Court, the Impugned Transactions involving the assignment of the Bellpac Indebtedness and the assignment of the $10,000,000 of convertible bonds from Bellpac to Shan Pei were ineffective. I have also provisionally concluded that, if those transactions were effective, there may be a basis for setting them aside, subject to questions of defences of good faith and bona fide purchaser. Those conclusions could affect the position of the holders of the remaining convertible bonds, although their position is different from, and possibly stronger than, that of Ken Hung, in that they have become registered as the holders of the bonds.
225 In the circumstances, I consider that the appropriate course is to invite the parties to make submissions as to whether there is any basis upon which the holders of the remaining convertible bonds should be invited to be heard as to whether declarations and orders should be made as sought by the Liquidators and Bellpac. An alternative course would be for the Liquidators and Bellpac to undertake to the Court not to seek to impugn the title of the registered holders of the remaining bonds, as a condition of making the declarations and orders.
226 I am mindful of the fact that there is no issue presently before the Court as between Ken Hung and Austcorp, on the one hand, and Alfred Wong and Shan Pei, on the other hand. While orders made in this proceeding will create estoppels as between the Liquidators and Bellpac, on the one hand, and all of the defendants, on the other hand, there has been no submission as to the consequences as between the various defendants.
I certify that the preceding two hundred and twenty-six (226) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.
Associate:
Dated: 30 September 2011
APPENDIX 1
APPENDIX 2
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Uolilo v Minister for Home Affairs [2021] FCAFC 138
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2024-09-13T22:46:14.891731+10:00
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Federal Court of Australia
Uolilo v Minister for Home Affairs [2021] FCAFC 138
Appeal from: Uolilo v Minister for Home Affairs [2020] FCA 1135
File number: NSD 962 of 2020
Judgment of: NICHOLAS, YATES AND CHARLESWORTH JJ
Date of judgment: 6 August 2021
Catchwords: MIGRATION β where second respondent affirmed decision of a delegate of first respondent refusing to grant appellant a visa β where primary judge rejected all grounds of review relied on by appellant at trial β whether appellant should be granted leave to rely on new grounds of review on appeal that were not relied on before the primary judge β whether those grounds lacked merit β whether appellant's failure to raise them before primary judge was explained
Held: leave to rely on new grounds refused β appeal dismissed with costs
Legislation: Migration Act 1958 (Cth) ss 5, 5J, 36, 486I, 499, 501(1)
Migration Regulations 1994 (Cth)
Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, opened for signature 10 December 1984, 1465 UNTS 85 (entered into force 26 June 1987)
Convention Relating to the Status of Refugees, opened for signature 28 July 1951, 189 UNTS 137 (entered into force 22 April 1954)
International Convention for the Protection of All Persons from Enforced Disappearance, opened for signature 6 February 2007, 2176 UNTS 3 (entered into force 23 December 2010)
International Covenant on Civil and Political Rights, opened for signature 19 December 1996, 999 UNTS 171 (entered into force 23 March 1976)
Cases cited: BCH17 v Minister for Immigration and Border Protection [2018] FCA 300
Director of Public Prosecutions for Nauru v Fowler (1984) 154 CLR 627
Hossain v Minister for Immigration and Border Protection (2018) 264 CLR 123
Ibrahim v Minister for Home Affairs (2019) 270 FCR 12
Inco Europe Ltd v First Choice Distribution (a firm) [2000] 1 WLR 586
Lobban v Minister for Justice (2016) 244 FCR 76
Minister for Immigration and Border Protection v Le (2016) 244 FCR 56
Minister for Immigration and Border Protection v SZMTA (2019) 264 CLR 421
Minister for Immigration and Citizenship v SZJGV (2009) 238 CLR 642
MZAPC v Minister for Immigration and Border Protection [2021] HCA 17
Uolilo v Minister for Home Affairs [2019] FCA 336
Minister for Immigration and Ethnic Affairs v Daniele (1981) 61 FLR 354
Minister for Immigration and Ethnic Affairs v Gungor (1982) 63 FLR 441
Minister for Immigration and Multicultural Affairs v SRT (1999) 91 FCR 234
Ure v Commonwealth of Australia (2016) 236 FCR 458
Maxwell, On the Interpretation of Statutes, 12th ed (1969)
Division: General Division
Registry: New South Wales
National Practice Area: Administrative and Constitutional Law and Human Rights
Number of paragraphs: 87
Date of hearing: 4 February 2021
Counsel for the Appellant: Mr M Albert
Solicitor for the Appellant: Mayek Legal, Barristers & Solicitors
Counsel for the First Respondent: Mr G Johnson SC with Mr N Swan
Solicitor for the First Respondent: Australian Government Solicitor
Counsel for the Second Respondent: The second respondent submitted save as to costs
ORDERS
NSD 962 of 2020
BETWEEN: VALUFITU FIU UOLILO
Appellant
AND: MINISTER FOR HOME AFFAIRS
First Respondent
ADMINISTRATIVE APPEALS TRIBUNAL
Second Respondent
order made by: NICHOLAS, YATES AND CHARLESWORTH JJ
DATE OF ORDER: 6 August 2021
THE COURT ORDERS THAT:
1. The appeal be dismissed.
2. The appellant pay the first respondent's costs of the appeal as taxed or agreed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
NICHOLAS AND YATES JJ:
Introduction
1 Before the Court is an appeal from a judgment of a single judge of the Court dismissing the appellant's application for judicial review of a decision of the second respondent ("the Tribunal"). By its decision the Tribunal affirmed a decision of a delegate of the first respondent ("the Minister") under s 501(1) of the Migration Act 1958 (Cth) ("the Act") refusing to grant the appellant a Partner (Migrant) (Class BC) visa.
2 Before the primary judge, the appellant pressed six grounds of review all of which were rejected by her Honour. In his appeal, the appellant does not seek to identify any error in her Honour's reasons or approach. Rather, the appellant seeks to raise three new grounds which, he accepts, were not raised before the primary judge. Some parts of her Honour's reasons are relevant to the new grounds on which the appellant now seeks to rely but, as the grounds were not raised below, her Honour's reasons do not directly address them.
3 At the commencement of the hearing, the appellant was given leave to file an amended notice of appeal, which deletes six grounds of appeal broadly corresponding to the six grounds of review rejected by the primary judge and inserts three new grounds of appeal. The appellant was given leave to file that document on the express understanding that the Court would still need to determine whether he should be given leave to rely on any of the three new grounds.
Factual Background
4 The primary judge's reasons include a detailed account of the background to the appellant's application for judicial review. The following account of the relevant facts is drawn largely from her Honour's reasons.
5 The appellant, Valufitu Fiu Uolilo, is a Samoan national who has lived in Australia since 31 August 2014.
6 On 27 January 2012, the appellant married an Australian citizen and on 26 August 2013, sponsored by his wife, he applied for a Partner (Provisional) (Class UF) (Subclass 309) visa (the "temporary visa") and a Partner (Migrant) (Class BC) (Subclass 100) visa (the "permanent visa").
7 On 13 January 2013 the appellant was convicted in the Supreme Court of Samoa of two criminal offences, compendiously referred to by the Tribunal as "grievous bodily harm" and "armed with dangerous weapon". He was sentenced to two years' imprisonment for the first offence and nine months' imprisonment for the second offence. The sentences were to be served concurrently.
8 On 27 May 2014 the appellant submitted to the Australian authorities a Penal Clearance certificate, purporting to be issued by the Samoan Ministry of Police and Prisons, stating that the appellant "has passed the records verification conducted by the Samoan Police" with findings of "no [c]riminal or [t]raffic offences".
9 On 9 July 2014 the appellant was granted a temporary visa.
10 On 31 August 2014, having served seven months of his two-year sentence, the appellant absconded from jail, and flew from Samoa to Australia. On his incoming passenger card he ticked "No" against the question "Do you have any criminal conviction/s?" and declared the contents of the card to be true, correct, and complete.
11 On 12 September 2014 the Department of Immigration and Border Protection was advised that the appellant had escaped from jail and had travelled to Australia. A Penal Clearance Certificate was subsequently obtained from the Samoan Ministry of Police and Prisons which disclosed his convictions.
12 On 25 August 2016 the Department invited the appellant to comment on evidence suggesting that he had provided, or caused to be provided, a bogus document or false or misleading information in relation to his visa application, and as such may not satisfy the Public Interest Criterion ("PIC") 4020(1) (contained in Sch 4 Pt 1 of the Migration Regulations 1994 (Cth)).
The first decision
13 On 4 October 2016 a delegate of the Minister refused to grant the appellant a permanent visa on the ground that the appellant did not meet PIC 4020 because he had provided a bogus document to the Department, being the "Penal Clearance Certificate".
14 The delegate's decision was set aside by the Tribunal on 12 October 2017. The Tribunal was satisfied that the information was false or misleading at the time it was given. But the Tribunal considered that there were compassionate or compelling circumstances that justified the grant of the permanent visa so that the requirements of PIC 4020(1) should be waived. The Tribunal remitted the visa application for reconsideration with a direction that the appellant met PIC 4020.
The second decision
15 On 27 March 2018 a different delegate refused to grant the appellant a permanent visa under s 501(1) of the Act. The appellant applied to the Tribunal for a review of this decision.
16 The Tribunal affirmed the delegate's decision. Although it found that there were "weighty" considerations for setting aside the decision, it decided that those factors were outweighed by considerations favouring affirmation of the delegate's decision.
17 The Tribunal's decision was later quashed and a writ of mandamus issued requiring the Tribunal to determine the appellant's application for review according to law: see Uolilo v Minister for Home Affairs [2019] FCA 336.
The Tribunal's Decision
18 The proceeding before the primary judge concerned the subsequent (third) decision of the Tribunal made on 16 December 2019 on the rehearing of the application for review.
19 It was common ground that, because of the sentence he had received, the appellant did not and could not satisfy the Tribunal that he passed the character test. Accordingly, the only question for the Tribunal to determine was whether it should exercise its discretion to refuse the permanent visa under s 501(1). Taking into account all the evidence the Tribunal concluded that the primary considerations of protection of the Australian community and the expectations of the Australian community outweighed the other considerations and that the decision under review should be affirmed.
20 In light of the new grounds of appeal upon which the appellant seeks to rely, it is necessary to refer in some detail to three particular matters that were considered by the Tribunal.
21 The first concerns the appellant's sentence. The Tribunal said at [46]-[55]:
[46] The Applicant was convicted and sentenced to a term of imprisonment of 24 months for the offences of grievous bodily harm and being armed with a dangerous weapon by the Supreme Court of Samoa in relation to an incident which occurred in Samoa. On the basis of the evidence, this was a "one off" offence and there is no indication of any violent reoffending. Certainly no further charges have been laid.
[47] I note that paragraph 11.1(1) of the Direction is of particular importance in considering this issue. It provides as follows:
When considering the protection of the Australian community, decision-makers should have regard to the principle that the Government is committed to protecting the Australian community from harm as a result of criminal activity or other serious conduct by non-citizens. There is a low tolerance for visa applicants who have previously engaged in criminal or other serious conduct.
[48] The Applicant put forward a number of matters in mitigation of his offence including that the victim was the aggressor in the violent incident; that the Applicant acted only in self-defence; that he had never had any prior convictions; and that the police had told him to plead guilty when the matter was taken to court, that he did not need a lawyer and that the consequences would not be serious. In the Applicant's view, he was sent to prison because of a corrupt statement on the part of the police, made to the court.
[49] I accept that the Applicant did not have any previous criminal record. I also accept his evidence as to the circumstances of how the offences of which he was found guilty occurred.
[50] The difficulty for the Applicant is that the offences of which he was found guilty, namely grievous bodily harm and being armed with a dangerous weapon, are very serious. He does not deny assaulting the victim.
[51] The Applicant did not have a lawyer for the Supreme Court proceedings. He stated that he was told by the police that he did not need a lawyer and did not pursue the matter further.
[52] Whilst the Applicant is free to raise matters before the Tribunal related to his offence, the Tribunal cannot, and in my view should not, contradict or impugn a conviction by a Court, nor the facts upon which that conviction was based. This is well established in a number of cases including Minister for Immigration and Multicultural Affairs v "SRT" (1999) 91 FCR 234; Minister for Immigration and Ethnic Affairs v Daniele [1981] FCA 247; and Minister for Immigration and Ethnic Affairs v Gungor (1982) FLR 441 [sic].
[53] The Applicant was sentenced to a period of 24 months imprisonment. Given that imprisonment is usually a last resort, the severity of the offences is reflected in the length of that sentence. As Senior Member Poljak observed in PNLB and Minister for Immigration and Border Protection [2018] AATA 162 at [22] (footnotes omitted):
The seriousness of the applicant's conduct is reinforced by the sentences imposed on him (paragraph 13.1.1(c)). Sentences involving terms of imprisonment are the last resort in the sentencing hierarchy and any such sentence must be viewed as a reflection of the objective seriousness of the offences involved. In the present case, the applicant has been sentenced to period of imprisonment totalling 96 months (eight years) and 30 days as a result of his offences.
[54] The Applicant's conduct in Samoa would attract criminal penalties in Australia if he were to commit the same offences in this country.
[55] After he was convicted and sentenced the Applicant failed to serve his sentence as required and left the prison after serving only seven months in order to come to Australia. In evidence, the Applicant admitted that he knew that he was required to serve the full period of his sentence.
22 The second matter relevant to the new grounds of appeal concerns the Tribunal's consideration of the impact on victims were the permanent visa granted. The Tribunal dealt with this matter in a single sentence at [90] where it said that "[t]here is no evidence before the Tribunal of any impact on victims if the visa were granted".
23 The third concerns the Tribunal's consideration of Australia's non-refoulement obligations. The Tribunal observed that the appellant claimed that he would face significant harm if he were removed to Samoa because the manner in which he left Samoa had attracted media attention and shed light on "systematic" corruption in the Samoan justice system. The Tribunal noted his submission that this could give rise to non-refoulement obligations. The Tribunal said at [82]-[85]:
[82] It was submitted by the Applicant that he would face significant harm if he were to be removed to Samoa, and that this could give rise to non-refoulement obligations. He claims that he has these fears due to the manner in which he left Samoa which resulted in media attention which has shed light on systematic corruption in the Samoan police and prison systems.
[83] Paragraph 12.1(4) of the Direction provides as follows:
Where a non-citizen makes claims which may give rise to international non-refoulement obligations and that non-citizen is able to make a valid application for another visa, it is unnecessary to determine whether non-refoulement obligations are owed to the non-citizen for the purposes of determining whether their visa application should be refused.
[84] In Minister for Immigration and Border Protection v Le [2016] FCAFC 120, the Full Federal Court set out a non-exhaustive summary of principles relating to whether Australia's non-refoulement obligations are a mandatory consideration when exercising the discretionary powers conferred by subsections 501(1) or (2). Their Honours relevantly state at [61]:
β¦
(e) in determining whether or not to exercise the powers in s 501(1) or (2) of the Migration Act, Australia's non-refoulement obligations and the prospect of indefinite detention are not mandatory considerations in circumstances where it is open to the person whose visa has been refused or cancelled on character grounds to apply in Australia for a protection visa or some other visa (which visa application the decision-maker is legally bound to consider and determine) and the consideration of the visa application must involve regard being paid to the prospect of indefinite detention if the visa is refusedβ¦
[85] It is therefore not necessary for me to determine whether non-refoulement obligations are owed for the purpose of determining whether the visa should be refused as it is open to the Applicant to make an application for a protection visa. I note that if the Applicant were to make such an application, Direction no. 75 requires the decision-maker to assess whether the Applicant is owed protection obligations because they are a refugee (section 36(2)(a)) or are owed complementary protection (section 36(2)(aa)) before any character concerns are considered.
24 The Tribunal also considered the risk that the appellant might suffer harm at a more general level (ie. outside the context of Australia's non-refoulement obligations) if he were required to return to Samoa. The Tribunal said at [92]-[97]:
[92] The Applicant gave evidence at the hearing about corruption in Samoa, particularly in the police force. He said that he was at risk of serious harm if he were to be returned to Samoa, because his departure from Samoa having only served a portion of his prison sentence had focused adverse attention onto the police.
[93] The Applicant's wife said that he would be likely to be killed if he were to return to Samoa. A newspaper article was given in evidence which outlined the circumstances as to the death of a man in police custody in Samoa. The Respondent submitted that this article could be given little weight as there was no evidence linking those events to any likely treatment of the Applicant.
[94] The circumstances of the Applicant leaving Samoa certainly raise questions about the prison system and the police, as does the evidence that he was sent out from gaol to work each day but had to give the money earned to the police when he returned. Other media articles contained in the evidence indicate that there have been investigations into corruption in the Samoan prison system.
[95] It appears somewhat extraordinary that the Samoan authorities were so inattentive that the Applicant was able to get a new passport, purchase an airline ticket and board a flight to Australia all within a 24 hour period, without the authorities appearing to notice.
[96] On the basis of the limited evidence available, I find there is a risk of harm to the Applicant if he were to return to Samoa. The circumstances of his departure certainly appear extraordinary and it may be that he has drawn unwanted attention to failures in the system. Certainly the Samoan authorities want him back. There is however not sufficient evidence to enable a determination as to the degree of risk the Applicant personally would be likely to face and more evidence would be required in order to make such an assessment.
[97] Accordingly, I find that the Applicant is at risk of harm if he was to return to Samoa and that this weighs against a refusal to grant the visa. However, I attach very limited weight to this issue given the lack of evidence.
25 With regard to the Tribunal's reasons at [96]-[97], the primary judge found at [177] that it was open to the Tribunal to conclude that the evidence was insufficient to enable it to determine the degree of risk the appellant would likely face in Samoa and that this conclusion was neither legally nor factually unreasonable. None of her Honour's findings on that issue were challenged on appeal.
The New Grounds
26 The appellant seeks leave to rely on the following three grounds set out in the amended notice of appeal as follows:
Ground 1: The Tribunal erred by applying Direction No 79 when purporting to assess 'international non-refoulement obligations' arising from the claims of the Appellant in circumstances where:
(a) That was not, or was not a valid, direction under s 499 of the Migration Act 1958 (Cth) because it was inconsistent with the Act, and thus in breach of s 499(2); or
(b) Alternatively to a, that aspect of the Directions was not a relevant consideration to a visa refusal.
Ground 2: The Tribunal erred by making a finding on a critical matter required to be considered by the direction of the Minister under s 499 of the Migration Act 1958 (Cth) for which it failed to take into account relevant material or for which there was no evidence, namely that 'there was no evidence before the Tribunal of any impact on victims if the visa were granted'.
Ground 3: The Tribunal erred by applying the wrong law when it considered the sentence given to the Appellant, namely old case law concerning criminal judgments of Australian courts, rather than current case law, including case law dealing with judgments of foreign courts.
27 Curiously, the amended notice of appeal does not assert that any of the three errors referred to in grounds 1, 2 and 3 were jurisdictional errors. During the course of his argument, counsel for the appellant accepted that, in order for the appeal to succeed, it was necessary for the appellant to show jurisdictional error.
Relevant Statutory Provisions
28 Section 499 of the Act relevantly provides:
499 Minister may give directions
(1) The Minister may give written directions to a person or body having functions or powers under this Act if the directions are about:
(a) the performance of those functions; or
(b) the exercise of those powers.
(1A) For example, a direction under subsection (1) could require a person or body to exercise the power under section 501 instead of the power under section 200 (as it applies because of section 201) in circumstances where both powers apply.
(2) Subsection (1) does not empower the Minister to give directions that would be inconsistent with this Act or the regulations.
(2A) A person or body must comply with a direction under subsection (1).
β¦
29 Section 5 of the Act includes the following definition of "non-refoulement obligations":
non-refoulement obligations includes, but is not limited to:
(a) non-refoulement obligations that may arise because Australia is a party to:
(i) the Refugees Convention; or
(ii) the Covenant; or
(iii) the Convention Against Torture; and
(b) any obligations accorded by customary international law that are of a similar kind to those mentioned in paragraph (a).
The instruments referred to in s 5(a)(i)-(iii) of the Act are the Convention Relating to the Status of Refugees, opened for signature 28 July 1951, 189 UNTS 137 (entered into force 22 April 1954), the International Covenant on Civil and Political Rights, opened for signature 19 December 1996, 999 UNTS 171 (entered into force 23 March 1976) ("the ICCPR") and the Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, opened for signature 10 December 1984, 1465 UNTS 85 (entered into force 26 June 1987) ("the CAT") respectively.
Direction 79
30 Paragraph 5 of Direction 79 outlines the contents of the Direction. Relevantly, para 5 states that Part B of the Direction:
Identifies the considerations relevant to visa applicants in determining whether to exercise the discretion to refuse a non-citizen's visa application.
31 Part B includes various paragraphs including para 12 which relevantly states:
12. Other considerations - visa applicants
(1) In deciding whether to cancel a visa, other considerations must be taken into account where relevant. These considerations include (but are not limited to):
a) International non-refoulement obligations;
b) Impact on family members;
c) Impact on victims;
d) Impact on Australian business interests.
12.1 International non-refoulement obligations
(1) A non-refoulement obligation is an obligation not to forcibly return, deport or expel a person to a place where they will be at risk of a specific type of harm. Australia has non-refoulement obligations to non-citizens in Australia under the 1951 Convention relating to the Status of Refugees as amended by the 1967 Protocol (together called the Refugees Convention); the Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment (the CAT); and the International Covenant on Civil and Political Rights and its Second Optional Protocol (the ICCPR). The Act reflects Australia's interpretation of those obligations and, where relevant, decision-makers should follow the tests enunciated in the Act.
(2) The existence of a non-refoulement obligation does not preclude refusal of a non-citizen's visa application in Australia. This is because Australia will not remove a non-citizen, as a consequence of the refusal of their visa application, to the country in respect of which the nonΒrefoulement obligation exists.
(3) Claims which may give rise to international non-refoulement obligations can be raised by the non-citizen in response to a notice of intention to consider refusal of their visa under s501 of the Act, or can be clear from the facts of the case (such as where the non-citizen is an applicant for a protection visa)
(4) where a non-citizen makes claims which may give rise to international non-refoulement obligations and that non-citizen is able to make a valid application for another visa, it is unnecessary to determine whether non-refoulement obligations are owed to the non-citizen for the purposes of determining whether their visa application should be refused.
(5) If, however, the visa application being considered for refusal is a Protection visa application, the person will be prevented from making an application for another visa, other than a Bridging R (Class WR) visa (section 501E of the Act and regulation 2.12A of the Regulations refers). The person will also be prevented by section 48A of the Act from making a further application for a Protection visa while they are in the migration zone (unless the Minister determines that section 48A does not apply to them - sections 48A and 48B of the Act refer).
(6) In these circumstances, decision-makers should seek an assessment of Australia's international treaty obligations. Any non-refoulement obligation should be weighed carefully against the seriousness of the non-citizen's criminal offending or other serious conduct in deciding whether or not the non-citizen should be granted a visa. Given that Australia will not return a person to their country of origin if to do so would be inconsistent with its international non-refoulement obligations, the operation of sections 189 and 196 of the Act means that, if the person's Protection visa application were refused, they would face the prospect of indefinite immigration detention.
12.2 Impact on family members
(1) Impact of visa refusal on immediate family members in Australia, where those family members are Australian citizens, Australian permanent residents, or people who have a right to remain in Australia indefinitely;
12.3 Impact on victims
(1) Impact of a decision to grant a visa on members of the Australian community, including victims of the non-citizen's criminal behaviour, and the family members of the victim or victims, where that information is available and can be disclosed to the non-citizen being considered for visa refusal;
12.4 Impact on Australian business interests
(1) Impact on Australian business interests if the non-citizen's visa application is refused, noting that an employment link would generally only be given weight where visa refusal would significantly compromise the delivery of a major project or delivery of an important service in Australia.
Ground 1
32 Ground 1 of the notice of appeal does not identify the inconsistencies that are said to exist between the Act and Direction 79. However, in the appellant's written and oral submissions it was submitted that para 12.1 of the Direction is inconsistent with the Act in two respects.
33 First, the appellant submitted that the Direction defines "non-refoulement obligations" in a manner that is inconsistent with the Act. This was because para 12.1(1) refers to Australia's non-refoulement obligations under the Refugees Convention, the CAT and the ICCPR whereas Australia has other non-refoulement obligations arising under various other conventions. According to the appellant, para 12.1(1) is to be interpreted as an exhaustive, and therefore inaccurate, statement of Australia's non-refoulement obligations.
34 Second, the appellant submitted that para 12.1 of the Direction conflates "non-refoulement obligations" and "Australian's interpretation of these obligations" and that this was also inconsistent with the Act because it expressly distinguishes between them.
35 Paragraph 12.1(1) does not, in terms, state that the conventions and covenant referred to are the only sources of Australia's non-refoulement obligations. Nevertheless, in the appellant's submission, the specific reference to the three instruments coupled with the absence of the word "including" or any other word or words that would indicate that the references to the instruments are non-exhaustive would lead a decision-maker to conclude, upon a fair reading of the Direction, that the instruments referred to are the only sources of Australia's non-refoulement obligations.
36 According to the appellant, the Tribunal proceeded on the basis that the Direction was valid and that if, as he contended, para 12.1 was inconsistent with the Act, then this would amount to jurisdictional error because the Tribunal's consideration of the appellant's claims was informed by a mistaken understanding of the relevant law.
37 The appellant relied on the Full Court's decision in Ibrahim v Minister for Home Affairs (2019) 270 FCR 12 ("Ibrahim"). In that case the Full Court held that, when exercising the power under s 501BA(2) of the Act to set aside the revocation of a cancellation decision, the relevant decision-maker had made a jurisdictional error by declining to consider non-refoulement obligations because the decision-maker understood that Australia's non-refoulement obligations under international treaties, such as the Refugees Convention, and the protection obligations under s 36(2) of the Act, would be considered in the context of an application for a protection visa.
38 The Full Court found that this reflected a misunderstanding of the law. For example, the Full Court observed that "the internal relocation principle" by which persons may be found to be refugees within the meaning of the Refugees Convention if they have a well-founded fear of persecution in one part of their home country, and it would not be reasonable to expect them to relocate to another part, could not be considered when determining an application for a protection visa under s 36 of the Act. The Full Court referred to s 5J(1)(c) of the Act which was said to have the effect of removing the internal relocation principle from consideration in the context of an application for a protection visa. Their Honours noted the decision of Rangiah J in BCH17 v Minister for Immigration and Border Protection [2018] FCA 300 where his Honour said at [46]:
Following the amendments, in order to satisfy the "refugee" criterion, the person must have a "well-founded fear of persecution", which, under s 5J(1)(c) of the Act, requires that the real chance of persecution "relates to all areas of a receiving country". Section 5J(1)(c) represents a significant narrowing of the "internal relocation" principle. In SZATV v Minister for Immigration and Citizenship (2007) 233 CLR 18 at [22], [78]-[81], the High Court held that a person would be excluded from refugee status under the Refugees' Convention if, under all the circumstances, it would be reasonable to expect the person to seek refuge in another part of his or her country. The High Court held at [24] that what was "reasonable" depended upon the particular circumstances of the person and the impact upon that person of relocation within the country of nationality. Section 5J(1)(c) does not leave any room for consideration of the reasonableness of internal relocation. Under that provision, a person is not a "refugee" if there is some area of the receiving country where there is no real chance of the person being persecuted for reason of race, religion, nationality, membership of a particular social group or religion.
39 In Ibrahim the Full Court noted that counsel for the appellant had submitted that the internal relocation principle was potentially relevant to the appellant because of the claim that the appellant had a well-founded fear of persecution in the North of Nigeria. It does not appear to have been submitted on behalf of the Minister that the internal relocation principle was not relevant to the appellant's case or that its relevance was purely hypothetical in nature. The Full Court, in finding that there had been a jurisdictional error in Ibrahim, accepted that the differences between Australia's non-refoulement obligations under the Refugees Convention and the criterion to be applied under s 36(2) when read with s 5J(1)(c) of the Act were material to the appellant's case.
40 In the present case the appellant submitted that the whole of the Direction is invalid if any part of it was not authorised by the Act. He submitted that it must follow that the Tribunal committed jurisdictional error in purporting to follow it.
41 However, the critical question is whether the Direction, or any relevant part of it, led the Tribunal into error in a manner that affected the exercise of its jurisdiction according to law: Hossain v Minister for Immigration and Border Protection (2018) 264 CLR 123 at [29]-[31], Minister for Immigration and Border Protection v SZMTA (2019) 264 CLR 421 at [45]-[46], MZAPC v Minister for Immigration and Border Protection [2021] HCA 17 at [32]-[39]. In our opinion there is no reason to think that the Tribunal was led into error or, even assuming that it was, that any such error could have in any way affected the exercise of the Tribunal's jurisdiction.
42 Paragraph 12.1(4) of the Direction states that where a non-citizen makes claims which may give rise to international non-refoulement obligations and that non-citizen is able to make a valid application for another visa, it is unnecessary to determine whether non-refoulement obligations are owed to the non-citizen for the purpose of determining whether their visa application should be refused. In the present case it is not disputed that it was (and remains) open to the appellant to apply for a protection visa.
43 As the Tribunal noted, the appellant submitted that he would face significant harm if he were to be removed to Samoa, and that this could give rise to non-refoulement obligations. Having noted this claim, the Tribunal then referred to para 12.1(4) of the Direction and the Full Court's decision in Minister for Immigration and Border Protection v Le (2016) 244 FCR 56.
44 The Tribunal found that there was a risk of harm to the appellant if he were to return to Samoa. However, it went on to state that there was insufficient evidence to enable it to determine the degree of risk the appellant would likely face and that more evidence would be required in order to make such a determination.
45 The Tribunal went on to state that, although the appellant was at risk of harm if he returned to Samoa and that this weighed against a refusal to grant the visa, it would attach limited weight to this issue given the lack of evidence.
46 It follows that the Tribunal considered the appellant's claim that he may suffer harm if he was returned to Samoa and the limited evidence supporting that claim, and took this into account when deciding whether or not to grant the appellant a permanent visa.
47 So far as concerns the differences between Australia's non-refoulement obligations arising under an international treaty such as the Refugees Convention, and the criteria for the grant of a protection visa, the appellant did not identify any difference between the two that might be considered relevant to his claims. It was not suggested, for example, that the internal relocation principle was relevant to his claims; nor was the appellant able to identify any other non-refoulement obligation upon which he did rely, or could have relied, before the Tribunal.
48 Although the appellant's counsel made some general references to other international treaties to which Australia is a party which impose non-refoulement obligations, it was not suggested that any of them apply in the case of the appellant or that the Tribunal committed any jurisdictional error by failing to have regard to them. Counsel did refer us to the International Convention for the Protection of All Persons from Enforced Disappearance, opened for signature 6 February 2007, 2176 UNTS 3 (entered into force 23 December 2010) ("the ICPPED"). However, Australia is not a party to the ICPPED. Other nations not party to it include the United States, Canada, the United Kingdom and New Zealand.
49 Article 2 of the ICPPED provides:
For the purposes of this Convention, "enforced disappearance" is considered to be the arrest, detention, abduction or any other form of deprivation of liberty by agents of the State or by persons or groups of persons acting with the authorization, support or acquiescence of the State, followed by a refusal to acknowledge the deprivation of liberty or by concealment of the fate or whereabouts of the disappeared person, which place such a person outside the protection of the law.
Article 16 of the ICPPED provides:
(1) No State Party shall expel, return ("refouler"), surrender or extradite a person to another State where there are substantial grounds for believing that he or she would be in danger of being subjected to enforced disappearance.
(2) For the purpose of determining whether there are such grounds, the competent authorities shall take into account all relevant considerations, including, where applicable, the existence in the State concerned of a consistent pattern of gross, flagrant or mass violations of human rights or of serious violations of international humanitarian law.
50 Counsel for the appellant submitted that obligations under the ICPPED (and specifically the obligation contained in art 16) could form part of customary international law and, if so, that they would fall within the definition of non-refoulement obligations contained in s 5(b) of the Act.
51 Counsel for the appellant did not develop the argument that art 16(1) reflects an obligation under customary international law in either written or oral submissions. A review of the transcript shows that the only submission made on this point was that the Convention "has been signed by a very significant number of states, and β¦ express[es a] non-refoulement obligation".
52 The Full Court considered the principles governing the ascertainment of rules of customary international law in Ure v Commonwealth of Australia (2016) 236 FCR 458 at [29]. These principles are well established and require evidence of a general practice of States that is extensive and virtually uniform and which is accepted by States as law (opinio juris). The case advanced by the appellant falls far short of establishing that art 16(1) of the ICPPED reflects an obligation of customary international law.
53 In any event, art 16(1) refers to "substantial grounds" for believing that a person would be in danger of being subjected to enforced disappearance. The Tribunal did not accept that the appellant was at risk of serious harm if he was returned to Samoa: see the Tribunal's reasons at [92]-[96].
54 In those circumstances it is not open to conclude that any failure to consider whether Australia owed the appellant a non-refoulement obligation to the effect of that contained in art 16 of the ICPPED under customary international law could have given rise to any jurisdictional error.
55 In our opinion, this case does not provide a suitable vehicle to consider the correctness of the appellant's arguments concerning the validity of para 12.1(4) of the Direction. But assuming that the appellant is correct (we express no view on the point), we do not think this is a case where any jurisdictional error could arise.
56 The appellant also submitted that on the proper construction of para 12(1) of Direction 79, the various matters referred to in paras 12.1, 12.2 and 12.3 were, contrary to the view of the Tribunal, not matters that it was required to take into account when deciding whether to grant the appellant a visa. This was because, according to the appellant's submission, para 12(1) refers to "cancel a visa" rather than "refuse a visa".
57 As counsel for the appellant expressly conceded before the primary judge, para 12(1) mistakenly refers to cancellation of a visa rather than a grant of a visa. It is apparent from the clear language of para 5 that Part B of the Direction, including the whole of para 12, is concerned with the consideration of an application for a visa. The words "cancel a visa" as used in para 12(1) is an obvious drafting error. The appellant was right to concede this point before the primary judge.
58 From time to time courts are required to adopt an interpretation of legislation, sometimes referred to as a "rectifying interpretation", that corrects what is an obvious drafting error: see, for example, Director of Public Prosecutions for Nauru v Fowler (1984) 154 CLR 627 at 630, Minister for Immigration and Citizenship v SZJGV (2009) 238 CLR 642 at [9] per French CJ and Bell J citing with apparent approval a passage in Maxwell, On the Interpretation of Statutes 12th ed (1969) at 228 and the speech of Lord Nicholls of Birkenhead in Inco Europe Ltd v First Choice Distribution (a firm) [2000] 1 WLR 586. In the present case this would involve interpreting the words "cancel a visa" in para 12(1) to read "refuse a visa".
59 It is obvious from the heading to para 12(1) and the context provided by other relevant provisions in Part B that this is how the clause is to be interpreted. The appellant's argument to the contrary has no merit. It is also inconsistent with the position adopted by the appellant before the primary judge.
ground 2
60 Paragraph 12(1) of the Direction required the decision-maker to take into account where relevant the impact of a decision to grant a visa on members of the Australian community, including victims of the non-citizen's criminal behaviour. At [90] of its reasons, the Tribunal said that "[t]here is no evidence before the Tribunal of any impact on victims if the visa were granted".
61 The appellant submitted that the Tribunal erred in so holding. He submitted that the evidence showed that a decision to grant the appellant a visa would have had no impact on the victim. He further submitted that the Tribunal's consideration of "impact on victims" should have weighed in favour of granting the appellant a permanent visa.
62 It is common ground that the evidence before Tribunal indicated that the victim of the appellant's crimes had relocated from Samoa to New Zealand. In those circumstances the impact of any decision to grant a visa to the appellant on the victim was not a mandatory consideration because the victim was not a member of the Australian community.
63 Further, we are not satisfied that the appellant ever submitted to the Tribunal that para 12.3(1) raised a consideration that should weigh in his favour. We therefore consider that the Tribunal was entitled to treat this consideration as neutral in the sense that it weighed neither against nor in favour of the grant of a visa.
64 Finally, we think the Tribunal's finding at [90] is, when fairly read, properly understood as referring to the absence of any evidence that the grant of the visa would have any adverse impact on any victim of the appellant's crimes. The brevity of the Tribunal's finding on the point no doubt reflects the fact that it was never suggested that the grant of the visa would have any such impact. In our opinion ground 2 lacks merit.
Ground 3
65 We have previously referred to [52] of the Tribunal's reasons where it said that the Tribunal cannot, and should not, contradict or impugn a conviction by a court, nor the facts upon which that conviction was based. In support of that proposition, the Tribunal referred to Minister for Immigration and Ethnic Affairs v Daniele (1981) 61 FLR 354, Minister for Immigration and Ethnic Affairs v Gungor (1982) 63 FLR 441 and Minister for Immigration and Multicultural Affairs v SRT (1999) 91 FCR 234. It is common ground that each of those decisions was concerned with convictions recorded and sentences imposed by Australian courts.
66 We have also referred to [53] of the Tribunal's reasons in which it discusses the sentence imposed on the appellant. The Tribunal said that, since imprisonment is usually a last resort, the severity of the offences is reflected in the length of the sentence. The Tribunal then referred to observations made by a differently constituted Tribunal which noted that "[s]entences involving terms of imprisonment are the last resort in the sentencing hierarchy and any such sentence must be viewed as a reflection of the objective seriousness of the offences involved".
67 The appellant submitted that those observations can only apply to sentences imposed by Australian courts and are not necessarily true of sentences imposed by foreign courts. The appellant submitted that the Tribunal committed an error of law by "treating a foreign judgment as if it is an Australian judgment" giving the former the deference and weight afforded to the latter.
68 The appellant submitted that imprisonment is not, or at least may not be, the punishment of last resort in other countries and that the severity of the appellant's offences could not be determined by reference to the fact that a prison sentence of 24 months was imposed. According to the appellant, the Tribunal's error in relying on the sentence imposed in assessing the severity of the appellant's offences was compounded by the absence of any sentencing remarks to which decision-makers usually have regard in assessing the seriousness of an offence. The sentencing remarks of the Supreme Court of Samoa were not in evidence.
69 The appellant also submitted that the approach of the Samoan Supreme Court was very different to the approach that would be taken by an Australian court. He pointed to the fact that the 24 month prison sentence had been imposed in relation to one incident of violence perpetrated against an adult male colleague by an offender with no criminal record. He also relied on the fact that the sentencing court took matters into account that would not be taken into account if the appellant had been sentenced by an Australian court including his lack of involvement in the Church.
70 In his written submissions counsel for the appellant made clear that his client did not seek to dispute the fact of his conviction, or the sentence imposed, but what he did put in issue was the appropriateness of that sentence in light of the appellant's conduct.
71 The first matter to note about the appellant's submissions is that he did not seek to put in evidence before the Tribunal any sentencing remarks. In considering the appellant's offending, the Tribunal was therefore left to consider the nature of the offences, the sentence imposed, and the account given by the appellant.
72 The second matter to note about the appellant's submissions is that they give no weight to the explicit consideration the Tribunal gave to the appellant's account of the circumstances in which the offences were committed, the absence of any prior convictions, that he had been encouraged to plead guilty by the police, and that he was unrepresented before the Supreme Court of Samoa.
73 The Tribunal noted that the appellant did not have a prior criminal record and accepted his evidence as to the circumstances in which the offences occurred. However, after considering all of the material before it (including the appellant's account) the Tribunal found that those offences were very serious.
74 In describing the appellant's offences as very serious the Tribunal did not suggest that an Australian court would have imposed the same or a similar sentence had he been convicted in Australia. Rather, it observed that the appellant's conduct in Samoa would attract criminal penalties in Australia were the same offences committed here.
75 In our opinion the Tribunal took into account the circumstances of the appellant's offending and concluded, independently of the sentence imposed by the Supreme Court of Samoa, that the appellant had committed a violent assault in which he inflicted grievous bodily harm on his unarmed victim by striking him with a metal pipe.
76 The third matter to note is that the offences for which the appellant was sentenced were not the only matters relied upon by the Tribunal when considering the risk to the Australian community.
77 As the Tribunal outlined at [61] of its reasons, not only had the appellant been convicted of serious criminal conduct, he had engaged in further serious conduct by not serving his prison sentence, and by engaging in what the Tribunal characterised as "a pattern of ongoing deception of the relevant Australian authorities" which the Tribunal said "must be viewed extremely seriously". In light of those matters the Tribunal considered that the risk to the Australian community weighed heavily in favour of refusal of the appellant's application for a permanent visa.
78 It is true that the Tribunal stated at [53] of its reasons that imprisonment is usually a last resort and that the severity of the appellant's offences was reflected in the length of the sentence imposed on him. We accept that this approach to sentencing does not necessarily reflect the approach taken in all jurisdictions. However, this is acknowledged by the Tribunal by its use in [53] of the word "usually".
79 Similarly, the length of a prison sentence imposed by courts in some foreign jurisdictions may not accurately reflect the severity of the offence when assessed by reference to sentencing principles applied by Australian courts. Some courts may apply different principles that lead them to impose different sentences than would be expected were the matter dealt with by an Australian court. This may be due to different statutory penalty regimes, the existence of mandatory minimum sentences, a "two-stage" rather than instinctive synthesis approach to sentencing, prescribed guilty plea discounts, or different levels of prosecutorial discretion. When considering the approaches taken to sentencing by foreign courts, it may therefore not be helpful to make generalised statements.
80 In any event, we are not persuaded that any error of the kind postulated by ground 3 could have had any impact on the outcome of the review. It is clear from the Tribunal's reasons that it was independently satisfied that the appellant's criminal conduct was serious and that, when regard was had to that conduct and the subsequent conduct to which the Tribunal referred, it was satisfied that the protection and the expectations of the Australian community outweighed all other relevant considerations. In our opinion the appellant has failed to establish that any error of the kind identified in ground 3 would, even if made out, amount to a jurisdictional error.
Disposition
81 Each of grounds 1 to 3 in the appellant's notice of appeal relates to a matter that was not raised before the primary judge. The appellant has not provided any explanation for his failure to advance any of those grounds below except to point to a change in counsel. In the absence of any other explanation, and having regard to their lack of merit, we think the appropriate course is to refuse the appellant leave to rely on any of his three grounds of appeal. In the result, the appeal will be dismissed. The appellant must pay the first respondent's costs of the appeal as taxed or agreed.
I certify that the preceding eighty-one (81) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Nicholas and Yates.
Associate:
Dated: 6 August 2021
REASONS FOR JUDGMENT
CHARLESWORTH J:
82 I have had the benefit of reading the reasons for judgment of Nicholas and Yates JJ in draft. I agree that there should be no grant of leave to introduce the three grounds of appeal and that, accordingly, the appeal must be dismissed.
83 For the three reasons given below, I would refuse to grant leave to introduce the new arguments, even if it could be shown that they have reasonable prospects of success.
84 First, as has been identified, the appellant was legally represented in the proceedings at first instance. No explanation has been given for the failure to advance the arguments before the primary judge, other than to say that there has been a change of counsel. It is plainly not in the interests of justice to entertain arguments in circumstances where the arguments have previously been considered by a party's legal representative and where a decision has been made not to advance them. Whether or not that has or has not occurred is a question of fact. In the absence of any evidence bearing on the topic I am not prepared to draw an inference that the arguments were not previously considered. There are no obvious indications of incompetency or other concerns affecting the quality of the appellant's legal representation in the proceedings before the primary judge. It is not otherwise in the interests of justice to permit an argument to be raised merely because different counsel may adopt a different approach to the same materials, even if the matter be one involving a claimed fear of harm. To the contrary, the practice of incoming counsel abandoning all that has gone before and introducing a wholly new case at the appellate level is to be discouraged.
85 Second, the jurisdictional errors alleged in the three proposed grounds do not raise issues of general significance to any other case: cf Lobban v Minister for Justice (2016) 244 FCR 76.
86 Third, it is a requirement of litigation relating to a migration decision that the litigation has reasonable prospects of success, in all cases where the litigation is commenced by a lawyer: Migration Act 1958 (Cth), s 486I. Demonstration of an arguable case is of course necessary. But it cannot be regarded as a sufficient base warranting leave to run a new case.
87 If I am wrong in identifying these reasons as sufficient of themselves to warrant the refusal of the grant of leave, then I would refuse leave for the additional reason that the grounds lack merit. I agree with all that has been said by Nicholas and Yates JJ in that regard.
I certify that the preceding six (6) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Charlesworth.
Associate:
Dated: 6 August 2021
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federal_court_of_australia:fca/single/1981/1981FCA0051
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decision
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commonwealth
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application/pdf
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1981-05-05 00:00:00
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Trade Practices Commission v Westco Motors (Distributors) Pty Ltd trading as Westco Motors NSW [1981] FCA 51
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/1981/1981FCA0051.pdf
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2024-09-13T22:46:15.136776+10:00
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βCATCHWORDS.
Practice and procedure - joinder of additional respondents -
jurisdiction to permit joinder where respondents are not
necessary parties - Federal Court Rules Order 6 Rules 2 and
8.
Trade Practices Commission v. Westco Motors (Distributors) Pty.
Limited trading as_WESTCO MOTORS N.S.W.
No. N.S.W. G 34 of 1979
Coram: Sheppard J
Date: 5 May, 1981 .
Sydney
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY G. 34 of 1979
GENERAL DIVISION
In the matter of -
THE TRADE PRACTICES ACT 1974
Between
TRADE PRACTICES CCMMISSICN
Plaintiff
and
WESTCO MOTORS (DISTRIBUTORS) PTY.
LIMITED trading as_WESTCO MOv0xS ".S.W.
Defendant
JUDGE MAKING ORDER: Sheppard J.
DATE OF ORDER > 2 May, 1981
WHERE MADE : Sydney
THE COURT ORDERS THAT :
1. The proceedings continue under the Rules of Court which
came into force on 1 August, 1979.
2. Leave be given to the plaintiff to join as defendants in the
proceedings Cyril William Anderson and Donald Cleuide 3lair.
3. The plaintiff have leave to file an amended statement of
claim in terms of the document initialled and dated dy
Sheppard J and left with the papers.
4, Costs of the argurent on the questions of joinder and amend-
ment to be costs in the proceedings.
IN THE FEDERAL COURT OF AUSTRALIA }
NEW SOUTH WALES DISTRICT REGISTRY G. 34 of 1979
GENERAL DIVISION
In the matter of -
THs TRADE PRACTICES ACT 1974
Between
TRADE PRACTICES COMMISSION
Plaintiff
and
WESTCO MOTORS (DISTRIBUTORS) PTY.
MUTE rading as #ESTCO MOTORS
W.s.a.
Defendant
; 5 May, 1981
CORAM: SHEPPARD J. 2
JUDGMENT
(On application for leave to amend Statement
of Claim and to join additional defendants)
The plaintiff in this matter seeks to file an amended
Statement of Claim. By the amendment the plaintiff seeks
to join as defendants two persons, Messrs. Anderson and
Blair, not yet parties to the proceedings. The plaintiff
also seeks to add a further paragreph to the Statement of
Claim in which is made an additional allegation of breach
by the existing defendant, as well as by the defendants to
be added, of s.48 of the Trade Practices Act 1974. The
additional defendants are said to be persons who have beer,
directly or indirectly, knowingly concerned in or party to
the contraventions of the Act alleged against the existing
defendant - see s.76 of the Act.
The application 1s opposed upon the basis that there
are questions concerning the Court's jurisdiction to permit
the joinder of the new defendants, and also on the ground
that it ought not to allow the amendment or the joinder by
reason of matters going to the exercise of its discretion.
Before I proceed, there is a preliminary zatter to be
dealt with. The action was commenced by summons filed on
29 June, 1979. That was before the existing rules came into
force on 1 August, 1979. Rule 1 of Order 64 provides that
proceedings commenced prior to the date when the existing
rules came into operation are to continue uncer the repesled
rules, "subject to any order or direction of the Court or a
tt
Judge ". Thus, at the time that this matter was argued the
existing rules had no application. To that extent the argu-
ment in this matter proceeded upon a false basis. It sas
only after I had prepared these reasons that I Loticed that
the matter had been commenced before the coming into force
of the existing rules. I thereupor svoke to both counsel
about the problem. Having obtained instructions, they have
agreed that I should make an order pursuant to Order 64 Rule 1
that the proceedings henceforth continue under tne new or
existing rules. If that be done the new rules will here-
after apply and the rules relied upon by counsel for the
plaintiff for the joinder of the new parties will be applicable.
As a first matter, therefore, I order by consent that the
proceedings continue under the Rules of Court which came into
force on 1 August, 1979.
A formal consequence of the making of that order will be
that the parties will respectively become apvlicant and
respondent instead of plaintiff and defendant. I have not,
however, thought it necessary to change their titles 1n this
judgment.
I return to deal with the questions of substance which are
in issue. In the submission of coursel Zor tne plaintif?
there is jurisdiction to permif the joinder of tue new Jefendants.
Reliance was placed cumulatively and alternatively upor: the fro-
visions of Rules 2 and 8 of Order 6 of the Rules. I deal first
with submissions concerning the applicability of Order 6 Rule 8.
So far as it 1s relevant the Rule vrovides as follovs:
"8.(1) Where a persor who 1s not a party -
(a? ought to have been joined as a party; or
(b) 1s a person whose joinder as a party is necessary
to ensure that all matters in dispute in the vro-
ceeding may be effectually and completely determined
and adjudicated upon,
the Court, on application by hin or ey aly party or of its
own motion, may order that he be added as a party and make
: fal "
orders for the further conduct of the proceeding.
In the submission of counsel for the defendant the ney
defe.idants are ne1ther persons who ousht to ave been joined
2A.
as parties or persons whose joinder as parties is
necessary to ensure that all matters in dispute in
the proceeding may be effectually and completely
determined and adjudicated upon. In my opinion that
submission, i8 sound. The breaches of the Act to be
relied upon against each of the defendants are separate
and independent breaches. If the defendants are liable
for the penalties for which the plaintiff sues their
liability will be several and not joint. The action
as presently constituted is one in which the existing
defendant is sued for penalties for breaches of s.48 of
the Act. The action is properly constituted as to
parties and there is no person other than the first
defendant who is interested or concerned in the relief
which is Claimed. All matters in dispute in the proceed-
ing may be effectually and completely determined and
adjudicated upon in the proceedings as they are presently
constituted.
My conclusion in this regard finds support in some
of the jguagments of the members of the House of Lords in
Vandervell Trustees Limited v. White (1971) A.C.912. The
Court was there concerned with the then equivalent of the
English Rules, Order 15 Rule 6(2). The wording of the
rule was similar to that of the rule now under consideration.
It may be that there was less connection between the causes
3.
of action of the defendants in that case than there is
in the present. It may be also true to say that 1Β’ was
inappropriate, because of the provisions of the income tax
legislation there in question, for the two causes of action
and the two defendants to be joined at all in the one set
of proceedings. But Lord Morris said that the matters
in dispute between the executors and the trustees could be
effectively and completely determined and adjudicated upon
an the absence of the other party (p.930). It followed
that in his opinion the presence of the other party was
not shown to be "necessary" within the meaning of the rule.
Viscount Dilhorne expressed a similar view (p.936), adding
that the rule does not give power to add a party whenever
1t 1s gust or convenient to do so. I refer also to what
was said by Lord wilterforce (p.940),
In saying what I have I do not wish to be taken as
accepting without qualification the dictum of Devlin J.(as
he was) in Amon v. Raphael Tuck & Sons Limited (1956) 1 Β«u.5.
357 at p.380. His Lordship said:
"The court might often think it convenient or
desirable that some of such persons should be
heard so that the court could be sure that 1t
had found the complete answer, but nce one would
sugeest that it 1s necessary to hear then for
that purpose, The only reason whicn makes 1t
necessary to make a verson a party to an action
1s so that he should be cound by the result of
the action, and the juestion to be settled
therefore must be a question in the action which
cannot be effectually ana completely settled
unless he 1s 2 party."
Although that dictum has been applied in later cases -
see for example, The Result (1958) P.174 - 1t has also been
criticised. I refer to Gurtner v. Circuit (1968) 2 92.5.587
at pp.595 and 602. On the other hand it should be noticed
that Gurtner's case was decided before Vandervell and that
the two judges critical of what Devlin J. had said in the
Amon case were Lord Denning M.R. and Diplock L.J. (as he was).
Lord Denning's view of the rule was not accepted by some of
the members of the House of Lords in Vendervell; and, although
Lord Diplock was a member of the Bench which decided Vandervell,
he found it unnecessary to express a view on the meaning and
effect of the rule. All I wish to say 2pout Gurtner and
cases in which it has been followed since Vandervell was
decided (I refer to Bradvica v. Radulovic (1975) V.2.434 and
McIntosh v. Williams (1979) 2 N.S.W.L.R. 543) 1s that it and
the otner cases to which I have referred are cases very
different from the present. They are ceses in which tne
rights and/or liabilities of other parties were plainly
iunvolved.
I turn to consider Order 6 Rule 2. It provides as
follows:
"Two or more persons may be joined as applicants
or respondents in any proceeding -
(a) where -
(i) aif a separate proceeding were brought
by or against eacn of them, as the case
may be, some common question of iaw or
of fact would arise in all tne pro-
ceedings; and
"(ii) all rights to relief claimed in the
proceeding (whether they are joint,
several or alternative) are 1n respect
of or arise out of the same transaction
or series of transactions; or
(b) where the Court gives leave so to do."
Rule 4(1) provides that the Court may grant leave under
Rule 2 before or after the goinder. Rule 4(2) vrovides
than an applicant may apply for leave under Rule 2 either
before or after the filing of his originating process and
may apply without serving notice of the motion on any
person on whom the application has not been served.
I was at first inclined to think that the provisions
of Rule 2 afforded the plaintiff no assistance. But on
reflection I think tnat the case 1s one which comes within
Rule 2(b). Originally I read the rule as if it proviced
that an applicant might join two or more persons as
responaents where there was 'some common question of fact
or law or where the rights to relief claimed were in
respect of or arose out cf the same transaction or series
of transactions, and Rule 2(b) appliec to other classes of
cases, Plainly the present case falls within wle 2(a)
so that 1f the jgoinder had been mace originally, it woula
have ceen proper. That might lead one to think that a
case such as this does not fall within ~wle 2(c).
But one has to consiser the operation of Rule 4, It
enables the Court to grant leave berore or after the
concer. In those circumstances 1t weuid seem to ne
that a case which otherwise falls within Rule 2(a) may
also fall within Rule 2(b) if the parties sought to be
added were not originally joined. What it comes down to
is that an applicant may goin pursuant to Rule 2(a) without
leave 1f the goinder is of respondents in a proceeding
which 1s within that part of the rule. For all other
goinders he requires leave, whether they be jgoincers in
proceedings not falling within Rule 2(a), or goinders sought
to be made after the commencement of proceedings in pro-
ceedings otherwise within that provision. Senior counsel
for the existing defendant did not put a positive submission
to the contrary, although he said - and I agree - that the
matter 1S not clear.
In the course of argument reference was made to the
distinction whicn there 18 between Rules 2 and 8. There
is a question as to the need for Rule 8, if Rule 2 has
the effect contended for by counsel for the plaintiff. But
I think the explanation is to be found in tne historical
development of Rule 8 which was a provision designed
originally to overcome pleas in abatement, I have also
taken into account the fact that after Vandervell's cases
the Englisn eguivalent of rule 8 was amended to enadle
the court to permit goiander of another party wnrere it was
gust or convenient so to do, These two matters must ce
wiven weight, but tney do not persuade me that tae
anterpretation of the rule which I think should be acopted
is incorrect. I should add that neither counsel was
able to refer me to any authority which is in point,
notwithstanding that I gave leave to both counsel to put
in written submissions after I reserved my decision. Β»siy
own researches have not brought forth eny relevant
authority.
I should perhaps mention that 1f I had been against
the application which 1s now made, the position could have
been overcome by the commencement by the plaintiff of
separate proceedings against the new defendants and
consolidation of the existing proceedings and the new
proceedings. without wishing to pre-empt any future
exercise of discretion by any of the Judges of this Court
including myself I would have thought tnet tnis would have
been a clear case for the making of an order pursuant to
Order 29 Rule Β» the words of whicn follow closely those of
Order 6 Rule 2, The matters I have decided are therefore,
to a degree, academic,
For the above reasons I am satisfied that I have
jurisdiction to allow the goinder of the additional
defendants. The question 18 whetner I shculd exercise my
dascretion in favour of doing so. This tatter hes been
mentioned on a numter of occasions. The perties have been
endeavouring to arrive at an agreed statement cf fzcte.
t Ss 8 respect lave ay.egrently failed. In
the course of their discussions the legal representatives
of the plaintiff raised with those of the existing
defendant the question of whether that defencant would be
able to meet any judgment entered against 1t. Eventually
a letter was written by the solicitor for the plaintiff to
the solicitors for the defendant. It was in the following
terms:
"I refer to proceedings in the Federal Court
of Australia on 5 February 1981 and to a
telephone conversation between Mr. Bayliss of
your office and Mr. Brown of my office on
13 February 1981.
I am instructed that if the present proprietor
of Westco Motors N.S.wW., viz. Westco Australia
Pty. Limited, is willing to give an enforceable
undertaking 1n writing preferably by deed, that
1t will pay any penalties or costs which the
Court might impose on the defendant then the
plaintiff will not seek to join Messrs. Anderson
and Blair as second and third defendants nor to
amend its statement of claim by alleging that
Messrs. Anderson and Blair were concerned in the
alleged contraventions of Section 48 of tne Trade
Practices Act 1974 by the defencant company.
The other proposed amendments of the statement
of claim however will stand.
Please advise me of your instructions as soon
as possible."
Counsel for the existing defendant saic that this revealed
tnat anproper pressure was being brounht to bear upon a company
which 1s a stranger to tne proceedings and to the alleged
breaches of the Act which are relied upon. He submitted
that this demonstrated that the application now made to
goin the new defendants was cteing made, not for the purpose
of joining them but in an improper endeavour to persuade
the company which is a stranger to the proceedings to
Zive the undertaking which is referred to in the letter.
Counsel for the existing defendant cross-examined
the plaintiff's solicitor who had sworn an afficavit in
support of the application to amend, I express no view
as to the propriety or otherwise of the matters which are
referred to in the letter. I am concerned with an applic-
ation made by the Trade Practices Commissicn to add two
defendants against each of whoa it 1S said thet he 1s in
breach of provisions of the Act. Allegations to this effect
are maae in the arended statement of claim. They appear to
have some support in what 1s said in the jJudgrent of Franki J.
in Ron dodgson (Holdings) Pty. Limited v. Wwestco Motors
(Distributors) Pty. Limited 29 A.L.R. 307. Moreover the
Commission might, without any leave, co'nnence separate pro-
ceedings against the new defendants and seek, as I Fave
mentioned, an order consolidating them with the existing
proceeaings. The practicalities of the situetion are
such that notwitnstanaing resentment whicn is felt by the
existing defendant, the company independent of the proceed-
ings and the legal representatives for those parties, the
only sensible thing to do 1s to permit the joinder shich
1s sought.
10.
Insofar as the new paragrapn of the amended
statement of claim is concerned, there 1S no submission
by counsel for tne existing defendant that 1t would suffer
any embarrassment as a result of its addition. My guris-
diction to permit the amendment is clear.
For the reasons I have given I propose to give leave
to the plaintiff to file the amended statement of claim
subgect to one further matter which I now mention, In my
opinion the provisions of paragraph 10 and of the particulars
appended to paragrephs 13, 14 and 15 are imprecise in that
they do not indicate, in the case of paragraph 10, tc whom
the motor vehicles were supplied, and in the case of the
particulars which of the various companies 1s being referred to.
Discussion took place about further directions to be
given in relation to the filing of tne defences to the
amended statenent of claim, Β«interrogatories, Giscovery and
trial on affidavit evidence. I would prefer to give directions
about these matters after the new parties have bee served
ana have had an opportunity of considering their position,
It will then be possible to make appropriate cirections
wnicn will bind both the existing parties Β«nd the new ones
as well. The matter will be stoca over to a suitable date
for further directions.
The costs of the argument whicn has taken place on the
question of goinder and amendment will te costs in the
I certify that this and the 'Β© preceding
pages are rte copy of tha 1oa3ens for
proceedings.
judgment heroin of Tne riorourable
Mr Justice Sneppard. a fon Tes
y Associate
11, Dated Β’ May, igs /
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AWB Limited v Honourable Terence Rhoderic Hudson Cole AO RFD QC (No 3) [2006] FCA 1031
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2006/2006fca1031
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2024-09-13T22:46:15.426749+10:00
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FEDERAL COURT OF AUSTRALIA
AWB Limited v Honourable Terence Rhoderic Hudson Cole AO RFD QC (No 3) [2006] FCA 1031
AWB LIMITED (ACN 081 890 459) v THE HONOURABLE TERENCE RHODERIC HUDSON COLE AO RFD QC AND COMMONWEALTH OF AUSTRALIA
VID 594 OF 2006
YOUNG J
9 AUGUST 2006
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY VID 594 OF 2006
BETWEEN: AWB LIMITED (ACN 081 890 459)
Applicant
AND: THE HONOURABLE TERENCE RHODERIC HUDSON COLE AO RFD QC
First Respondent
COMMONWEALTH OF AUSTRALIA
Second Respondent
JUDGE: YOUNG J
DATE OF ORDER: 9 AUGUST 2006
WHERE MADE: MELBOURNE
UPON THE APPLICANT BY ITS COUNSEL UNDERTAKING TO THE COURT:
(a) to submit to such order (if any) as the Court may consider to be just for the payment of any compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, adversely affected by the operation of this order or any continuation (with or without variation) thereof; and
(b) to pay the compensation referred to in (a) to the person there referred to.
THE COURT ORDERS THAT:
1.1 Until 4.30pm on Thursday 10 August 2006, the First Respondent be restrained from publishing or disclosing any of the documents or statements referred to in Exhibit JM-C4 to the affidavit of John Mitchell sworn 9 August 2006.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY VID 594 OF 2006
BETWEEN: AWB LIMITED (ACN 081 890 459)
Applicant
AND: THE HONOURABLE TERENCE RHODERIC HUDSON COLE AO RFD QC
First Respondent
COMMONWEALTH OF AUSTRALIA
Second Respondent
JUDGE: YOUNG J
DATE: 9 AUGUST 2006
PLACE: MELBOURNE
REASONS FOR JUDGMENT
1 I have made an interim order on the ex parte application of the applicant, AWB Limited ('AWB'). The order restrains the First Respondent from publishing or disclosing certain documents and statements which have been produced to the Commission of Inquiry ('the Inquiry') until 4.00 pm tomorrow.
2 AWB's application was supported by an affidavit of John Mitchell sworn 9 August 2006. In addition, the application was supported by the tender of a letter dated 9 August 2006 from the solicitor assisting the Inquiry to Mr John Mitchell of Arnold Bloch Leibler, the solicitors for AWB. The letter was received by AWB's solicitors in Court very shortly before the ex parte application was made. The letter stated, inter alia, that the Inquiry proposed to publish exhibit 1020 to the Inquiry at 4.30 pm on 9 August 2006. In the circumstances, for reasons which I will describe, I made an interim order to preserve the status quo until AWB's application could be properly argued and considered.
3 The documents that the Inquiry proposes to publish are, I was told, those listed in exhibit JM-C4 to the affidavit of Mr Mitchell. Essentially those documents consist of draft statements of contrition that are no longer the subject of a claim for legal professional privilege, but which contain various references to the existence of legal advice obtained by AWB.
4 In the current proceedings before me, one of the principal issues is whether disclosures made by AWB to the Inquiry have resulted in an imputed waiver of privilege that AWB claims over other documents by AWB. Those other documents have not been produced to the Inquiry and are the subject of a claim for legal professional privilege in these proceedings.
5 AWB has argued in this proceeding that disclosures to the Inquiry under its compulsory processes are to be seen in a special light as disclosures made under compulsion or, at least, in circumstances which may be seen to fall outside that category of disclosure which would found an imputed waiver. AWB also submits that disclosures made to the Inquiry on the basis of a claim for confidentiality also fall outside the category of disclosures that would attract the doctrine of imputed waiver. The affidavit of Mr Mitchell indicates that AWB wishes to raise a claim of confidentiality in respect of the documents in exhibit JM-C4, but AWB has not yet had an opportunity of mounting such a claim.
6 In these circumstances, AWB submits that it will suffer prejudice if the documents in exhibit JM-C4 are published to the general public by the Inquiry this afternoon. It says that publication would deny it the right to seek an order for confidentiality from the Commission and may adversely affect its claim for legal professional privilege in these proceedings. In particular, it claims that disclosures to the Inquiry stand on a different footing than general public disclosures and that AWB's claims for relief might be impaired or weakened by the actions that the Inquiry proposes to take this afternoon. AWB also submits that as these issues are presently under consideration by this Court, the threatened publication of those documents by the Inquiry may constitute a contempt of Court.
7 Having regard to these submissions, there is at least some foundation for the proposition that AWB will suffer prejudice if the publication of the documents goes ahead at 4.30 pm this afternoon. On the other hand, there is before me no material indicating that the Inquiry will be inconvenienced or prejudiced in any way if the publication is deferred until the matter can be properly considered by the Court.
8 In all the circumstances I consider that it is a proper exercise of the Court's discretion to preserve the status quo until these matters can be properly considered by the Court. Accordingly, I have made the interim order sought by AWB, limited to continue only until 4.30 pm tomorrow.
I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Young.
Associate:
Dated: 10 August 2006
Counsel for the Applicant: J Judd QC, P Corbett and Dr S McNicol
Solicitor for the Applicant: Arnold Bloch Leibler
Counsel for the First Respondent: There was no appearance for the First Respondent
Counsel for the Second Respondent: I Harrison SC and NJ Beaumont
Solicitor for the Second Respondent: Australian Government Solicitor
Date of Hearing: 9 August 2006
Date of Judgment: 9 August 2006
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Fair Work Ombudsman v Eastern Colour Pty Ltd (No 2) [2014) FCA 55
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2014/2014fca0055
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2024-09-13T22:46:17.983800+10:00
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FEDERAL COURT OF AUSTRALIA
Fair Work Ombudsman v Eastern Colour Pty Ltd (No 2) [2014] FCA 55
Citation: Fair Work Ombudsman v Eastern Colour Pty Ltd (No 2) [2014] FCA 55
Parties: FAIR WORK OMBUDSMAN v EASTERN COLOUR PTY LTD (ACN 001 852 071), SB EMPLOYMENTS PTY LTD (ACN 117 006 596), NB EMPLOYMENTS PTY LTD (ACN 117 059 319) and LOUISA BARONIO
File number: QUD 376 of 2010
Judge: COLLIER J
Date of judgment: 11 February 2014
Corrigendum: 18 February 2014
Catchwords: INDUSTRIAL LAW β first respondent operated fruit picking and packing business at farm β fourth respondent director of first respondent and manager of farm β second and third respondents purported to employ fruit pickers on documentation β sole directors of second and third respondents sons of fourth respondent β Notional Agreement Preserving State Awards β employees subject to Fruit and Vegetable Growing Industry Award β State 2002 (Qld) β legal obligation to pay employees who worked more than 40 hours per week overtime β s 182 Workplace Relations Act 1996 (Cth) β employees not paid overtime β arrangement at farm whereby employees worked up to 40 hours for second respondent and voluntarily worked extra hours for third respondent β whether employees employed by first respondent or second and third respondents β principles relevant to identifying employer β employees believed they worked for first respondent β employees wore shirts bearing logo of first respondent β employees had limited knowledge of second and third respondents except as payroll companies β no contracts of employment with second or third respondents β first respondent was employer β fourth respondent aware of legal obligation to pay overtime β purpose of creating second and third respondents was to avoid overtime obligations β s 728 Workplace Relations Act 1996 (Cth) β whether second to fourth respondents aided and abetted or were knowingly concerned in contravention by first respondent β knowledge of essential facts by second to fourth respondents
Legislation: Workplace Relations Act 1996 (Cth) ss 182, 182(1), 208(1), 717, 719, 728
Workplace Relations Amendment (Work Choices) Act 2005 (Cth) Sch 1
Fruit and Vegetable Growing Industry Award - State 2002 (Qld)
Cases cited: Damevski v Giudice (2003) 133 FCR 438 cited
Fair Work Ombudsman v Ramsey Food Processing Pty Ltd (2011) 198 FCR 174 cited
Franks v Reuters Ltd [2003] IRLR 423 cited
Yorke v Lucas (1985) 158 CLR 661 cited
Date of hearing: 22-23 October and 8 November 2012
Place: Brisbane
Division: FAIR WORK DIVISION
Category: Catchwords
Number of paragraphs: 133
Counsel for the Applicant: Mr J Phillips SC with Mr C Murdoch
Solicitor for the Applicant: Fair Work Ombudsman
Counsel for the First, Second, Third and Fourth Respondents: Mr W Friend SC with Mr A Herbert and Mr MP Costello
Solicitor for the First, Second, Third and Fourth Respondents: McKays Solicitors
FEDERAL COURT OF AUSTRALIA
Fair Work Ombudsman v Eastern Colour Pty Ltd (No 2) [2014] FCA 55
CORRIGENDUM
1 On the cover sheet the appearances should read, Mr W Friend SC "with Mr A Herbert and Mr MP Costello".
2 On the cover sheet the appearances should read, "Solicitor for the First, Second, Third and Fourth Respondents: McKays Solicitors".
I certify that the preceding two (2) numbered
paragraphs are a true copy of the Corrigendum
to the Reasons for Judgment herein of the
Honourable Justice Collier.
Associate:
Dated: 18 February 2014
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
FAIR WORK DIVISION QUD 376 of 2010
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: EASTERN COLOUR PTY LTD (ACN 001 852 071)
First Respondent
SB EMPLOYMENTS PTY LTD (ACN 117 006 596)
Second Respondent
NB EMPLOYMENTS PTY LTD (ACN 117 059 319)
Third Respondent
LOUISA BARONIO
Fourth Respondent
JUDGE: COLLIER J
DATE OF ORDER: 11 FEBRUARY 2014
WHERE MADE: BRISBANE
THE COURT ORDERS THAT:
1. At a date to be fixed, Counsel bring in signed minutes of orders to give effect to the reasons in this judgment.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
FAIR WORK DIVISION QUD 376 of 2010
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: EASTERN COLOUR PTY LTD (ACN 001 852 071)
First Respondent
SB EMPLOYMENTS PTY LTD (ACN 117 006 596)
Second Respondent
NB EMPLOYMENTS PTY LTD (ACN 117 059 319)
Third Respondent
LOUISA BARONIO
Fourth Respondent
JUDGE: COLLIER J
DATE: 11 FEBRUARY 2014
PLACE: BRISBANE
REASONS FOR JUDGMENT
INTRODUCTION
3 In substance, this case raises one critical question for determination. At material times, who was the employer of certain workers at a farm at 244 Aerodrome Road, Applethorpe, Queensland?
4 The applicant, the Fair Work Ombudsman ("FWO"), asserts that the employer of these workers was the first respondent, Eastern Colour Pty Ltd ("Eastern Colour"). The FWO contends further that as Eastern Colour was the employer, it has contravened both the Workplace Relations Act 1996 (Cth) ("the Act") and certain clauses of the applicable Notional Agreement Preserving State Awards (NAPSA) (relevantly, the Fruit and Vegetable Growing Industry Award - State 2002 (Qld), which was in operation at material times) by failing to pay those workers overtime, and penalty rates on public holidays. The applicant asserts further that although the putative employers of those workers were the second and third respondents, the arrangement was ineffective as the totality of the circumstances demonstrated that the true employer was Eastern Colour, and that the second and third respondents were merely payroll companies associated with Eastern Colour.
5 The crux of the respondents' defence to the proceedings commenced by the FWO was the second and third respondent were the true employers of the relevant workers. If this defence is substantiated, the applicant's entire case must fail.
6 In my view the FWO has substantiated its case against the respondents. I am satisfied that the first respondent was the true employer of the employees identified in the FWO's claims, and that the second, third and fourth respondents were accessorially liable within the meaning of s 728 of the Act. I have reached this view in light of the evidence before the Court and for reasons to which I will shortly turn.
BACKGROUND
7 Determination of this case, and the key question of the identity of the employer of relevant employees, is very much dependent on the facts. The parties have made extensive submissions based on those facts. It is appropriate to recount the facts in some detail before examining the case before the Court.
The parties
8 Antonio Baronio and the fourth respondent, Louisa Baronio, have been married since 1972. They have four adult children: Stephen Baronio, Nathan Baronio, Karen Baronio and Angela Baronio.
9 Mr and Mrs Baronio are the sole directors and shareholders of Eastern Colour. Eastern Colour is the trustee of the Eastern Colour Family Trust, which is effectively a family trust established for the benefit of the Baronio family. The beneficiaries of the trust are Mr and Mrs Baronio's children, their children's spouses, and their grandchildren.
10 In its capacity as trustee for the Eastern Colour Family Trust, Eastern Colour conducts the business of the Eastern Colour farm ("the farm") at 244 Aerodrome Road, Applethorpe, Queensland. Since their marriage, Mr and Mrs Baronio have continued to operate the farm. At material times the farm grew and sold capsicums, stone fruit and apples.
11 Stephen Baronio is the sole shareholder and director of the second respondent, SB Employments Pty Ltd ("SB").
12 Nathan Baronio is the sole shareholder and director of the third respondent, NB Employments Pty Ltd ("NB").
13 The FWO discontinued the proceedings against the fifth respondent, Mr Catanzaro, on 4 October 2012.
14 In 2008 the following former casual workers of the farm made complaints to the FWO (formerly the Workplace Ombudsman) in relation to overtime and penalty rates on public holidays:
Gordon Falconer;
Lachlan Falconer (Gordon Falconer's son);
Sandra Di Betta; and
Joanne Donges.
(For convenience throughout this judgment I will refer to these employees collectively as "the relevant employees".)
15 The hours worked by each employee are not in dispute. The respondents acknowledge that the Falconers and Ms Di Betta worked more than 40 hours at the farm during some weeks and that all four employees worked on at least one public holiday. The issue is whether the employees were employed by the first respondent. If so, they were entitled to overtime and penalty rates, and the first respondent has contravened the Act and cll 6.4.2, 7.6.1, 7.6.2 and 7.6.3 of the NAPSA.
Material relied upon by the parties
16 The FWO relied on the following material:
Affidavit of Melissa Maree King sworn 2 May 2012 (exhibit 1(A)).
Affidavit of Annaliese Jackson affirmed 31 August 2012 (exhibit 2(A)).
Affidavit of Jennifer Anne Crook sworn 2 May 2012 (exhibit 3(A)).
Supplementary affidavit of Jennifer Anne Crook sworn 31 August 2012 (exhibit 4(A)).
Affidavit of Gordon Peter Falconer sworn 2 May 2012 (exhibit 5(A)).
Supplementary affidavit of Gordon Peter Falconer sworn 31 August 2012 (exhibit 6(A)).
Two shirts (exhibit 7(A)).
Affidavit of Lachlan Eric Falconer affirmed 18 May 2012 (exhibit 8(A)).
Supplementary affidavit of Lachlan Eric Falconer affirmed 29 August 2012 (exhibit 9(A)).
Affidavit of Sandra Di Betta affirmed 3 May 2012 (exhibit 10(A)).
Supplementary affidavit of Sandra Di Betta affirmed 31 August 2012 (exhibit 11(A)).
A roll of stickers (exhibit 13(A)).
Affidavit of Joanne Kathleen Donges sworn 4 May 2012 (exhibit 14(A)).
Supplementary affidavit of Joanne Kathleen Donges affirmed 30 August 2012 (exhibit 15(A)).
Two colour photographs displaying "Eastern Colour Pty Ltd" (exhibit 18(A)).
Four aerial photographs of 244 Aerodrome Rd, Applethorpe (exhibit 19(A)).
Electronic lodgement declaration forms being tax declarations of Louisa Baronio (exhibit 20(A)).
Tax returns and associated financial statements for Eastern Colour and the Eastern Colour Family Trust for the years ending 30 June 2006 to 30 June 2011 (exhibit 26(A)).
17 Counsel for the respondents cross-examined Jennifer Anne Crook, Gordon Falconer, Lachlan Falconer, Sandra Di Betta and Joanne Donges.
18 The respondents relied on the following material:
Two employment documents, one of SB and one of NB, dated 28 June 2007 signed by Sandra Di Betta (exhibit 12(R)).
Affidavit of Louisa Baronio sworn 10 July 2012 (exhibit 16(R)).
Affidavit of Louisa Baronio sworn 17 July 2012 (exhibit 17(R)).
Affidavit of Antonio Giovanni Baronio sworn 10 July 2012 (exhibit 21(R)).
Affidavit of Adela Caruso sworn 10 July 2012 (exhibit 22(R)).
Affidavit of Vincenzo Cateno Catanzaro sworn 10 July 2012 (exhibit 23(R)).
Tax returns for SB for the years ending 30 June 2006 β 30 June 2011 (exhibit 24(R)).
Tax returns for NB for the years ending 30 June 2006 β 30 June 2011 (exhibit 25(R)).
19 Counsel for the FWO cross-examined Louisa Baronio, Antonio Giovanni Baronio, Adela Caruso and Vincenzo Cateno Catanzaro.
GENERAL OPERATIONS AT THE FARM
Evidence of Louisa Baronio
The farming business
20 The farm sells most of its produce to major Australian supermarket chains including Coles and Woolworths. These chains have high standards in respect of the shape, size, colour, imperfections and sugar content of the fruit that they will accept.
21 Mrs Baronio deposed that the Eastern Colour business is a "price taker" because it has no capacity to negotiate the supermarket chains as there are no substitute purchasers. As a result the farm runs on small margins. Her evidence was that the ongoing viability of the business depended on the farm producing sufficient volumes and quality of produce to ensure the supermarket chains will purchase the goods.
22 The vast majority of the work available at the farm is seasonal. This high-volume work involves picking and packing particular produce during the few months each year when it is ripe. The farm requires few permanent staff, but during peak periods a large volume of work is required to be performed at the farm. During these peak periods, the workforce comprises backpackers, itinerant workers and unskilled local residents. The backpackers and itinerant workers generally seek as much work as possible to finance their travel or holidays. The local workers tend to work only in the fruit picking and packing industry, so they aim to work long hours during the peak season to support themselves through the rest of the year when there are few local employment opportunities.
23 At paragraph 16 of her affidavit sworn 10 July 2012, Mrs Baronio deposed:
The workers engaged at the farm would regularly say that they wanted to work more than 40 hours per week. The workers were always extremely disappointed when I told them that we could not offer them more than 40 hours per week. Almost all of the workers I spoke [sic] stated that they were prepared to forego their entitlement to over time if we could provide them with further hours. I would always explain to the workers that the we [sic] could not offer them more than 40 hours per week.
24 Mrs Baronio deposed that given its small profit margin, the farm would not be commercially viable if it had to pay overtime during the picking season because the wages costs would exceed the prices that the supermarkets paid. Mrs Baronio was not aware of any other farms which paid overtime rates to their picking and packing staff.
25 Generally Mrs Baronio was responsible for the farming operations in the packing shed and Mr Baronio was responsible for farming operations in the field. In 2006 the farm engaged Mr Corrado Rizzato as shed manager. Mrs Baronio shared the role with him for 12 months so he could learn how to allocate work to employees and how to determine how many workers would be required each day.
Historical practices in engaging workers at the farm
26 Mrs Baronio deposed that historically the farm engaged workers as casuals for a maximum of 40 hours per week. As a general rule once that group of workers had exceeded 40 hours, the farm employed another group of workers, who would also only be permitted to work up to 40 hours each week at the farm. Those additional workers were recruited from labour hire companies as well as being workers who had already worked 40 hours at other local farms.
27 Mrs Baronio deposed that it was normally more expensive to pay the labour hire companies than to directly employ workers, due to the surcharge the labour hire companies charged. However she also deposed that paying the labour hire companies' surcharge was less expensive than paying workers overtime.
28 In relation to two or more external labour companies hiring a single worker Mrs Baronio deposed at the hearing as follows:
HER HONOUR: Ms Baronio, can you just explain to me again why you setup β why S.B. and N.B. were setup. Why didn't you continue to simply hire people directly from Eastern Colour or by Eastern Colour?---Well - - -
I know it's quite a long time ago, obviously the advice ..... but can you recall why?---Well, we couldn't employ people out of Eastern Colour, right, unless we had kept the hours under 40 hours.
I see, it was the 40 hours limitation that was the problem?---Yes.
I see. And you did mention that before?---Yes.
And that was the reason?---The reason was that we wanted everything to be legal and above board, right, and the workers were asking for more than 40 hours. We had staff β the labour hire companies had staff where they would refuse to work at the workplace unless they would give them more than 40 hours. How do we tackle this problem.
Okay. So under the arrangement where you before S.B. and N.B. went through other labour hire companies, that was a problem β it was a similar problem then?---The problem was from way back, right, and then in 1994 we engaged the first two labour hire companies, right, which was Ag-Grow and FarmLink and then it moved on from there.
Okay?---And we kept the same system in regards β in β from advice given by Livingstones.
Right. So just let me understand this, just say a person, I will say a man, wants some workers as a pickup, so before you engaged the labour hire companies, he would come to you and you would say, "We can only engage you for 40 hours a week."?---That's right.
And then you started using different labour hire companies, so in, was it, 1994 you started doing that, so how would that person's position have changed under those labour hire companies?---Well, the way they were engaged was they were explained that the first 40 hours would be under S.B. Employments, if it wasn't - - -
No, no, I mean under the old labour hire companies, not S.B.?---Under Eastern Colour?
No, no, you know there was a list of labour hire companies?---Yes, well - - -
I [sic] just trying to understand, what was the situation in the transitional period between Eastern Colour and S.B. and N.B., so that person could have been engaged by several labour hire companies?---Could have done, yes.
And maybe worked more than 40 hours because he was engaged by different labour hire companies?---Yes.
All right. And so you were seeking to duplicate that arrangement by S.B. and N.B. being set up; is that right?---Yes, from the advice that Vince had received.
(Transcript 23 October 2012 p 79 l 1 β p 80 l 5.)
Creation of SB and NB
29 In 1994 Mr and Mrs Baronio sought legal advice in respect of alternative strategies for labour hire without affecting the commercial viability of the farm. Mr Vince Catanzaro, the farm's solicitor and accountant, advised the Baronios that their problem was faced by many farmers in the Stanthorpe area and that some farmers used internal labour hire companies. He recommended however that they seek advice from an industrial relations expert, Livingstones.
30 Livingstones provided a short written advice. Mrs Baronio discussed this advice with Mr Catanzaro and understood it to be as follows:
a) we would incorporate two separate companies;
b) those companies would be distinct legal entities from Eastern Colour;
c) those two companies and Eastern Colour would reach an agreement for the provision of labour;
d) those two companies would agree that certain Eastern Colour employees or directors (i.e. John and Me) could act as agents for the companies;
e) both of those companies would offer employment to the workers at the farm;
f) the first company would engage the workers for a period of up to 40 hours per week;
g) after the completion of 40 hours for the first company the employees would be entitled to take up employment with the second company;
h) each of the separate companies would be responsible for the wages of the employees for the relevant hours;
i) at the end of any given period the separate companies would invoice Eastern Colour for the costs of the labour;
j) the employees needed to be clear that they were accepting employment with two companies and that they would not be entitled to overtime;
k) two separate timesheets would need to be completed for each employee;
l) each company would be responsible for making the payment to its workers; and
m) certain Eastern Colour employees or directors (i.e. John and Me) would be entitled to direct and control the employee provided [sic] pursuant to the agreement between the three companies.
31 The Baronios decided to set up their own labour hire companies rather than use companies provided by Livingstones. Two shelf companies were purchased: Farmlink Pty Ltd ("Farmlink") and Agro Pty Ltd ("Agro"). Stephen Baronio became shareholder and director of Farmlink and Karen Baronio became shareholder and director of Agro. Mrs Baronio deposed that the following agreement was reached:
a) Farmlink and Argo would provide labour to Eastern Colour;
b) Eastern Colour would pay Farmlink and Agro for the costs of that labour;
c) John and myself would be entitled to act as agents of Farmlink and Agro;
d) when a new worker started at the farm they would be offered employment with Farmlink and Agro;
e) the worker would be free to accept employment with one or both employers;
f) at the commencement the employee would be advised that their first 40 hours of work would be with Farmlink and that any subsequent hours worked on the farm would be with Agro;
g) John and I (and any other nominated employees of Eastern Colour, Farmlink or Agro) would have authority to offer employment with Farmlink and Agro and to dismiss employees; and
h) John and I (and any other nominated employees of Eastern Colour, Farmlink or Agro) would have authority to direct and control the labour provided by Farmlink and Agro.
32 The family also decided that new employees would sign a separate commencement letter and tax file declaration form for each of the two companies, and each week complete a separate timesheet for each of the two companies.
33 Due to changes within the Baronio family, in 2000 two new labour hire companies replaced Farmlink and Agro: Louanda Pty Ltd and Jasak Pty Ltd. Notwithstanding this development, the farm's operations continued exactly as they had under Farmlink and Agro.
34 In 2005 SB and NB were created to replace Louanda Pty Ltd and Jasak Pty Ltd.
35 Subsequently Mr and Mrs Baronio met with Stephen Baronio (director and shareholder of SB) and Nathan Baronio (director and shareholder of NB). They agreed that Eastern Colour, SB and NB would adopt the agreements reached between the previous labour hire companies and Eastern Colour.
36 It appears from his affidavit sworn 10 July 2012 that Mr Catanzaro's recollection of events leading to the creation of SB and NB is similar to that of Mrs Baronio.
Employment of workers
37 In relation to the hiring of casual workers at the farm, Mrs Baronio deposed in her affidavit sworn 10 July 2012 as follows:
67. Throughout the existence of N.B and S.B the process for hiring new employees was as follows:
a) the prospective employee would be interviewed by either John, Stephen, Corrado or myself. If we formed the view that the prospective employee was suitable we would advise them that there was work available and refer them to Ms Adela Caruso in the office;
b) Ms Caruso would give the prospective employee: an employee detail form for S.B, a tax file number declaration form for S.B, an employee detail form for N.B, a tax file number declaration form for N.B, and a one page work document (in relation to each of S.B. and N.B.) about their workplace health and safety obligations;
c) Ms Caruso would then explain to the worker that they would work for S.B. for up to 40 hours per week. If they wished to work more than 40 hours they would then start working for N.B. It was made clear to the worker that any work that was done for N.B. was voluntary additional hours at the same rate of pay as work done for S.B;
d) if the employee was content with those terms they would then sign the forms and commence working. So the position was abundantly clear to the employees, the forms for S.B. were white in colour and the forms for N.B. were green in colour. It has always been our practice to have different coloured forms for each labour hire entity.
68. At the end of each week the employees would be required to sign two timesheets, one for the hours that they have worked with S.B and one for the hours they have worked with N.B. The employees would then receive payment from S.B and N.B respectively.
69. It was part of Ms Caruso's responsibility to ensure that each new worker understood and agreed to the arrangements at the farm. Further, Ms Caruso was responsible for ascertaining whether a new worker wished to work more than 40 hours per week. If they did not wish to work more than 40 hours per week then they were only to accept employment with S.B.
70. When Ms Caruso ceased working in the administrative office in the middle 2007 [sic] we decided that her responsibilities, in respect of new employees, would be undertaken by Mr Rizzato, in respect of packing shed workers and Stephen, in respect of field workers.
71. At no time were employees forced to accept employment with S.B or N.B. Further, no employees were forced to work in excess of 40 hours per week. All work undertaken by employees was done so on a voluntary basis.
38 During cross-examination, the following exchange occurred:
MR PHILLIPS: And the reason why these entities were established was for the simple reason that if people worked for more than 40 hours a week, you didn't want to pay overtime?---There was no overtime available in the system.
No, but - - -?---There was never any β why would we pay overtime when we've got staff knocking on doors looking for work?
Yes, but - - -?---I mean, if we pick our fruit on a Saturday instead of a Friday, Coles and Woolworths are not going to give us extra money because we paid 150 or 200 per cent.
(Transcript 23 October 2012 p 80 ll 12-21.)
39 During cross-examination, Mrs Baronio was shown the Eastern Colour t-shirts, and the following exchange occurred:
MR PHILLIPS: You will see - have you - I think - when you were in court yesterday, I think they were being shown to Mr Falconer?---Yes. That's right.
Mr Falconer, Senior, and other witnesses. And those shirts or shirts like them were worn by packers in the shed if they wanted to purchase one?---That's right.
Yes. But they were the only shirts or type like that with Eastern Colour's livery on them which were available for sale for packers if they wanted them?---Packers and staff in the field, yes.
Yes. They could by [sic] those. Were there any shirts with the livery of NB Employments Proprietary Limited on them for sale?---No, because that was - Eastern Colour was the workplace.
Yes?---Right? And this symbolises the workplace.
(Transcript 23 October 2012 p 70 ll 24-38.)
Practice at the farm in relation to public holidays
40 Mrs Baronio deposed that the practice at the farm in relation to public holidays was as follows:
a) at the commencement of the week in which the public holiday fell the shed manager would assess whether it was likely that we would need people to work on the public holiday;
b) if it was expected that work would be required, a meeting of all workers would be held and they would be asked whether they would like to work on the public holiday in return for a day off in lieu; and
c) the workers who wanted to work would then raise their hands. Those workers who wanted to work would then complete a form confirming that they wished to work on the public holiday. Those workers who did not wish to work on the public holiday were not asked to work on the public holiday.
41 Most of the workers always opted to work on public holidays. However, it appears that in 2008 Mrs Baronio inadvertently threw away a significant number of the forms that workers had signed, in which they agreed to work on public holidays.
Re-signing of paperwork by employees in June 2007
42 In her supplementary affidavit sworn 17 June 2012, Mrs Baronio deposed that the employees of SB and NB signed a second set of "employee engagement" paperwork in June 2007. Mr Catanzaro's office had commenced administration of the payroll and noticed deficiencies in some of the employee paperwork, for example in relation to choice of superannuation.
43 In the packing shed Mrs Baronio organised a meeting of all workers on the farm. She took the workers through the new paperwork and repeated her earlier explanation to them of how they worked their core hours for SB and their voluntary additional hours for NB. She said that she took special care to ensure that the workers understood the reason and purpose behind the new forms, which replicated the existing arrangements, and how the employment arrangements between SB and NB worked.
Enterprise agreement β employment practices at farm
44 As at 10 July 2012, all employees at the farm were employed by Stanap Services Pty Ltd pursuant to an enterprise agreement approved by Fair Work Australia on 16 May 2010. All employees had taken up the option in the enterprise agreement to work voluntary additional hours at their ordinary rates of pay.
Evidence of Adela Caruso
45 Adela Caruso immigrated to Australia from El Salvador on 13 July 1990. Both of her parents have worked at the farm. After 1999 Ms Caruso accepted work in the farm office. In her affidavit sworn 10 July 2012 Ms Caruso deposed that her responsibilities included the following:
providing commencement forms and explaining employment arrangements to new employees;
collecting the commencement forms and tax file number declaration forms from new employees;
preparing each employee's timesheet for each company based on their weekly run sheets;
ensuring that each employee checked and signed their timesheets, and understood the pay arrangements.
46 Ms Caruso deposed that if there was insufficient work in the office, she would perform packing duties in the packing shed.
47 Ms Caruso ceased performing any payroll or roster duties in June 2007. She has not worked at the farm since June 2008.
Practice in relation to informing new employees of their employment arrangements
48 In early 2006 Louisa Baronio convened a meeting of all of the farm's workers in the packing shed. At that meeting, Mrs Baronio advised the workers (in summary):
the two existing labour hire companies were being wound up;
two new companies, SB and NB, would be incorporated and responsible for employing all of the workers on the farm;
the workers were invited to accept employment with SB and NB on the same arrangement as with the two previous companies;
the workers would work their first 40 hours of work each week for SB. Any subsequent work would be for NB;
if the workers did not wish to work more than 40 hours per week, they could accept employment solely with SB.
49 Ms Caruso deposed that subsequently her general practice was to explain to new employees that they would be employed by both SB and NB. If a new employee wished to work more than 40 hours per week, they would need to accept employment with both companies. They would work their first 40 hours for SB and any additional hours for NB. Ms Caruso made it clear that if an employee accepted employment with both SB and NB, they would not be paid overtime. Ms Caruso would provide an employee who accepted these conditions with a set of white commencement forms for SB, and a set of green commencement forms for employment with NB. If instead a supervisor had given the forms to a new employee, Ms Caruso would ensure that she took the time to explain the employment arrangements to them when the employee returned the forms to her.
Timesheets
50 Each work crew at the farm had a run sheet listing all of the employees in that crew. At the end of each day, each worker recorded the total hours they had worked for that day. As a general practice Ms Caruso took the run sheets and created weekly timesheets of work performed by each worker for SB and NB. Ms Caruso would record up to 40 hours of work by a worker for SB and any remainder for NB.
51 Ms Caruso would ask each employee to review their weekly timesheets in the office, and sign them if they were accurate. Ms Caruso deposed that her practice was that while an employee reviewed their timesheets she would reiterate the details about why the worker was being paid by two companies. She could not recall any employee expressing confusion about the SB and NB arrangements.
Evidence of Jennifer Crook
52 Jennifer Crook is the Fair Work Inspector who had carriage of the investigations relating to the relevant employees from 2008 when the complaints were referred to or lodged with the Workplace Ombudsman.
53 On 16 December 2008 Ms Crook interviewed Wendy McDonald, ex shed manager at the farm. Ms Crook was unable to obtain a signed statement from Ms McDonald, due to Ms McDonald being ill. However, Ms Crook deposes that the record of interview transcript dated 16 December 2008 annexed to her affidavit sworn 2 May 2012 is an accurate record of the interview. During the interview Ms McDonald stated, in summary, that:
It was explained to her to tell new employees that the reason they had to fill out two tax file declaration forms was as follows: "I was β I was told that you would work 40 hours under one company and then you would work 40 hours under the other and I was told to tell them this way. They β they had to pay less tax." (transcript 16 December 2008 p 14 ll 16-33).
When the employees had to sign new tax file declaration forms for SB and NB, the rest of the staff were told "just that they were changing pay companies" (transcript 16 December 2008 p 15 ll 13-29).
Ms McDonald agreed with her husband's statement that the reason for SB and NB was "to cancel out overtime" so that the workers never received overtime or holiday pay (transcript 16 December 2008 p 16 ll 13-30).
WORK BY GORDON PETER FALCONER
Evidence of Gordon Falconer
54 Gordon Falconer worked at the farm as a forklift driver from 27 November 2005 until November 2007.
Commencement at the farm by Gordon Falconer
55 In his affidavit sworn 2 May 2012, Gordon Falconer deposed that in 2005 he had had his forklift licence for more than 20 years. He went into Ready Workforce, an employment centre in Stanthorpe on Friday 25 November 2005. The manager of the employment centre told him to go to Eastern Colour's farm and speak to John Baronio, who had a position for a forklift driver.
56 Mr Falconer deposed that, at the farm, John Baronio said words to the following effect:
Are you willing to work long hours because you'll have to work as long as it takes each day to pack the day's goods. You should expect to be working at least 50 hours a week. You will have to work at least six days per week and sometimes seven days per week.
57 Gordon Falconer said that was not a problem. Mr Baronio told him he would start off on a casual basis, probably over the weekend. Gordon Falconer deposed that Mr Baronio did not discuss wages with him or which law would apply to his employment. He did not recall Mr Baronio saying anything to him about labour hire companies offering 40 hours of work with SB and working any additional voluntary hours at the same rate of pay with NB.
58 Louisa Baronio subsequently called Gordon Falconer, and asked him to start work on 27 November 2005. While he worked at the farm, Mrs Baronio directed his days and hours of work. Mrs Baronio never told him that she was acting as an agent for SB or NB. While he met Stephen and Nathan Baronio, they did not play any role in Gordon Falconer's recruitment or direct his work at the farm.
59 In his affidavit sworn 2 May 2012 Gordon Falconer deposed that he signed a single tax file number declaration form. He could not remember the name of the employer on the form. However, under cross-examination he conceded that on 27 November 2005 he filled out two tax file number declaration forms (transcript 22 October 2012 p 20 ll 21-24). The section "to be completed by a payer" was blank (transcript 22 October 2012 p 19 ll 23-33).
60 Annexed to the affidavit of Mr Catanzaro are the commencement forms that Gordon Falconer signed on 27 November 2005 when he started working at the farm. There is one bundle of documents for SB (annexure VC-2) and one bundle of documents for NB (annexure VC-3).
61 Gordon Falconer did not recall ever having a conversation with Ms Caruso in relation to the payment arrangements by SB and NB. He recalls returning his employment forms to Ms Wendy McDonald. Nor did Gordon Falconer recall any explanation by Ms Caruso of the SB and NB structures to him or his son, Lachlan.
62 In contrast to Gordon Falconer's recollection, Ms Caruso deposed that Gordon Falconer returned his commencement forms to her. When he did so, she said:
You understand that you are accepting employment with two companies. SB will pay you for the first 40 hours and NB will pay you for any hours after that. All wages will be paid at the ordinary time rate.
63 Mr Falconer deposed that when he started work, and throughout his employment, he believed that his employer was Eastern Colour. The boxes that were packed and shipped out of the farm had Eastern Colour's labels and address on them. The transport documents for the goods were also in the name of Eastern Colour. During examination-in-chief, Gordon Falconer deposed that Mrs Baronio or Wendy McDonald gave him two shirts with the Eastern Colour label on them. Other workers in the packing shed had similar clothes. However, he conceded during cross-examination that the workers did not have to wear the Eastern Colour shirts when they worked at the farm.
Timesheet and pay of Gordon Falconer
64 Gordon Falconer completed one timesheet for every day he worked. The timesheet was signed by him and his supervisor. Gordon Falconer generally worked six days per week, having Saturday off. He would normally work from 5 am or 6 am until 6 pm or 7 pm. There was no formal work roster. Mrs Baronio would tell him each afternoon whether he would be required to work the next day, depending on the number of orders that were required to be filled. The details of the days and hours that Gordon Falconer worked at the farm are not in dispute.
65 Mr Falconer was paid weekly in arrears every Wednesday by direct deposit into his bank account. His bank accounts show deposits from NB and SB. Every week Gordon Falconer received two payslips, one from SB for 40 hours work, and one from NB for the hours that he worked above 40 hours per week. The payslips showed the total hours worked for each company and did not detail the hours that Gordon Falconer worked each day. Both companies paid him at the same rate of pay.
66 In mid-2007 a meeting was held for the workers to fill out new tax file number declarations for SB and NB. Gordon Falconer recalled the meeting, but did not recall Mrs Baronio or Ms Caruso saying anything about how the workers worked their core hours for SB and their voluntary additional hours for NB.
Overtime and work on public holidays
67 In relation to the overtime that he worked while at the farm, Gordon Falconer deposed in his affidavit sworn 2 May 2012 that:
45. I worked more than 40 hours per week at least every three out of every four weeks β¦
46. I worked all the hours voluntarily. However I was never given a choice by my employer to work over 40 hours per week. I just kept on working until the work was completed each day.
47. No one from SB every spoke to me about my work when I reached 40 hours. No one from NB ever offered me work for the rest of the week in excess of the 40 hours I had already worked for SB.
48. Nothing ever happened that alerted me to the fact that at any given point in time I was working for a different employer. The nature of my work never changed. I worked in the same shed whether I was paid by SB or NB. After 40 hours were completed, I never signed off and then signed on with another employer.
49. When I got my first pay cheque I asked Wendy Anderson, one of the other employees, to the effect why we did not get paid overtime and she told me to the effect that employer's [sic] in the fruit industry do not have to pay overtime. I had been away in America for 18 years so I was unaware of any changes in industrial relations laws so I just accepted this explanation.
50. I never understood why I was being paid by two companies. I thought it was strange but I never asked about this as I just thought it must be because the industrial relations laws had changed while I was living overseas.
51. I was never paid overtime for any of the hours I worked over 40 hours per week.
68 However, under cross-examination, the following exchanges took place between Counsel for the respondents and Mr Falconer:
So you were clearly aware that there were two employers involved in this transaction, weren't you?---Not really sure, you know, I had an odd number of forms to fill out and I just did it and handed them in. I wasn't aware of the way SB and NB actually operated until after I got my first pay.
(Transcript 22 October 2012 p 19 ll 15-18.)
Now, you said that you didn't realise what was happening about the payment that Eastern Colour and the work on the farm until you got your first pay?---Yes.
But from the time you got your first page [sic], you knew that there were two employers, one would play [sic] for the first 40 hours and the next - yes? ---Yes.
(Transcript 22 October 2012 p 20 ll 26-30.)
69 Gordon Falconer also deposed that he never received additional payments for the work he did on public holidays. He denied that the workers had had a meeting to vote in relation to working on public holidays. Instead, the workers were told whether they were required to work on public holidays. He recalled he was only asked once or twice to sign a form substituting a public holiday for a normal working day.
Evidence of John Baronio
70 Mr Baronio confirmed that he spoke to Gordon Falconer when Mr Falconer came to farm to enquire about work. Mr Baronio deposed that:
12. During the conversation Mr Falconer (Snr) told me that he had recently been divorced from his wife who lived in the United States. Mr Falconer (Snr) told me that he was seeking work so that he could bring out his teenage son from the United States. During the conversation Mr Falconer (Snr) said words to the following effect:
"I need as much work as I can get. I need to bring my family out from the United States."
13. I then said words to the following effect:
"Here at Eastern Colour, we use labour hire companies. Those labour hire companies offer 40 hours of work with SB. If you want to work additional hours, they will be with NB as additional voluntary hours at the same rate of pay."
14. I then said that Mr Falconer (Snr) should see Ms Adela Caruso in the administration office and she would explain to him the details for the employment arrangements on the farm.
WORK BY LACHLAN FALCONER
Evidence of Lachlan Falconer
Commencement at the farm by Lachlan Falconer
71 Between 1 September 2006 and 11 March 2007 Lachlan Falconer worked as a casual fruit packer at the farm. He obtained the job through his father, Gordon Falconer. In August 2006, before he started work, Lachlan Falconer met with Mrs Baronio, Mr Baronio and Ms McDonald.
72 When he started work, Ms McDonald asked him to complete two tax file number declaration forms. However she did not explain to Lachlan Falconer the purpose for which he was completing two different forms. Mr Falconer also signed commencement documents for NB and SB on 4 September. During cross-examination, the following exchange occurred between Lachlan Falconer and Counsel for the respondents:
You would have realised you were signing two copies of the same documents at the time, wouldn't you?---Yes.
You realised that there were two employment arrangements being set up at that time, didn't you?---I didn't really understand it. I just signed it to commence working.
(Transcript 22 October 2012 p 29 ll 13-17.)
73 Lachlan Falconer does not recall the meeting that Mrs Baronio deposes occurred in mid-2007.
74 Lachlan Falconer deposed that he believed that his employer was Eastern Colour. The name of the farm was Eastern Colour, and Eastern Colour was printed on the stickers that went on the fruit and the label on his work uniform (transcript 22 October 2012 p 33 ll 30-37). In Mr Falconer's view his employers at the Eastern Colour farm were Mr and Mrs Baronio, because they were the ones telling people what to do and how to do their job, and they were the people who hired and fired workers at the farm.
Completion of timesheets and payment of wages
75 Lachlan Falconer worked at the same shed at the same address during the entire period at which he worked at the farm. Normally he stacked boxes of fruit onto pallets in preparation for them to be shipped. However, he would help out with whatever he was asked to do. All the workers were directed and disciplined, if necessary, by Mr Baronio, Mrs Baronio, Ms McDonald or Mr Rizzato. Lachlan Falconer personally was always directed by Mrs Baronio, Ms McDonald or Mr Rizzato.
76 By hand he completed one timesheet at the end of every day entitled Eastern Colour. The timesheet was kept on a desk by the office in the shed. He completed the same timesheet, regardless of the numbers of hours he worked.
77 In her affidavit sworn 10 July 2012, Adela Caruso deposed that she recalled the first time that Lachlan Falconer inspected his timesheet, because he came with his father, Gordon Falconer. She explained the arrangement between SB and NB to Lachlan Falconer. He said he understood. In contrast, Lachlan Falconer deposed that he does not recall Ms Caruso explaining why he would be paid by both SB and NB (transcript 22 October 2012 p 32 ll 9-20). Ms Caruso might have said something about SB and NB paying him, but he did not recall her telling him why the arrangement was set up in that way.
78 At the end of each day Mrs Baronio or someone directed by her would tell Lachlan Falconer whether he would be working the next day. If Lachlan Falconer could not work on a day he would contact Mrs Baronio or Ms McDonald. They resolved any disputes between workers at the farm.
79 Mr Falconer gave evidence that he was never told when he had worked more than 40 hours in a week. He was offered work by Mr or Mrs Baronio, but he was never given a choice about whether he wanted to work more than 40 hours per week. He was never paid for working on a public holiday and never agreed to substitute another day for a public holiday. He thought there may have been a meeting of the workers about public holidays once. He recalled that sometimes he might have had a choice to work on a public holiday, but most of the time he was required to work on a public holiday.
80 Mr Falconer said that Mrs Baronio determined his rate and method of pay. SB made a weekly deposit of Lachlan Falconer's wages into his bank account. Some weeks he also received a deposit from NB. During cross-examination, the following exchange took place:
Okay, so you will see the third entry on that page, 19 September, NB Employments, pay for 19 September 2006?---Yes.
And the fourth entry, SB Employments, pay for 19 September 2006?---Yes.
That would have been your first pay, would it not?---Yes. It's the first entry, yes.
So you would have known that you were being paid by the two different companies from the beginning?---Yes. Yes.
(Transcript 22 October 2012 p 30 ll 31-36.)
81 Lachlan Falconer deposed that he did not know much about SB and NB, did not agree to work for them, and was never aware that either company was his employer. While Lachlan Falconer had met Nathan Baronio, he never met Stephen Baronio.
WORK BY SANDRA DI BETTA
Evidence of Sandra Di Betta
82 Sandra Di Betta worked in the packing shed at the farm from 13 January 2007 to 21 February 2008. Her duties included fruit grading, packing orders, operating machinery, cleaning the shed and training backpackers.
Commencement at the farm by Ms Di Betta
83 Ms Di Betta deposed that when she went to the farm to see if there was any work available she spoke with Louisa Baronio. Mrs Baronio offered Ms Di Betta a job two days later over the telephone. Ms Di Betta deposed that Mrs Baronio never said anything about the work being with SB and NB. Ms Di Betta did not agree to work for SB and NB, was unaware that she had a relationship with SB and NB, and did not know what the company names stood for. She thought she was employed and paid by Eastern Colour.
84 Ms Di Betta understood that the name of the business for which she worked was Eastern Colour, as this was the name written on the sign on the front gate and the packing stickers and boxes. Each fruit packer had a different packing number on their stickers, so that when the boxes of fruit went through a quality check it was obvious who had packed which fruit. Some of the workers in the packing shed wore "Eastern Colour" shirts. Ms Di Betta did not as the workers had to pay for the shirts. No one told Ms Di Betta that they were acting on behalf of SB or NB.
85 In her affidavit evidence Ms Di Betta stated that she believed during her time at the farm that her employers were Mrs and Mr Baronio, because they owned the property, the business and the company. Ms Di Betta said that Mrs Baronio was in control of the working conditions at the farm. At the start of the season she oversaw everyone and checked which orders were to be packed. She told the workers when to take breaks, and reprimanded workers if they threw away too much fruit. Mrs Baronio also hired and dismissed workers. Ms McDonald filled these roles when Mrs Baronio was not there, which occurred more frequently as the season progressed.
86 However, in relation to her knowledge of SB and NB, during cross-examination Ms Di Betta deposed the following:
I see. Now, you have got Mr Catanzaro's affidavit there? The thick one, I'm sorry?---Yes.
Can you turn to page 62 please of that affidavit? That is a document you signed about workplace health and safety guidelines on 13 January, is that right?---Yes.
All right. And look at 63. Do you remember getting that document about the same time?---Yes.
Did you read it?---Yes.
And you read those first words prior to commencing employment with the above company:
The following information will be required.
?---Yes. Fax numbers and everything like that.
Yes. And you signed a form about SB Employments β the next page, 64?---Yes.
And you signed another form, 65, with your employee details for SB Employments?---Yes.
And indeed, you completed a tax file declaration which is at page 73 for SB Employments, didn't you?---Yes.
You also, on the same day, looking over to page 76, filled out an employee detail form for NB Employments, didn't you?---Yes.
And you filled out the document on page β signed the document on page 79 for NB Employments?---Yes.
The ..... document on page 78 about NB Employments:
Before commencing with the above company, the following information will be required.
You have seen that as well?---Yes.
Yes. And you did a tax file declaration for NB Employments, as well. You knew at that stage that you were accepting employment with two companies, didn't you?---I was led to believe that there were two companies operating in the shed?
Yes. And you knew that that's what the employment was offered to you was with the two companies?---Yes.
(Transcript 22 October 2010 p 39 l 11 β p 40 l 8.)
87 When Ms Di Betta started work at the farm she did not receive a letter of appointment. Mrs Baronio handed her two sheets of paper β a white sheet with SB at the top and a green one with NB at the top. The forms stated that employees, prior to commencing, were required to provide personal, tax, superannuation and bank information. The forms discussed meal breaks and when wages would be paid but not hours of work or rate of pay. The forms stated further that the position was a casual position on a trial basis, until confirmed in writing.
88 On 28 June 2007 Ms Di Betta completed employee details forms for SB and NB and a document entitled "Eastern Colour Pty Ltd Workplace Health and Safety Guidelines". Mrs Baronio also gave her two tax file number declaration forms to sign for SB and NB. When Mrs Baronio gave Ms Di Betta those forms, section B to be completed by the payer was blank (transcript 22 October 2012 p 47 l 44 β p 78 l 5).
Working hours and pay of Ms Di Betta
89 The usual hours that Ms Di Betta worked were 6 am to 5 pm. However, these changed depending on the number of orders that Mrs Baronio had accepted for each day, and Ms Di Betta deposed that she never knew at what time she would finish work. Ms Di Betta completed a single timesheet every day. On Mondays Ms Di Betta had to a sign a pay sheet for SB listing all of her hours for the week. If she had worked more than 40 hours that week she would also sign a pay sheet for NB. It was never explained to Ms Di Betta why she was required to sign two pay sheets.
90 Every Wednesday SB would pay Ms Di Betta by direct credit into her bank account, except for a few times when she first started working at the farm and collected a cheque from Mr Catanzaro's office. Some weeks she also received a payment from NB. Ms Di Betta believed that since Mr and Mrs Baronio were the owners of Eastern Colour, they decided how much she was paid. She would receive one or two payslips depending on how many hours she had worked that week. She never asked why she received two payslips and assumed it was so the farm could avoid paying her overtime. In paragraph 11 of her supplementary affidavit affirmed 31 August 2012, Ms Di Betta deposed that she did not recall Ms Caruso explaining to her why she was being paid by two different companies, and she was not asked about giving up her entitlement to overtime. Further she did not recall Mrs Baronio holding any meetings in mid-2007 to explain the employment arrangements at the farm.
91 Regardless of the number of hours she worked in a week, Ms Di Betta always worked in the same spot in the Eastern Colour packing shed, supervised by the same people. On one occasion she asked Mrs Baronio whether she could work fewer hours, but Mrs Baronio said she could not as that would amount to favouritism. Ms Di Betta was never paid additional wages for working on public holidays, and never agreed to substitute another day for a public holiday. In her supplementary affidavit affirmed 31 August 2012, Ms Di Betta deposed that she was never asked whether she wanted to work public holidays. She did not recall any meeting in which the workers voted to work on a public holiday.
Evidence of the respondents concerning Ms Di Betta
92 In her affidavit sworn 10 July 2012, Mrs Baronio deposed in summary:
Ms Di Betta called the farm in January 2007 to enquire whether there was work available. Mrs Baronio said it did not matter that Ms Di Betta had no experience in packing capsicums, and she would call her if any vacancies arose.
Mrs Baronio subsequently called Ms Di Betta to advise her of a vacancy in the packing shed. Ms Di Betta stated that she was keen to start work. Mrs Baronio told Ms Di Betta that when she arrived at the farm she could speak to Ms Caruso, who would provide her with all the details about the job.
93 Mrs Baronio denies she told Ms Di Betta that she could not work fewer hours, because at all times the hours worked at the farm were voluntary.
94 Ms Caruso does not recall providing Ms Di Betta with commencement forms. However, she did remember that Ms Di Betta returned the forms to her, at which time Ms Caruso deposed that the following exchange took place (affidavit of Adela Caruso sworn 10 July 2012 at [38]-[41]):
38. β¦ I said words to the following effect:
"Do you understand that you are accepting employment with two companies, S.B and N.B?"
39. Ms Di Betta said words to the following effect:
"Yes."
40. I then said words to the following effect:
"S.B will pay you for the first 40 hours and N.B will pay you for any hours after that. All hours will be paid at ordinary time rate."
41. Ms Di Betta said in words to the following effect:
"Yes."
95 Annexure VC-6 to the affidavit of Vincenzo Cateno Catanzaro sworn 10 July 2012 shows that Ms Di Betta signed the following documents on 13 January 2007:
Eastern Colour Pty Ltd Workplace Health & Safety Guidelines;
an "Agreement Authority" headed SB;
an employee and bank details forms for SB;
a choice of superannuation fund - Standard choice form for SB;
a tax file number declaration form (the payer information section B was signed on 20 February 2007 for SB).
96 On 15 February 2007, Ms Di Betta signed the following documents (affidavit of Vincenzo Cateno Catanzaro sworn 10 July 2012 annexure VC7):
an employee and bank details forms for NB;
a choice of superannuation fund - Standard choice form for NB;
an "Agreement Authority" headed NB;
a tax file number declaration form (the payer information section B was signed on 28 February 2007 for NB).
97 In her Statement dated 14 November 2008 to the Workplace Ombudsman, Ms Di Betta stated at [20]:
I also had to complete two tax file number declaration forms that were given to me at the same time. I had to write SB Employments Pty on one hand and NB Employments Pty Ltd on the other. I can't remember whether I had to put their Australian Business Numbers on the tax file number declarations or not β¦
(Affidavit of Vincenzo Cateno Catanzaro sworn 10 July 2012 annexure VC20.)
98 Mrs Baronio deposed that all of the employees voted to work the show holiday in February 2008. Ms Di Betta left prior to the completion of the shift without giving Mrs Baronio any notice.
WORK BY JOANNE DONGES
Evidence of Joanne Donges
99 From 13 July 2007 to 21 February 2008 Joanne Donges worked in the packing shed at the farm as a fruit and vegetable packer, cleaner and machine operator. Her duties included stacking, labelling, re-boxing, making up cartons and training other workers.
100 Ms Donges deposed that she was offered the job of packer by Mrs Baronio and Mr Currado Rizzatto, one of the shed bosses (affidavit of Joanne Kathleen Donges sworn 4 May 2012). She knew Mrs Baronio and Mr Currado were in charge as they were allocating tasks to the workers.
101 When she started working at the farm Ms Donges believed that her employers were Mr and Mrs Baronio because they were the bosses. When she started work Mrs Baronio asked her to complete a tax file number declaration form, with SB listed as the employer. However, Ms Donges deposed that it was incorrect to say that she accepted employment with SB but declined employment with NB. She knew that SB stood for Stephen Baronio, but he never instructed her in her work.
102 In her evidence Ms Donges stated:
I did not receive a letter of appointment but at the end of my shift on the first day I started I was given a job description form. The name of the employer on this form was S.B. Employments Ltd. It was given to me with my tax form and other paperwork which I completed and gave back the same day. The details of the job description included that we worked for SB and that we got breaks. I didn't pay much attention to it at all. I also signed a document entitled "Eastern Colour Pty Ltd Workplace Health and Safety Guidelines" ...
103 In relation to overtime work, Ms Donges deposed:
46. When I first started Louisa gave me a tax form for SB and a tax form for NB. Louisa said words to the following effect:
"You won't need the second tax form as the first 40 hours are paid by SB and once you have worked over 40 hours those hours are paid by NB. We pay with two companies so you pay less tax. Because you won't work over 40 hours per week you only need to fill out the form for SB."
47. Louise showed me a form where I could choose what amount of tax I wanted to pay, there was 10%, 13%, 20% or the standard. I chose to pay the standard amount of tax.
48. I did not work more than 40 hours in one week.
104 Usually Ms Donges worked from 6 am to 7 pm over two-three days, for an average of 30-35 hours per week. She deposed that she would be told by Mrs Baronio or Mr Rizzatto when she was to work, and had no say in when or where she worked. Mrs Baronio would call her in the evening and inform her of her start time the next day. Her finish time changed each day depending on how many orders had to be filled.
105 Ms Donges does not recall Ms Caruso ever explaining why the workers were paid by two different companies or the mid-2007 meeting referred to by Mrs Baronio. She signed one timesheet each week for SB. At some point each week she would receive a payslip with SB on it.
106 In relation to public holidays, Ms Donges deposed that she never agreed to substitute another day for a public holiday as it was never discussed with her. She did not get paid additional wages for working on the public holidays. She never signed a public holiday waiver form, and no meeting of workers was held in relation to voting to work on public holidays.
107 During oral examination-in-chief, Ms Donges deposed that (transcript 22 October 2012 p 50 l 30 β p 51 l 3):
although she did not wear the work shirts from Eastern Colour, other workers did;
the stickers with Eastern Colour on them were for the workers to place on the crates and boxes for Woolworths and Coles;
the packing boxes all had Eastern Colour on them.
108 During cross-examination, Ms Donges conceded that she had written a letter of complaint to Workplace Health and Safety. She responded, "Yes", to the question, "So you made as many complaints as you could think of there, didn't you?" (transcript 22 October 2012 p 54 l 28).
Evidence of Louisa Baronio
109 In early July 2007 Ms Di Betta asked Mrs Baronio whether there was work available at the farm for her friend, Ms Donges. Mrs Baronio told Ms Di Betta to tell the friend to come to see her (affidavit of Louisa Baronio sworn 10 July 2012 at [106]).
110 Ms Donges came to the farm and had a brief discussion with Mrs Baronio about the types of work available. Ms Donges stated that she only wished to work two days every week. Mrs Baronio said that was fine. She should speak with Ms Caruso, who would inform her of the details of working at the farm. Mrs Baronio did not ask Ms Donges to complete any forms. In accordance with her usual practice she referred Ms Donges to Ms Caruso for these to be completed.
RELEVANT LEGISLATIVE PROVISIONS
111 At material times, s 182(1) of the Act stated as follows:
Subdivision BβGuarantee of basic rates of pay
182 The guarantee
Guarantee of APCS basic periodic rates of pay
(1) If:
(a) the employment of an employee is covered by an APCS; and
(b) the employee is not an APCS piece rate employee;
the employee must be paid a basic periodic rate of pay for each of the employee's guaranteed hours (pro-rated for part hours) that is at least equal to the basic periodic rate of pay (the guaranteed basic periodic rate of pay) that is payable to the employee under the APCS.
Note: For what are the employee's guaranteed hours, see section 183.
112 It is not in dispute that from 27 March 2006 there existed an Australian Pay and Classification Scale ("APCS"), being a preserved APCS within the meaning of that term given by s 208(1) of the Act and which was applicable to the work performed by the relevant employees. The APCS was derived from the Fruit and Vegetable Growing Industry Award - State 2002 (Qld) upon the commencement of Sch 1 of the Workplace Relations Amendment (Work Choices) Act 2005 (Cth) on 27 March 2006.
113 The coverage provisions of the APCS set out in cl 1.4 of the NAPSA provided that the APCS applied to:
All employers and their employees engaged in the fruit and vegetable growing industry, including the preparation of land, cultivation, planting, care, picking, handling, treating, packing and despatching of all fresh fruits (including tomatoes) and vegetables, on or from fruit and vegetable farms, vineyards, orchards and plantations, throughout the State of Queensland.
114 It is clear that the conditions of employment of the relevant employees in this case fell within the terms of the NAPSA.
115 Clause 6.4.2 of the NAPSA provides in relation to overtime that:
6.4.2 All time worked by casual employees in excess of 40 hours in any 7 days shall be deemed overtime and paid for at the rate of time and a half for the first 3 hours and double the ordinary rate of pay thereafter.
116 Clause 7.6 of the NAPSA relevantly provides in relation to public holidays that:
7.6.1 Subject to clause 7.6.7 all work done by an employee on:
the 1st January;
the 26th January;
Good Friday;
Easter Saturday (the day after Good Friday);
Easter Monday;
the 25th April (Anzac Day);
The Birthday of the Sovereign;
Christmas Day;
Boxing Day; or
any day appointed under the Holidays Act 1983, to be kept in place of any such holiday
will be paid for at the rate of double time and a-half with a minimum of 4 hours.
7.6.2 Labour Day
All employees covered by this Award are entitled to be paid a full day's wage for Labour Day (the first Monday in May or other day appointed under the Holidays Act 1983, to be kept in place of that holiday) irrespective of the fact that no work may be performed on such day, and if any employee concerned actually works on Labour Day, such employee will be paid a full day's wage for that day and in addition works on Labour Day, such employee will be paid a full day's wage for that day and in addition a payment for the time actually worked by the employee at one and a-half times the ordinary time rate of pay prescribed for such work with a minimum of 4 hours.
7.6.3 Annual show
All work done by employees in a district specified from time to time by the Minister by notification published in the Industrial Gazette on the day appointed under the Holidays Act 1983, to be kept as a holiday in relation to the annual agricultural, horticultural or industrial show held at the principal city or town, as specified in such notification of such district will be paid for at the rate of double time and a-half with a minimum of 4 hours.
In a district in which a holiday is not appointed for an annual agricultural, horticultural or industrial show, the employee and employer must agree on an ordinary working day that is to be treated as a show holiday for all purposes.
CLAIMS AGAINST THE RESPONDENTS
117 In its application filed 7 September 2010 the FWO claimed that Eastern Colour had contravened all of these provisions. Alternatively, the FWO claimed that Eastern Colour and the second and third respondents had contravened those provisions.
118 In relation to the fourth respondent Louisa Baronio, the FWO claims that Mrs Baronio should be held to have been involved in Eastern Colour's contravention of the Act by virtue of s 728 of the Act, which provides:
728 Involvement in contravention treated in same way as actual contravention
(1) A person who is involved in a contravention of a civil remedy provision is treated as having contravened that provision.
(2) For this purpose, a person is involved in a contravention of a civil remedy provision if, and only if, the person:
(a) has aided, abetted, counselled or procured the contravention; or
(b) has induced the contravention, whether by threats or promises or otherwise; or
(c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d) has conspired with others to effect the contravention.
119 The FWO claims that s 182(1) of the Act and cll 6.4.2, 7.6.1, 7.6.2 and 7.6.3 of the NAPS are "applicable provisions" within the meaning of s 717 of the Act, and for the purposes of s 718 of the Act. Section 719 of the Act empowers the Court to impose a penalty on a person if that person is bound by an applicable provision and the person breaches the provision. The FWO seeks the imposition of penalties against each respondent for contraventions of these applicable provisions.
120 In summary, the FWO claims that:
in breach of s 182 of the Act, the first respondent failed to pay each of:
o Mr Gordon Falconer from 5 December 2006 until 30 September 2007;
o Mr Lachlan Falconer from 5 December 2006 until 11 March 2007;
o Ms Di Betta from 16 January 2007 until 30 September 2007; and
o Ms Donges from 9 July 2007 until 30 September 2007,
at least the guaranteed basic periodic rate of pay payable under the AFPCS for each of the employees guaranteed hours of work.
The first respondent was required to pay each of the employees at least the overtime rate of pay for hours worked in excess of 40 hours in any seven days, and failed to do so in respect of each of the relevant employees.
The first respondent was required to pay each of the employees at least the penalty rate of pay for hours worked on public holidays, and failed to do so in respect of each of the relevant employees.
As a result of these contraventions, the first respondent underpaid wages and entitlements to the relevant employees in the amount of $19,034.11.
121 In the second further amended statement of claim the FWO pleads that the underpayments were actually paid to each of the relevant employees by the second respondent in or about August 2010.
122 In summary, the respondents dispute the FWO's claims on the basis that the relevant employees accepted offers of employment from both SB and NB and/or worked for those entities, and further that to the extent they acted Mr and Mrs Baronio were acting on behalf of SB and NB.
123 It does not appear to be in dispute that penalty rates were not paid on public holidays. The major area of contention concerns the identity of the employer of the relevant employees.
CONSIDERATION
124 In my view it is clear that, at all material times, the employer of the relevant employees was the first respondent, Eastern Colour.
125 The respondents submit, in summary, that:
There is evidence before the Court as to the commercial purpose of the arrangements adopted wherein SB and NB were incorporated as labour hire companies, and employees would work up to 40 hours for one of those companies and then work additional hours for the other.
SB and NB were substantial business structures in their own right with tiers of management.
126 That the respondents operate in an industry where profits are low, where persons in the Stanthorpe area are keen to work in the fruit industry and indeed to work as many hours as possible, where the work is seasonal and an employee may be required to work more than 40 hours per week, where the respondents are required to take prices offered to them by the major supermarket chains, and where farms may otherwise take employees from labour hire companies and impose a maximum of 40 hours per week, are facts which are not in dispute. Indeed, the difficulties faced by primary producers in this country are of daily report in the media. However these facts do not detract from the legal position under the Act, which this Court is required to apply.
127 Principles relevant to the identification of an employer in circumstances of ambiguity were considered by the Full Court in Damevski v Giudice (2003) 133 FCR 438. In that case in particular Marshall J observed, in summary, that:
the existence of a contractual relationship and employment relationship, in any given set of circumstances, is ultimately a question of law (at 450).
Payment of wages by a third party is not fatal to the existence of a contract of employment between a worker and a putative employer (at 451).
control over a worker did not merely relate to the on-the-job situation, but rather the ultimate or legal control over the worker (at 451).
Contact between the putative employer and employee is an indicator of an employment relationship (at 452).
contracts of employment may be entered into with a minimum of formality (at 452).
It is necessary to look "beyond and beneath the documents" and not reach a decision concerning the existence of an employment contract on the basis of construing the correspondence (at 453, cf Lord Mummery in Franks v Reuters Ltd [2003] IRLR 423).
Even where the work relations are documented, it is necessary to examine not only the correspondence, but also the circumstances surrounding it, the subsequent conduct of the parties, and the way in which the parties operated and understood the situation (at 453).
128 In this case the evidence demonstrates that each of the relevant employees signed (or had signed for them) weekly time sheets under the heading of either SB or NB. Similarly, each of the employees received payment advices under the name of either SB or NB. However in my view the arrangements whereby the relevant employees were identified as working for SB or NB were, effectively, a sham. That the true employer was Eastern Colour is clear from the evidence before the Court. In particular I note the following:
The fact that all relevant employees considered that Mr and Mrs Baronio were "the bosses" who could hire and fire employees, and that this did actually appear to be a correct perception.
The evidence of each of the relevant employees that they believed that they were working for Eastern Colour. Indeed employees on the farm wore shirts bearing the name "Eastern Colour", on the basis that this was their employer. Similarly, the only Workplace, Health and Safety Guidelines applicable at the farm were in the name of Eastern Colour (transcript 23 October 2012 p 84 ll 9-19). This may be compared with the absence of evidence of any employees having any direct separate involvement with SB or NB in the employment environment.
The fact that the employees performed the work in the same location, namely on the farm owned by Eastern Colour, and by packing fruit in boxes labelled as produced by Eastern Colour.
The fact that the relevant employees had limited knowledge of SB or NB other than as entities whose name appeared on pay slips. Indeed, there is clear evidence before the Court that there was no practical difference in their work environment or practice after an employee had worked 40 hours.
The lack of awareness of the relevant employees of the arrangements whereby they worked up to 40 hours for one of the respondents and any additional hours for another, notwithstanding evidence of Ms Caruso and Mrs Baronio that they had informed them of the arrangements.
The directors of SB and NB had no involvement in employing staff.
The clear fact that SB and NB existed only to provide services to the first respondent.
Notwithstanding the existence of time sheets and pay slips, the absence of any contract of employment between either SB or NB, and the relevant employees.
Mrs Baronio repeatedly gave evidence to the effect that there was no overtime available in the system, and that no farms paid overtime rates to their harvesting and packing staff. However while this may have been the practice, it is very clear that Mrs Baronio was aware of the legal obligation on employers to pay overtime once an employee had worked 40 hours. Indeed, it was for this very reason that SB and NB were created β namely to be entities who could be the nominal employers of employees on the farm to obviate the legal requirements of Eastern Colour as employer to pay overtime for more than 40 hours work. That the directors of SB and NB were the children of Mr and Mrs Baronio simply supports the inference that SB and NB functioned in the context of the family business.
129 The respondents relied on comments of Buchanan J in Fair Work Ombudsman v Ramsey Food Processing Pty Ltd (2011) 198 FCR 174, in particular the following observations of his Honour:
76. There may be many reasons why companies, businesses or enterprises associated with each other might wish to organise their affairs in a way where one legal personality employs labour for the ultimate use and benefit of other legal personalities. Such arrangements will often not be characterised or accompanied by the apparent profitability or identified reward which might be necessary in order to regard an arms-length arrangement as a genuine one.
77. In such intra-group arrangements there may be overlapping, or even common, directorships, interlocking shareholdings (either cross-ownership or through ultimate ownership) and there is frequently a system of cross-guarantees in place. Little of this may be apparent to outsiders. The details may not be discoverable through the public records system. Arrangements between or amongst companies related in this way where one company (or more) operates to engage labour while others are concerned with management, operations, marketing or sales are by no means unusual. They are certainly not illegal. Arrangements along these lines may even be indispensable for some forms of business activity e.g. joint ventures. Although more than mere lip service must be paid to the separation of legal personality provided by individual incorporation, the tests applied to other labour hire arrangements, of independence and separate business, are either not relevant or are much less readily applied in such a circumstance.
78. Nevertheless, it must be possible to identify a rational explanation for the arrangement and the explanation must be satisfactorily related to an intelligible business objective. That is so because otherwise, doctrines of agency, at least, may operate to defeat a bare claim of independence and isolated liability, supported only by a bare reference to separate incorporation. That is particularly likely to be the case when: the separate employing company is completely reliant upon a company to which it purportedly supplies labour; it has no assets and no management structure of its own; and it exists only as a corporate shell to protect another company, which does have assets, from liability to employees. In such a case a court might not hesitate long before pronouncing the arrangement ineffective or, in a more serious case, a sham.
130 In my view these observations do not assist the respondents. Indeed the concluding comments of Buchanan J at [78] concerning circumstances where the Court would not hesitate long before pronouncing an arrangement ineffective or a sham are squarely applicable here. While there may have been a rational explanation for the arrangements put in place by the respondents, to adopt comments of Marshall J in Damevski v Giudice at 450, it was to effectively to:
attempt to exploit difficult areas of law and create vehicles designed, inter alia, to enable employers to avoid their award and statutory obligations.
131 As Marshall J observed in Damevski v Giudice there is no legitimacy in such arrangements.
132 It follows that the FWO has substantiated its claim that the first respondent was the employer of Mr Gordon Falconer, Mr Lachlan Falconer, Ms Di Betta and Ms Donges.
133 Finally I am satisfied that any contravention by the first respondent involving underpayment of entitlements to these employees involved the second, third and fourth respondents within the meaning of s 728 of the Act. As the High Court explained in Yorke v Lucas (1985) 158 CLR 661 at 670:
There can be no question that a person cannot be knowingly concerned in a contravention unless he has knowledge of the essential facts constituting the contravention.
134 It is clear from the material before the Court that these three respondents aided and abetted the contravention, and/or were knowingly concerned in the contravention, in that:
The second and third respondents were party to the arrangements whereby the relevant employees were allegedly employed by one of them for up to 40 hours per week and then by another respondent for additional hours.
Each of the second and third respondents made payments to the relevant employees which were in breach of the provisions of the Act.
The second and third respondents had knowledge of the essential facts constituting the contravention of the Act by the first respondent.
The fourth respondent, who had detailed knowledge of the arrangements, had knowledge of the essential facts constituting the contravention of the Act by the first respondent.
CONCLUSION
135 I will ask the parties to prepare a minute of order to reflect these findings. Further, I note that the applicant seeks the imposition of penalties for contravention of the Act. In the circumstances I will make timetabling orders for the matter to return to Court for the parties to make appropriate submissions on penalty.
I certify that the preceding one hundred and thirty-three (133) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier.
Associate:
Dated: 11 February 2014
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Boehringer Ingelheim Animal Health USA Inc. v Intervet International B.V. (No 2) [2020] FCA 1433
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2020/2020fca1433
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2024-09-13T22:46:18.826682+10:00
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Federal Court of Australia
Boehringer Ingelheim Animal Health USA Inc. v Intervet International B.V. (No 2) [2020] FCA 1433
Appeal from: A decision of a delegate of the Commissioner of Patents: Merial, Inc. v Intervet International B.V. [2018] APO 52 (17 August 2018)
File number: VID 1127 of 2018
Judgment of: MOSHINSKY J
Date of judgment: 5 October 2020
Catchwords: PRACTICE AND PROCEDURE β costs β costs of interlocutory applications to amend patent application β where orders made by consent that the patent application be amended β where appeal under s 60(4) of the Patents Act 1990 (Cth) dismissed
Legislation: Patents Act 1990 (Cth), s 105
Cases cited: Eli Lilly and Co v Pfizer Research and Development Co NV/SA (2003) 59 IPR 234
Les Laboratoires Servier v Apotex Pty Ltd (2010) 273 ALR 630
Division: General Division
Registry: Victoria
National Practice Area: Intellectual Property
Sub-area: Patents and associated Statutes
Number of paragraphs: 7
Date of last submissions: 30 September 2020
Date of hearing: Determined on the papers
Counsel for the Appellant: Mr C Dimitriadis SC with Ms C Cunliffe
Solicitor for the Appellant: Ashurst Australia
Counsel for the Respondent: Mr CH Smith
Solicitor for the Respondent: Spruson & Ferguson Lawyers
ORDERS
VID 1127 of 2018
BETWEEN: BOEHRINGER INGELHEIM ANIMAL HEALTH USA INC.
Appellant
AND: INTERVET INTERNATIONAL B.V.
Respondent
order made by: MOSHINSKY J
DATE OF ORDER: 5 OCTOBER 2020
THE COURT ORDERS THAT:
1. The appellant and the respondent each bear their own costs of the respondent's interlocutory applications filed on 10 December 2018 and 31 May 2019.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
MOSHINSKY J:
1 On 17 September 2020, I published reasons for judgment in this matter and ordered that the parties provide minutes of proposed orders to give effect to the Court's reasons: Boehringer Ingelheim Animal Health USA Inc. v Intervet International B.V. [2020] FCA 1333. These reasons should be read together with the 17 September 2020 reasons. I adopt the abbreviations used in those reasons.
2 The parties subsequently provided proposed orders that were agreed except in one respect, namely as regards the costs of two interlocutory applications filed by Intervet by which it sought to amend the Patent Application. Accordingly, on 24 September 2020 I made orders that:
(a) the appeal be dismissed;
(b) Australian patent application number 2011268899 proceed to grant;
(c) Boehringer pay Intervet's costs of the proceeding (apart from the costs of Intervet's interlocutory applications filed on 10 December 2018 and 31 May 2019, which are to be the subject of submissions on costs), as agreed or assessed; and
(d) by 4.00 pm on 30 September 2020, each party file and serve a written submission (of no more than two pages) on the issue of the costs of Intervet's interlocutory applications filed on 10 December 2018 and 31 May 2019; that issue will then be determined on the papers.
3 Each party has now filed a written submission on the costs of Intervet's interlocutory applications filed on 10 December 2018 and 31 May 2019. The parties' positions are as follows:
(a) Intervet does not seek its costs of preparing and filing the interlocutory applications. However, it submits that there is no proper basis for excluding any other costs of the interlocutory applications from the general order as to costs in Intervet's favour.
(b) Boehringer submits that the appropriate order is that Boehringer and Intervet each bear their own costs of the interlocutory applications.
4 The following matters are noted in relation to the two interlocutory applications. By the interlocutory application filed on 10 December 2018, Intervet sought to amend the Patent Application to limit the references to "levamisole" in each of claims 1, 11, 14 and 16 to "levamisole salt" (so as to exclude levamisole in its free base form). Corresponding amendments were sought at page 2 (lines 8, 9 and 23) and page 2a (lines 2 and 3) of the specification. On 5 March 2019, an order was made by consent that, pursuant to s 105(1A) of the Patents Act 1990 (Cth), the complete specification of the Patent Application be amended as set out in Annexure 1 to the interlocutory application. The orders made on 5 March 2019 did not reserve or otherwise refer to the costs of the interlocutory application.
5 By the interlocutory application filed on 31 May 2019, Intervet sought to amend the Patent Application to delete the concluding words, "and wherein the formulation does not contain water" from claim 11. A corresponding deletion was sought at page 2 (line 26) of the specification. Boehringer initially opposed this amendment on discretionary grounds, but ultimately consented to it. On 18 February 2020, an order was made by consent that, pursuant to s 105(1A) of the Patents Act, the complete specification of the Patent Application be amended as set out in Annexure A to the interlocutory application. It was also ordered that the hearing of the interlocutory application (listed for 16 March 2020, the first day of the hearing of the proceeding) be vacated, and that the costs of the interlocutory application be reserved.
6 I consider it appropriate to deal with the costs of the interlocutory applications separately from the overall costs of the proceeding. They were discrete applications.
7 In my view, the appropriate order in the circumstances is that Boehringer and Intervet each bear their own costs of the interlocutory applications. In respect of each interlocutory application to amend, Intervet sought something in the nature of an indulgence: see Les Laboratoires Servier v Apotex Pty Ltd (2010) 273 ALR 630 at [59]; cf Eli Lilly and Co v Pfizer Research and Development Co NV/SA (2003) 59 IPR 234. For this reason, the patentee may be ordered to pay the costs of the amendment application, regardless of the outcome. In this case, however, Boehringer does not seek a costs order in its favour, but only an order that each party bear its own costs. I consider that to be appropriate, particularly in circumstances where there was no adjudication on the merits of either application. Although Intervet may have incurred some costs in considering and responding to Boehringer's initial opposition to the second application to amend, I consider it appropriate for these costs to lie where they fall. Boehringer had a proper interest in considering the proposed amendments, and any such costs incurred by Intervet were occasioned by Boehringer's proper consideration of the proposed amendments. Accordingly, I will make an order that Boehringer and Intervet each bear their own costs of the interlocutory applications.
I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Moshinsky.
Associate:
Dated: 5 October 2020
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AQA19 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2021] FCA 929
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2021/2021fca0929
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2024-09-13T22:46:19.126969+10:00
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Federal Court of Australia
AQA19 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2021] FCA 929
Appeal from: AQA19 v Minister for Immigration [2019] FCCA 3002
File number: NSD 1870 of 2019
Judgment of: PERRAM J
Date of judgment: 9 August 2021
Catchwords: MIGRATION β application for extension of time and leave to appeal from Federal Circuit Court decision dismissing judicial review application β where Immigration Assessment Authority affirmed delegate's decision to refuse protection visa β where proposed grounds concern application of complementary protection test and procedural fairness
Legislation: Federal Court of Australia Act 1976 (Cth) ss 24(1), 24(1A)
Migration Act 1958 (Cth) ss 36(2), 36(2A), 473DA, 473DC, 473DD(a), 473GB
Federal Circuit Court Rules 2001 (Cth) r 44.12
Division: General Division
Registry: New South Wales
National Practice Area: Administrative and Constitutional Law and Human Rights
Number of paragraphs: 13
Date of hearing: 5 August 2021
Counsel for the Applicant: The Applicant appeared in person with the assistance of an interpreter
Solicitor for the First Respondent: Ms K Pieri of Minter Ellison
Counsel for the Second Respondent: The Second Respondent filed a submitting notice save as to costs
ORDERS
NSD 1870 of 2019
BETWEEN: AQA19
Applicant
AND: MINISTER FOR IMMIGRATION, CITIZENSHIP, MIGRANT SERVICES AND MULTICULTURAL AFFAIRS
First Respondent
IMMIGRATION ASSESSMENT AUTHORITY
Second Respondent
order made by: PERRAM J
DATE OF ORDER: 9 August 2021
THE COURT ORDERS THAT:
1. The application for extension of time and leave to appeal dated 12 November 2019 be dismissed with costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
PERRAM J:
1 This is an application for an extension of time and leave to appeal from a decision of the Federal Circuit Court: AQA19 v Minister for Immigration [2019] FCCA 3002 ('AQA19'). The proceeding in that court related to the Applicant's efforts to secure the grant to him of a Safe Haven Enterprise (Subclass 790) Visa ('SHEV'). A SHEV is a species of protection visa. It is available, generally speaking, when an applicant is able to satisfy the decision maker that they have a well-founded fear that, if returned to their country of origin, they will face persecution on grounds of race, religion, politics or membership of a particular social group: s 36(2)(a) of the Migration Act 1958 (Cth) ('the Act'). It may also be granted where an applicant satisfies the decision maker that there are substantial grounds for believing that as a necessary and foreseeable consequence of the applicant's removal from Australia there is a real risk that the applicant will suffer significant harm: s 36(2)(aa).
Application For Extension of Time and Leave to Appeal
2 The Applicant is a citizen of Bangladesh. A delegate of the First Respondent ('the Minister') rejected his application for a SHEV and the Immigration Assessment Authority ('the Authority') affirmed this decision on review. It was the Authority's affirmation decision which the Applicant sought to challenge in the Federal Circuit Court. The Federal Circuit Court refused his application, dismissing it on the basis that it had not 'raised an arguable case for the relief claimed' within the meaning of r 44.12(1)(a) of the Federal Circuit Court Rules 2001 (Cth) ('FCCR'): AQA19 at [18]. Such a determination is deemed to be interlocutory by FCCR r 44.12(2). The immediate consequence of that deeming is that leave of this Court is required before any appeal may be brought from such a decision: Federal Court of Australia Act 1976 (Cth) s 24(1)(d) and (1A). The Applicant has applied for that leave although he was 8 days late in doing so. Consequently, he has also applied for an extension of 8 days so that his application for leave to appeal may be brought.
3 The application was heard on Thursday 5 August 2021 which was during the period during which Sydney was in lockdown as a result of the spread of the Delta variant of the SARS-CoV-2 virus. The Applicant was in lockdown in the area of Sydney where he lives. He informed my Chambers that he did not have access to a computer or a mobile phone with which he could participate in a virtual hearing. Ultimately, the hearing was conducted in the form of a Microsoft Teams meeting with the Applicant dialled in via telephone. Since he does not speak English fluently an interpreter was provided who was also on the telephone (at a different location). The Minister's representative, Ms Pieri, took part in the virtual hearing in a visible manner with her device's camera enabled, as did I. The Minister's written submissions were translated for the Applicant during a short adjournment. Ultimately, he did not seek to make any oral submissions in support of his application.
Grounds of Appeal if Extension and Leave Granted
4 From the documents which he has filed it is apparent that the Applicant proposes to pursue two grounds of appeal if permitted to appeal. The first is that the Authority failed explicitly to disaggregate the statutory formulae under s 36(2)(aa) of the Act. The second is that it denied him procedural fairness.
5 I do not think that either proposed ground of appeal is viable.
Ground One
6 As to the first, s 36(2)(aa) of the Act provides that it is a criterion for the grant of a protection visa (which would include a SHEV) that:
a non-citizen in Australia (other than a non-citizen mentioned in paragraph (a)) in respect of whom the Minister is satisfied Australia has protection obligations because the Minister has substantial grounds for believing that, as a necessary and foreseeable consequence of the non-citizen being removed from Australia to a receiving country, there is a real risk that the non-citizen will suffer significant harm
7 Section 36(2)(aa) is referred to as 'complementary protection' and is an enactment which has some connection with Australia's non-refoulement obligations. The reference to 'significant harm' in s 36(2)(aa) is fleshed out in s 36(2A) in these terms:
(2A) A nonβcitizen will suffer significant harm if:
(a) the nonβcitizen will be arbitrarily deprived of his or her life; or
(b) the death penalty will be carried out on the nonβcitizen; or
(c) the nonβcitizen will be subjected to torture; or
(d) the nonβcitizen will be subjected to cruel or inhuman treatment or punishment; or
(e) the nonβcitizen will be subjected to degrading treatment or punishment.
8 The Authority set out these requirements at [53] of its reasons and then dealt with them at [54]-[55]:
I have concluded there is not a real chance the applicant will face any harm from the Awami League party, members or supporters, or the government because of his involvement with Jubo Dal, or because of his family and relatives' involvement with and support for the BNP, or because of his involvement with BNP Australia and attendance at protests against the Awami League leader and government and its actions, or for any affiliation with the BNP or Jubo Dal, or for any other reason, including his illegal departure and that he sought asylum in Australia. I am similarly not satisfied there is a real risk of any harm, including significant harm on these bases.
I am not satisfied there are substantial grounds for believing that, as a necessary and foreseeable consequence of the applicant being removed from Australia to Bangladesh, there is a real risk he will suffer significant harm.
9 I am unable to see how it can be said that the Authority failed to disaggregate the requirements of s 36(2)(aa). It identified each of the requirements in s 36(2)(aa) in [55] and unpicked the meaning of 'significant harm' in [53]. It answered those questions in [54] by reference to the findings it had made in relation to the Applicant's claims. I do not accept that the Authority failed in the way suggested. This was also the view of the primary judge who concluded at [14] that whilst the Authority's assessment did draw on anterior factual findings, he could find no error in that approach. Consequently, I do not accept that the proposed first ground of appeal has any prospects of success.
Ground Two
10 As to the second ground β that the Authority denied the Applicant procedural fairness β there is the difficulty that Div 3 of Pt 7AA of the Act, together with s 473GA and s 473GB, is an exhaustive statement of the natural justice hearing rule in relation to reviews undertaken by the Authority: s 473DA. It is not therefore enough to say that there has been a denial of procedural fairness. Rather, one must point to some aspect of Div 3 of Pt 7AA which has miscarried. The Applicant did not identify any provision which he said that the Authority had misapplied.
11 I have reviewed the Authority's reasons to see whether such an argument might nevertheless be available. The Authority has a power to receive 'new information' from an applicant (s 473DC(1) of the Act) and to hear from an applicant (s 473DC(3)(b)). The Applicant provided two pieces of 'new information', a written submission and excerpts of country information, which the Authority declined to consider on the basis that the Applicant had failed to demonstrate 'exceptional circumstances' as required by s 473DD(a). It is also clear that the Authority did not interview the Applicant. Again, however, the Authority is ordinarily under no obligation to do so. I accept that in some circumstances it may be possible to conclude that the Authority has erred in not interviewing an applicant but I can discern nothing in this case which might have required the Authority to take a different course to the one it adopted.
12 Whether as to the new information which it did not receive or the fact that it did not interview the Applicant, I am unable to detect any error in either. No argument is reasonably available on the basis of these provisions. Consequently, I conclude that the Applicant's second ground is not viable even if it is reimagined as a case under s 473DC(1), (3)(b) or s 473DD(a). For completeness, I have read the Authority's decision with some care and was unable to detect any other plausible ground of judicial review.
Conclusion and Orders
13 It follows that extending time to permit the Applicant to seek leave to appeal would serve no purpose. Leave would not be granted even if an extension of 8 days were to be granted because the proposed grounds of appeal do not enjoy sufficient prospects of success to warrant a grant of leave to appeal. The application dated 12 November 2019 must be dismissed with costs.
I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Perram.
Associate:
Dated: 9 August 2021
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NAOZ v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCA 820
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2003/2003fca0820
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2024-09-13T22:46:25.613863+10:00
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FEDERAL COURT OF AUSTRALIA
NAOZ v Minister for Immigration & Multicultural & Indigenous Affairs
[2003] FCA 820
NAOZ v MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
N 518 OF 2003
SACKVILLE J
SYDNEY
29 JULY 2003
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY N 518 OF 2003
BETWEEN: NAOZ
APPLICANT
AND: MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
RESPONDENT
JUDGE: SACKVILLE J
DATE OF ORDER: 29 JULY 2003
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The application be dismissed.
2. The applicant pay the respondent's costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY N 518 OF 2003
BETWEEN: NAOZ
APPLICANT
AND: MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
RESPONDENT
JUDGE: SACKVILLE J
DATE: 29 JULY 2003
PLACE: SYDNEY
REASONS FOR JUDGMENT
1 This is an application under s 39B of the Judiciary Act 1903 (Cth) for relief in respect of a decision of the Refugee Review Tribunal ("the RRT") handed down on 22 April 2003. The RRT affirmed a decision of a delegate of the respondent ("the Minister") to refuse to grant the applicant a protection visa.
2 The applicant has appeared unrepresented. The application filed in this Court does not identify any grounds of review but simply asks for "review" of the RRT's decision. The applicant has not made any significant oral submissions to the Court.
background
3 The applicant is a citizen of India. He is a Muslim from Hyderabad and was born in 1957. His family resides in India.
4 The applicant arrived in Australia on 14 January 2002. On 22 January 2002 he lodged an application for a protection (Class XA) visa with the Department of Immigration and Multicultural and Indigenous Affairs under the Migration Act 1958 (Cth) ("the Act"). On 10 May 2002, a delegate of the respondent ("the Minister") refused to grant the applicant a protection visa. On 4 June 2002 the applicant applied to the RRT for review of the delegate's decision, and on 31 March 2003 the RRT affirmed that decision.
5 In a written statement in support of his application for a protection visa, the applicant claimed to have a well founded fear of persecution, if he were to return to India, as a result of his political and religious opinions. The applicant claimed to have joined the Indian Muslim League in 1986 as a supporter, and later as a full member. He said that he had become a public figure within the party. The applicant stated that after the destruction of the Babri Mosque by Hindu extremists, relations between the majority and Muslim minorities in India became so strained that it was difficult to carry on his business. He said that his life was threatened, and that he received "no satisfactory response" on reporting this to the police. He also said that his shop had been looted twice, and that while he made many reports to the authorities, he was not given protection.
6 The applicant stated that his "sole sin was that [he] was from a party which is not tolerable [sic] by the majorities of the Hindu population". He stated that Muslims suffer discrimination in educational institutions and in many other respects. He also claimed to have been refused protection after being labelled a Pakistani ISI agent, and was told that he would be involved in cases "in which there is no bail". He claimed that the Indian authorities have "black laws" for Muslims, and that there have been cases of Muslims being arrested and kept in jail without trial for many years.
7 On 26 March 2002, a delegate of the Minister wrote to the applicant (with a copy to his agent) as follows:
"The claims you have advanced in support of your Protection Visa application are vague, lack details, credibility and would not amount to serious harm β¦ for a Convention reason. Furthermore you have not provided any evidence to support your claims of reporting the described incidents to the authorities in India".
The letter also cited passages from country information on India, and commented on the fact that the applicant had left India using a passport issued in his own name nearly three months after the grant of his visitor's visa and had only applied for a protection visa on the day his visitor's visa was due to expire. The letter invited the applicant to comment on the adverse material raised. The applicant did not respond to this invitation and on 10 May 2002 the delegate made his decision refusing to grant the applicant a protection visa.
8 In his application to the RRT, the applicant did not explain why he considered himself to be a refugee, but stated that written submissions would follow. The applicant signed the application himself, and gave his home and postal address (which were the same). He also nominated his migration agent as his "authorised recipient".
9 On 8 January 2003, the RRT wrote to the applicant advising that it had considered all the information available to it relating to his application, but was unable to make a favourable decision on that information alone. The applicant was invited to give oral evidence and present arguments before the RRT. The applicant was also advised that if he did not attend the hearing and a postponement had not been granted, the RRT would assume that he did not want to come to a hearing and that a decision could then be made without further notice. This letter was sent by registered post to the applicant at his postal address, and also to the address of his authorised recipient. There is no evidence of either letter being returned to the RRT.
10 The applicant did not attend the hearing scheduled for him, and neither he nor his authorised recipient contacted the Tribunal. No written submissions were made on his behalf to the RRT. The RRT proceeded to determine the matter on the evidence before it.
The RRT'S REASONS
11 The RRT noted that the applicant had not attended the scheduled hearing and that neither he nor his authorised representative had contacted the RRT.
12 The RRT observed that the applicant had provided only vague details in support of his claim and that there was nothing to support his claims other than his "unsubstantiated and unclear assertions." The RRT also considered that there were insufficient particulars provided by the applicant on such matters as whether he had been involved in protests arising out of the destruction of the Babri Mosque, the nature and extent of the alleged boycott of his business, the nature and extent of alleged threats on his life, and the identity and motivation of those who were said to have looted his business. The RRT also commented on the applicant's failure to respond to the invitations extended to him.
13 The RRT noted that country information indicated that India's Constitution provides for secular government and the protection of religious freedom and that these ideals are generally respected in practice. Moreover, the Muslim population constitutes some 12.7% of India's total population and is India's largest minority. Nonetheless, the RRT recognised that Hyderabad has a history of communal sensitivity. However, it did not consider that any violence was systematically organised or institutionalised in any way. Rather, it was the product of unpredictable frictions over a range of issues. Moreover, the RRT found that where communal violence occurs, the Indian authorities seek to end it at the earliest opportunity.
14 The RRT accepted the country information. It also noted that the term "protection" by no means implies that the authorities must provide absolute guarantees against harm.
15 Having regard to the country information and the unsupported nature of the applicant's claims, the RRT was not satisfied that the applicant had experienced persecution for a Convention reason. Nor could it be satisfied on the basis of the evidence that the applicant faced a real chance of persecution should be return to India at any time in the foreseeable future. It followed that the RRT could not be satisfied that the applicant had a well-founded fear of persecution for a Convention reason.
reasoning
16 The applicant has not specified any grounds for review in the application filed with this Court. The applicant chose not to respond to the numerous opportunities provided for him to give evidence or make submissions to the RRT. He has not put forward any arguments in support of his application for relief in this court beyond asserting that he had left everything to his migration agent. There is no evidence to support that assertion. In any event the material before me indicates that the tribunal complied with its statutory obligations.
17 Section 425 of the Actprovides that the RRT must invite the applicant to appear to give evidence and present arguments relating to the issues arising in relation to the decision under review. Section 425A provides that if the applicant is invited to appear before the RRT, the RRT must give notice of the day on which, and the time and place at which the applicant is scheduled to appear. Where the applicant is not in detention, the notice must be given to the applicant in accordance with one of the methods specified in s 441A.
18 Section 441A(4) provides for dispatch by prepaid post or by other prepaid means in the following terms:
"(4) Another method consists of a member, the Registrar or an officer of the Tribunal, dating the document, and then dispatching it:
(a) within 3 working days (in the place of dispatch) of the date of the document; and
(b) by prepaid post or by other prepaid means; and
(c) to:
(i) the last address for service provided to the Tribunal by the recipient in connection with the review; or
(ii) the last residential or business address provided to the Tribunal by the recipient in connection with the review."
19 The RRT was entitled to proceed as it did, and indeed was expressly authorised to do so by s 426A of the Migration Act, which provides that where the applicant is invited under s 425 to appear before the Tribunal, and does not appear before the Tribunal on the scheduled day, the Tribunal may "make a decision on the review without taking any further action to allow or enable the applicant to appear before it." The invitation contemplated by ss 425(1) and 425A of the Migration Act was given in the letter to the applicant, dated 8 January 2003. The reference numbers appearing on the file copy of this letter indicate that it was sent by registered post to both the applicant and his authorised recipient. I infer on the balance of probabilities that it was sent within 3 working days of 8 January 2003 in accordance with the requirements of s 441A(4). The RRT was not obliged to take any further steps to ensure that the applicant availed himself of the opportunity to appear.
20 In those circumstances, the RRT did not fail to comply with the requirements of ss 425 and 425A of the Migration Act.
21 The applicant has not identified any basis on which it could be said that the RRT had committed a jurisdictional error. I am not able to discern any such error. The RRT made findings on the only information available to it, namely the applicant's brief and vague statement and the country information in relation to India. It appears to have applied the correct principles.
conclusion
22 The application must be dismissed.
I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sackville.
Associate:
Dated: 29 July 2003
Counsel for the Applicant: The applicant appeared in person
Solicitor for the Respondent: Australian Government Solicitor
Date of Hearing: 29 July 2003
Date of Judgment: 29 July 2003
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Parianos v Melluish (Trustee) [2003] FCA 190
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2003/2003fca0190
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2024-09-13T22:46:26.171784+10:00
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FEDERAL COURT OF AUSTRALIA
Parianos v Melluish (Trustee) [2003] FCA 190
BANKRUPTCY β constructive trust β husband dies and his estate is made bankrupt - matrimonial home registered in husband's name alone on his death β whether wife had a constructive trust over the whole or one half share of the home or whether the equitable interest in the home rests in the trustee in bankruptcy β whether an equitable interest held to exist under a constructive trust would arise prior to the bankruptcy.
Bankruptcy Act 1966 (Cth)
Family Law Act 1975 (Cth) ss 78 and 79
Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) s 5(5)(b)(ii)
Muschinski v Dodds (1985) 160 CLR 583 followed
Baumgartner v Baumgartner (1987) 164 CLR 137 followed
Green v Green (1989) 17 NSWLR 343 applied
Calverley v Green (1984) 155 CLR 242 considered
Bryson v Bryant (1992) 29 NSWLR 188 considered
Pettitt v Pettitt [1970] AC 777 referred to
Gissing v Gissing [1971] AC 886 referred to
Parsons v McBain (2001) 109 FCR 120 followed
Sonenco (No 77) Pty Ltd v Silvia (1989) 24 FCR 105 referred to
ISABELLA CAMPBELL PARIANOS v JOHN MELLUISH (AS TRUSTEE FOR THE ESTATE OF THE LATE GEORGE PARIANOS)
N 7189 of 2002
JACOBSON J
13 MARCH 2003
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY N7189 of 2002
BETWEEN: ISABELLA CAMPBELL PARIANOS
APPLICANT
AND: JOHN MELLUISH (AS TRUSTEE FOR THE ESTATE
OF THE LATE GEORGE PARIANOS)
RESPONDENT
JUDGE: JACOBSON
DATE OF ORDER: 13 MARCH 2003
WHERE MADE: SYDNEY
THE COURT DECLARES:
1 the late George Parianos held his interest in the Drummoyne property upon trust for the Applicant and himself as joint tenants;
2 that upon his death his legal personal representative held the Drummoyne property upon trust for the Applicant; and
3 that the Drummoyne property is not divisible among the creditors of the late George Parianos in bankruptcy pursuant to the Bankruptcy Act, s 116(2).
THE COURT ORDERS THAT:
4. the respondent transfer the Drummoyne property to the applicant.
5. the respondent pay the costs of these proceedings other than the costs incurred in the Family Court as to which there is to be no order as to costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY N7189 of 2002
BETWEEN: ISABELLA CAMPBELL PARIANOS
APPLICANT
AND: JOHN MELLUISH (AS TRUSTEE FOR THE ESTATE
OF THE LATE GEORGE PARIANOS)
RESPONDENT
JUDGE: JACOBSON
DATE: 13 MARCH 2003
PLACE: SYDNEY
REASONS FOR JUDGMENT
INTRODUCTION
1 These proceedings arise out of the insolvency of the estate of the late George Parianos ("Mr Parianos") and the failure, prior to the date of his death of his marriage to the applicant ("Mrs Parianos").
2 The respondent, ("the Trustee") is the trustee of the estate of Mr Parianos. The Trustee is administering the estate under the provisions of Part XI of the Bankruptcy Act 1966 (Cth) ("the Bankruptcy Act").
3 Mrs Parianos seeks a declaration that the former matrimonial home situated at 63 Alexandra Street, Drummoyne ("the Drummoyne property") is, and was, prior to the death of Mr Parianos, held on a constructive trust for her under the well-known principles stated in Muschinski v Dodds (1985) 160 CLR 583 ("Muschinski") and Baumgartner v Baumgartner (1987) 164 CLR 137 ("Baumgartner").
4 The Drummoyne property was purchased in 1966 at the time of the marriage of Mr and Mrs Parianos. It was registered solely in Mr Parianos' name. Mrs Parianos claims that the Drummoyne property was held on trust for her either as a joint-tenant with Mr Parianos, or alternatively, as a tenant in common as to a one half share with her late husband. If it was held beneficially under a joint tenancy, Mrs Parianos is entitled to the whole of the Drummoyne property on survivorship.
5 The proceedings were commenced in the Family Court in October 1999 shortly before the death of Mr Parianos. Declarations were sought under ss 78 and 79 of the Family Law Act 1975 (Cth). The matter was transferred to this Court by an order of Cohen J made on 3 May 2002 pursuant to s 5(5)(b)(ii) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth).
The Facts
6 Mr and Mrs Parianos were married on 25 March 1966. Mr Parianos was an immigrant from Greece. Mrs Parianos had emigrated to Australia from Scotland about 17 months prior to their marriage. During the marriage, Mr Parianos accumulated substantial property interests, mostly in his own name. However, the evidence shows that without the financial assistance of Mrs Parianos, it would not have been possible for Mr Parianos to purchase the Drummoyne property in 1966.
7 Shortly before their marriage, the future Mr and Mrs Parianos were searching for a family home. They found the Drummoyne property which was for sale at Ε7000.00 (or $14,000, the purchase taking place about the time of conversion to decimal currency). A deposit of Ε700 was required. There was a discussion between them, the terms of which were not given in evidence, but after it Mrs Parianos gave Mr Parianos the sum of Ε400 which she received as a gift from her uncle.
8 Thus, Mrs Parianos contributed a little over half of the deposit. The balance of the deposit was provided by Mr Parianos.
9 Contracts were exchanged on 8 February 1966. Shortly before that date, Mr and Mrs Parianos approached the Manager of the Commonwealth Bank at Drummoyne for a loan for the whole or some part of the balance of the purchase price. The Manager told them that they did not have enough funds and the loan application was rejected.
10 Following this meeting, Mrs Parianos telephoned her sister in Scotland and wrote to her mother, also in Scotland, about the need for further funds to purchase the Drummoyne property. As a result, Mrs Parianos' mother, Mrs Mary Donaldson-Smith, sent Ε1,000 sterling to Mrs Parianos for the express purpose of assisting Mr and Mrs Parianos in the purchase of the Drummoyne property. Mrs Parianos gave this sum, which she exchanged for $A2,250 to Mr Parianos. She told him that the money was "to help us buy Drummoyne". Mr Parianos replied "Write to your mother and thank her very much."
11 Mrs Donaldson-Smith and Mrs Parianos' sisters, Ms Campbell-McGuigan and Ms Campbell-Henderson, have all given affidavit evidence in these proceedings. Mrs Donaldson-Smith, who was 91 when she swore her affidavit last year, deposed to the communications Mrs Parianos had with her in 1966 about the purchase of the Drummoyne property by "George and I". The same words were used by Mrs Parianos in conversations which she had with her sisters in 1966 and 1967.
12 After the Ε1,000 arrived in Australia, Mr and Mrs Parianos went to the Rozelle branch of the Commonwealth Bank where Mr Parianos completed a loan application. The evidence does not disclose the amount of the loan but Mrs Parianos was apparently aware that the loan application and the eventual loan approval were in the name of Mr Parianos. Mrs Parianos was employed at the time by the Sunbeam Company as a factory worker and she provided the details of her wages to the Bank as part of the loan application.
13 The solicitor who was acting on the purchase of the Drummoyne property had an office in Drummoyne. Mrs Parianos went with her husband to see him. I accept Mrs Parianos' evidence that, on her visits to the solicitor's offices with her husband, Mr Parianos described the Drummoyne property as "our home". I also accept Mrs Parianos' evidence that she believed that the title was to be taken in both names and that she did not know that the Drummoyne property was to be acquired in the sole name of Mr Parianos.
14 Completion of the purchase of the Drummoyne property took place on 22 February 1966, that is to say three days before the date on which Mr and Mrs Parianos were married.
15 It is not clear whether Mr Parianos contributed any cash to the purchase other than the sum of Ε300 which was paid as part of the deposit. He told Mrs Parianos that he had $3,000 to put into the purchase but he told her that he wanted to keep some of that money to start a business.
16 Shortly after the marriage, Mr Parianos started an electrical business. Mrs Parianos continued to work at the Sunbeam factory for a short time. She had two children, Bill Parianos and Debra Parianos, born in March 1967 and July 1971 respectively. Mrs Parianos did not engage in full time paid employment outside the home after the birth of her children. This was because Mr Parianos said to her on many occasions:-
"Women should not work outside the home; their place is in the home. Wives of Greeks don't work; it's an (sic) slur on the family."
17 Mrs Parianos' evidence, which I accept, was that she did not learn that the Drummoyne property was in Mr Parianos' sole name until just before the birth of Bill Parianos in March 1967. However, I also accept her evidence that Mr Parianos said to her at about that time and on many other occasions throughout the marriage: "It doesn't matter that the house is in my name, because it's yours too. What's mine is yours."
18 Mr and Mrs Parianos had a very frugal lifestyle. Within a few months of their marriage they closed off two rooms of the Drummoyne property and converted that area into a flat. Construction of the flat commenced in May 1966. They purchased materials for the flat from savings that they had both made. Mrs Parianos assisted in the building of the flat with her own physical labour. She cleaned and carried the bricks and pulled wires down cavities. This was necessary because the Drummoyne property was rewired as a part of the conversion of the two rooms into a flat.
19 The flat was rented out to tenants over a period of about ten years and the rent was used to pay off the mortgage. Mrs Parianos collected the rent. Sometimes she gave it to her husband to be used for mortgage payments. Sometimes she went to the Bank and deposited the monies directly into the mortgage account.
20 Mr Parianos explained to his children on many occasions the reason why the flat was built and rented to tenants. He said words to the effect:-
"We are renting out the flat so that we can pay the loan on this house (ie the Drummoyne property) and buy other property so that we can give you a good education and so that we can all be comfortable when we are old."
21 The mortgage to the Bank over the Drummoyne property was discharged in April 1975. It is not clear from the evidence whether the loan was paid off entirely out of the rental monies but the amount of the rent (even after allowing for tax) would have provided a sum which was, or which was close to sufficient to enable that to be achieved.
22 Mrs Parianos made other indirect financial and non-financial contributions to the acquisition and maintenance of the Drummoyne property. As I have said above, at Mr Parianos' insistence, Mrs Parianos ceased full time paid employment outside the home shortly after her marriage. Nevertheless, Mr Parianos often failed to give her housekeeping money. She supplied housekeeping funds for the family from working as a nanny, from a Christmas club account established by her sister, Ms Campbell-Smith and from regular payments in an amount of Ε20 sent to her every four to six weeks from Mrs Donaldson-Smith in Scotland.
23 Mrs Parianos' financial and non-financial contributions to the maintenance of the Drummoyne property included carrying out all the gardening, paying for plants, fertilizers, insecticides and gardening equipment, replacing the fences at her own expense, painting the interior of the house and painting the exterior woodwork of the house.
24 In 1969, Mr Parianos established a business known as N & B Electrics. Mrs Parianos was a partner in the business and she worked there for a time as a receptionist. She received a salary for the first few weeks but thereafter her wages were deposited directly into the mortgage loan account. She received no dividends or profits from the business.
25 Mrs Parianos was also a partner with Mr Parianos in other businesses from which, with one exception, she received no dividends or profit shares. The only exception was that the profits of a coffee business were used to purchase an investment property at 87 Crown Street, Wollongong, which was owned by Mr and Mrs Parianos as tenants in common. This was the only investment property in which Mrs Parianos had a proprietary interest. The property was leased but rental payments were not made to Mrs Parianos even though the rent was declared as part of her income in her tax returns.
26 In about August 1999, Mr Parianos underwent surgery for a brain tumour. On a number of occasions prior to and just after his operation, Mr Parianos said to his son, Bill Parianos, words to the following effect:-
"All of the properties belong to your mother and you must look after her, however I believe that by the time she dies, the government will have imposed an inheritance tax. If that happens all of our hard work will be for nothing. I am going to die of this (meaning brain tumour) as a result of too hard a life. I am therefore going to divide the properties between you and your sister. Mum will have a life interest in Drummoyne but it will be your sister's. That means that she will live there til she dies. Debbie will move in with her and look after her when she gets old. That's what my sister did for my mother. I am only doing this because of inheritance tax that will eventually come in. Also mum won't cope when I am gone so it's better for you two to manage the properties, collect rents, pay rates and manage the assets etc. Mum is a good person and she stuck by me all this time even when times were tough. She would get ripped off in business. Make sure you look after mum."
27 On 12 October 1999, approximately two weeks before his death, Mr Parianos made a new will. He referred in it to the "constant personal care" he had received since 1987 from his "de facto wife", Lexie Joy Watt. He gave legacies to Ms Watt, Mrs Parianos and his children. He left the residue of his estate to be divided equally between his children, Bill Parianos and Debra Parianos as tenants in common. Clause 5(b) of the will provided as follows:-
"As to the sum of twenty thousand dollars ($20,000) to be held upon trust to be paid toward rental assistance (if required for my wife, Isabella Parianos, after the sale of my property at 63 Alexandra Street, Drummoyne."
28 Mrs Parianos did not learn of her husband's relationship with Ms Watt until August 1999. She then decided to separate from Mr Parianos although she continued to live at the Drummoyne property. She commenced these proceedings on 13 October 1999. Interim orders were made in the Family Court on 21 October 1999 providing, inter alia, for Mrs Parianos to be given exclusive occupation of the Drummoyne property.
29 Mr Parianos died on 27 October 1999. Probate of his will was granted on 21 August 2000 to Mr BLJ Hedley who was the named executor. On 28 August 2001, the Federal Magistrates Court made an order under s 247 of the Bankruptcy Act appointing the Trustee as the trustee of the deceased estate. A Statement of Affairs filed with the Official Receiver on 28 November 2001 disclosed that at the date of Mr Parianos' death, the estate had an estimated surplus of assets of over $1,600,000 but, at the time of the appointment of the Trustee, there was a deficiency of assets estimated to be in the order of $600,000. This was because the initial estimates of value of assets were too high.
Constructive Trust
30 The principles under which equity will intervene to declare the existence of a constructive trust over a family home in a dispute between former spouses or de facto partners are now well settled. As Gleeson CJ said in Green v Green (1989) 17 NSWLR 343 at 353, the unifying underlying principle is that a constructive trust will be imposed where it would be unconscionable on the part of one of the parties to refuse to recognise the existence of an equitable interest in the other. His Honour referred to the decision of the High Court in Baumgartner at 147.
31 As Deane J said in Muschinski at 614, the constructive trust is a remedial institution which is imposed by equity regardless of actual or presumed intentions of the parties. However, it is open to a court of equity to find that a constructive trust has been established upon the basis of an actual intention. This would be so where it is proved that the parties had a common intention that both should have beneficial interests and that the claimant acted to his or her detriment on the basis of that common intention; see Green v Green at 354-355 per Gleeson CJ.
32 The evidentiary material from which the Court may draw inferences as to the intentions of the parties was described by Mason and Brennan JJ in Calverley v Green (1984) 155 CLR 242 at 262 and by Sheller JA in Bryson v Bryant (1992) 29 NSWLR 188 at 215. Their Honours said that it includes the acts and declarations of the parties before or at the time of the transaction or so close in time after the transaction as to constitute a part of it. Such evidence is admissible for or against the party but subsequent declarations are only admissible against interest.
33 As Gleeson CJ observed in Green v Green at 353-354, the most common case in which a constructive trust has been imposed is where a person for whom the trust is found has, directly or indirectly, made financial contributions toward the cost of acquiring, improving or maintaining the property. In those cases, it would be unconscionable to deny the beneficiary an equitable interest either because the Trustee has induced the cestui que trust to act to his or her detriment in the reasonable belief that he or she was acquiring a beneficial interest or, alternatively, because resources have been pooled for a joint relationship which has come to an end.
34 Baumgartner was a case in which the parties had pooled their earnings for the purposes of their joint relationship. The pooled earnings had been supplied by the de facto partners in the relationship of 55% for the man and 45% for the woman. The pooled earnings had been used to meet household expenses and mortgage commitments. When the relationship came to an end, the Court imposed a constructive trust in those proportions upon the basis of the general equitable principle stated by Deane J (with whom Mason J agreed) in Muschinski at 620, under which there is to be restored to a party the contributions which he or she has made to a joint endeavour which has failed where the contributions were not intended by the party who made them to be enjoyed by the other after the relationship has come to an end.
35 Mason CJ, Wilson and Deane JJ referred to this principle in Baumgartner at 147-148 and they said at 149:-
"The case is accordingly one in which the parties have pooled their earnings for the purposes of their joint relationship, one of the purposes of that relationship being to secure accommodation for themselves and their child. Their contributions, financial and otherwise, to the acquisition of the land, the building of the house, the purchase of furniture and the making of their home, were on the basis of, and for the purposes of, that joint relationship. In this situation the appellant's assertion, after the relationship had failed, that the Leumeah property, which was financed in part through the pooled funds, is his sole property, is his property beneficially to the exclusion of any interest at all on the part of the respondent, amounts to unconscionable conduct which attracts the intervention of equity and the imposition of a constructive trust at the suit of the respondent."
36 The contributions need not be exclusively financial. As Deane J said in Muschinski at 622, the contributions may include direct contributions of money or labour and indirect contributions in other forms such as support, homemaking and family care.
37 Where it is possible to infer an actual intention to share ownership it is, as Gleeson CJ observed in Green v Green at 355, rare that the parties will be so sophisticated as to have turned their minds to the particular form of legal title.
38 The flexibility of the institution of the constructive trust is such that, in an appropriate case, events which occur after acquisition may lead to the imposition of such a trust and beneficial interests may change in the course of the relationship between the parties; see Green v Green at 355-356 per Gleeson CJ.
Decision on the Facts
39 In my view, the circumstances in which Mr and Mrs Parianos found, paid for and took title to the Drummoyne property in 1966 gave rise to an inference that they both intended Mrs Parianos to have a beneficial interest in the property.
40 The circumstances which most clearly illustrate this are that they searched for the home together and, in particular, that it could not have been acquired but for the contribution of Ε1,000 supplied by Mrs Donaldson-Smith. Prior to the receipt of this money, the loan application made by Mr Parianos had been refused. It is plain that this contribution enabled Mr Parianos to make a successful loan application to the Commonwealth Bank at Rozelle without which the purchase could not have been made.
41 It was not suggested by the Trustee that Mrs Parianos did not intend to obtain a beneficial interest. Any such suggestion would have been fatuous. All of the contemporaneous statements made by Mrs Parianos to her mother and sisters and, indeed, by Mrs Parianos in the presence of Mr Parianos, were to the effect that the Drummoyne property was Mr and Mrs Parianos' home. Given the contributions of Ε1,000 and the Ε400 inheritance from her uncle, it would be extraordinary if Mrs Parianos intended otherwise. She could hardly have intended to have made a gift to her husband. There is, of course, no presumption of advancement in these circumstances.
42 The Trustee's case was, rather, to the effect that it was not possible to infer from what Mr Parianos did or said that he had any such intention. However, it was perfectly clear that Mr Parianos knew that the gift from Mrs Parianos' mother was to enable the engaged couple to purchase the Drummoyne property together. That is to say, he must have known and intended that they were both to have a beneficial interest in it. He could not have assumed that the Ε1,000 from Mrs Donaldson-Smith was to be a gift to him to enable him to purchase the property to the exclusion of any beneficial interest on the part of Mrs Parianos. His conversation with Mrs Parianos when he asked her to thank Mrs Donaldson-Smith makes this quite clear.
43 It is true that the loan application, the mortgage and title to the Drummoyne property were in the name of Mr Parianos. The reason for this is not explained. Nevertheless, it is sufficient that contemporaneously with the purchase, Mr Parianos described the Drummoyne property as "our home" and that he accepted $2,250 from Mrs Donaldson-Smith in the circumstances which I have described. I do not think those words when viewed in the light of Mr Parianos' acceptance of moneys from Mrs Parianos are so equivocal that they would prevent me from drawing an inference that the true common intention of the parties was that the property was to be beneficially owned by both of them.
44 Moreover, Mr Parianos reinforced his statement of intentions as to the true beneficial ownership when he said in February or March 1967 "It doesn't matter that the house is in my name, because it's yours too. What's mine is yours." It is difficult to understand what else he could have meant but that his intention was that Mr and Mrs Parianos were co-owners of the Drummoyne property. This must have been his intention bearing in mind in particular the sums of money contributed by Mrs Parianos and Mr Parianos' knowledge of the circumstances in which those contributions were made. Also, by March 1967, the flat had been built and Mr Parianos' words must be understood in light of Mrs Parianos' substantial contribution of cash and labour to that venture.
45 In my opinion, the circumstances in which Mr and Mrs Parianos searched for and purchased the Drummoyne property and the contemporaneous words spoken by them, not only by Mrs Parianos to her family, but also between husband and wife, must have led Mrs Parianos to believe that it was Mr Parianos' intention, in common with hers, that she had a beneficial interest in the property. She acted to her detriment upon the basis of this by contributing the Ε1,000 from her mother and the Ε400 inheritance from her uncle to the purchase of the Drummoyne property. Her evidence was that the Ε1,000, which by then had been converted to $A2,250 was not handed over until about the date of completion of the purchase. Mrs Parianos' cash contribution to the purchase was $3,050. Mr Parianos contributed, at most, $3,000.
46 In addition, Mrs Parianos acted to her detriment by accepting, at her husband's insistence, a frugal lifestyle which enabled the mortgage to be repaid in whole or in part out of the rent from the flat. Her contributions of money and labour to the construction of the flat provided further evidence that Mrs Parianos believed she had a beneficial interest and that she acted to her detriment upon the basis of a common intention engendered by Mr Parianos that she had such an interest in the Drummoyne property.
47 This is not a case in which an intention is to be imputed to the parties. To do so would be contrary to established principle; see Bryson v Bryant at 216; Pettitt v Pettitt [1970] AC 777 and Gissing v Gissing [1971] AC 886. Here in my view it is to be inferred that the parties had a common intention that the Drummoyne property was to be acquired by both of them. This intention was manifested in the words and conduct of Mr and Mrs Parianos. Moreover, Mr Parianos induced Mrs Parianos to act to her detriment in the reasonable belief that she was acquiring a beneficial interest in the Drummoyne property.
48 It follows, in my view, that it is appropriate to impose a constructive trust to avoid the unconscionable denial of an inferred common intention created by Mr Parianos and acted upon by Mrs Parianos to her detriment.
49 It seems to me that the decision of the Court of Appeal in Bryson v Bryant upon which the Trustee relied is distinguishable on its facts. There, the wife made no direct financial contribution to the purchase of the property. Nor was there any conduct on her part which she could not reasonably have been expected to embark upon unless she was to have an interest in the matrimonial home.
50 The question then is what form should the title take. Mr and Mrs Parianos did not turn their minds to that question.
51 Nevertheless, it seems to me that the words spoken by Mr Parianos to which I have referred above on a number of occasions, namely "It doesn't matter that the house is in my name, because it's yours too. What's mine is yours.", suggested that, in 1966, if the parties had been asked, they would have said that they intended to hold the Drummoyne property beneficially as joint tenants. In my view, this would be particularly so if an explanation had been given to them of the difference between tenancy in common and joint tenancy. As Gleeson CJ said in Green v Green at 358:-
"β¦ in my opinion the proper approach to the resolution of this issue is to seek a result which will most closely give effect to the common intention of the parties bearing in mind, first, that they did not themselves specifically address the matter of the legal form which would be conducted to give effect to their intention, and secondly, that this is an area in which equity is at its most flexible."
52 The words spoken by Mr Parianos to which I have referred in [17] were spoken for the first time in about February 1967 or March 1967. They are sufficiently close to the time of purchase for me to take them into account on the question of the parties' intentions as to the form of title. In any event, they constitute an admission against interest by Mr Parianos; see Calverley v Green at 262 and Bryson v Bryant at 215.
53 It should be noted that in Green v Green, Gleeson CJ (with whom Priestley JA agreed) held that the conclusion which best gave effect to the intention of the parties was that at the relevant time the parties were beneficially entitled to the property as joint tenants.
54 The statement made by Mr Parianos which I have set out at [26] above is of no assistance in resolving the issue of the form of the title. It was made by Mr Parianos 33 years after the acquisition of the property and was not an admission against his interest.
55 If I am wrong in what I have said above, it is plain that a constructive trust ought to be imposed irrespective of any intentions of Mr Parianos in order to give effect to the principle which underlies the decisions in Muschinski and Baumgartner.
56 That is to say, this is a case in which the parties pooled their earnings and their contributions, both financial and non-financial, toward the acquisition and maintenance of the Drummoyne property. They did so to secure the accommodation of themselves and their children. The relationship having come to an end in August 1999, it would be unconscionable to deny to Mrs Parianos the benefit of her contributions made to a failed joint endeavour.
57 The contributions which Mrs Parianos made were numerous. I have referred to them above and it is unnecessary to repeat them. They included the contribution of the inheritance from her uncle and the gift from her mother. They also included the financial and non-financial contributions to the conversion of the rooms in the Drummoyne property to a flat, the housekeeping funds which she provided from her work as a nanny and from the Christmas club account together with the other matters to which I have referred in paragraphs [22] to [25] above.
58 If the case is to be determined under the "pooling" principle, notions of practical equity must prevail; see Baumgartner at 150 (per Mason CJ, Wilson and Deane JJ). Thus, the maxim that equity favours equality would have to be applied and the Drummoyne property would then be held for Mrs Parianos on a constructive trust as to a one-half share as a tenant in common with the Trustee as trustee of the estate of the late Mr Parianos.
From when does the constructive trust exist?
59 In Parsons v McBain (2001) 109 FCR 120, a Full Court (Black CJ, Kiefel and Finkelstein JJ) held that a constructive trust does not first come into existence when it is declared by the Court. Their Honours referred to a passage from the judgment of Deane J in Muschinski at 614 in which his Honour said there does not need to have been a curial declaration or order before equity will recognise the prior existence of a constructive trust.
60 The constructive trust in Parsons v McBain was founded upon a common intention. It seems to me that the same approach to the question of when the constructive trust will take effect applies regardless of whether the trust is imposed by reason of an inferred intention or under the pooling principle stated in Baumgartner.
61 In either case, the facts which give rise to an eventual court order create a personal equity between the parties which may be defeated by competing claims. However, the equity will not be defeated merely because the legal title has passed to a trustee in bankruptcy who stands in the shoes of the bankrupt; see Parsons v McBain at 16; see also Sonenco (No 77) Pty Ltd v Silvia (1989) 24 FCR 105 at 112 (per Beaumont J).
62 I do not accept the Trustee's submission that Mrs Parianos' claim must fail because she did not lodge a caveat or because she failed to take any steps to assert her beneficial ownership prior to August 1999. I accept the submissions made by Mrs Parianos' counsel that the Drummoyne property has not been the subject of any dealings for value which could take priority over Mrs Parianos' equitable interest.
63 It follows in my view that Mrs Parianos' equitable interest in the Drummoyne property stands outside the bankruptcy.
Orders
64 I propose to make the following declarations:-
1. the late George Parianos held his interest in the Drummoyne property upon trust for the Applicant and himself as joint tenants
2. that upon his death his legal personal representative held the Drummoyne property upon trust for the Applicant
3. that the Drummoyne property is not divisible among the creditors of the late George Parianos in bankruptcy pursuant to the Bankruptcy Act, s 116(2)
65 I propose to order that the respondent transfer the Drummoyne property to the applicant.
66 I also propose to order the respondent to pay the costs of these proceedings other than the costs incurred in the Family Court as to which there is to be no order as to costs.
I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.
Associate:
Date: 13 March 2003
Counsel for the Applicant: Mr P Brereton SC
Solicitor for the Applicant: Foster Associates
Counsel for the Respondent: Mr B J Skinner
Solicitor for the Respondent: Access Business Lawyers
Date of Hearing: 4 December 2002
Date of Judgment: 13 March 2003
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Holzman (Administrator), in the matter of Aus Confec Pty Ltd (Administrators Appointed) [2020] FCA 181
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2020/2020fca0181
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2024-09-13T22:46:28.829322+10:00
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FEDERAL COURT OF AUSTRALIA
Holzman (Administrator), in the matter of Aus Confec Pty Ltd (Administrators Appointed) [2020] FCA 181
File number: NSD 133 of 2020
Judge: YATES J
Date of judgment: 12 February 2020
Catchwords: CORPORATIONS β external administration β application to extend period of adjournment of second meetings of creditors beyond period prescribed by the Insolvency Practice Rules (Corporations) 2016 β consideration of potential benefit to creditors
Legislation: Corporations Act 2001 (Cth) Pt 5.3A, ss 438A, 439A, 439C, 447A(1)
Insolvency Practice Rules (Corporations) 2016 (Cth) r 75-140(3)
Fair Entitlements Guarantee Act 2012 (Cth)
Cases cited: Georges, in the matter of Vical N.S.W. Pty Ltd (Administrators Appointed) [2018] FCA 1974
Date of hearing: 12 February 2020
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 13
Counsel for the Plaintiff: Mr J Baird
Solicitor for the Plaintiff: Henry William Lawyers
ORDERS
NSD 133 of 2020
IN THE MATTER OF AUS CONFEC PTY LTD ACN 624 426 044
JUSTIN HOLZMAN AND ANTHONY WAYNE ELKERTON IN THEIR CAPACITIES AS JOINT AND SEVERAL ADMINISTRATORS OF AUS CONFEC PTY LTD ACN 624 426 044 (ADMINISTRATORS APPOINTED)
Plaintiffs
JUDGE: YATES J
DATE OF ORDER: 12 FEBRUARY 2020
THE COURT ORDERS THAT:
1. Pursuant to s 447A(1) of the Corporations Act 2001 (Cth) (the Act), Pt 5.3A of the Act is to operate in relation to the administration of Aus Confec Pty Ltd (Administrators Appointed) ACN 624 426 044 (the Company) as if r 75-140(3) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (the Rules) omitted all words after "must not be adjourned to a dayβ¦" (namely, the words "that is more than 45 business days after the first day on which the original meeting was held") and included instead of the omitted words the words "later than 24 April 2020", and as if that Part allowed adjournment of the meeting convened under s 439A of the Act in relation to the Company to a day not later than 24 April 2020, despite the operation of s 75-140(3) of the Rules.
2. Pursuant to s 447A(1) of the Act, Pt 5.3A of the Act is to operate such that the requirement imposed on the plaintiffs to issue notices under rr 75-15 and 75-225 of the Rules is modified such that notices of the second meeting of creditors of the Company will be validly given to any creditor by, not less than five (5) business days prior to the date of the proposed meeting:
(a) giving such notice electronically by email sent to the email address of any creditor (including persons claiming to be creditors) of the Company for whom the plaintiffs hold an email address; or
(b) if the plaintiffs do not hold an email address or if notice is received by the plaintiffs that a notice sent in accordance with (a) has not been received, sending such notice by ordinary post to creditors of the Company for whom the plaintiffs have a postal address.
3. By 20 February 2020, the plaintiffs give notice of these orders to creditors (including persons claiming to be creditors) of the Company by means of a circular:
(a) published on the creditors' portal section of the website maintained by the administrators' firm, DW Advisory, in respect of the administration of the Company; and
(b) sent by email or by post to all known creditors.
4. Leave is reserved to any person claiming to be interested, including any creditor of the Company, to make any application to vary or discharge any or all of these orders upon 48 hours' notice to the plaintiffs and to the Court.
5. The plaintiffs have leave to apply to the Court on 2 days' notice.
6. The costs and expenses of this application be costs and expenses of the administration of the Company.
7. These orders be entered forthwith.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
YATES J:
1 The plaintiffs are the joint and several administrators of Aus Confec Pty Ltd (administrators appointed) (the administrators). They were appointed on 18 November 2019. The company is the trustee of the Aus Confec Unit Trust. The administrators are of the view that it remains in that capacity, notwithstanding their appointment.
2 The company is a manufacturer and supplier of confectionery products in Australia. It operates from leased premises at Prestons, New South Wales using specialised manufacturing plant and equipment, which it has installed. It supplies its products to various large retailers, including Woolworths, Coles, Aldi, Target and Noni B.
3 The company has one director. He has attributed the company's present financial circumstances to difficulties with an overseas supplier and production issues.
4 On 8 January 2020, after the administration commenced, the company entered into an Asset Sale Deed under which imported stock and related intellectual property assets were sold to an unrelated party. The sale has now completed, with realised proceeds of $440,000 (inclusive of GST).
5 A second meeting of the company's creditors under s 439A(1) of the Corporations Act 2001 (Cth) (the Act) was convened and held on 19 December 2019. The meeting was then adjourned until 26 February 2020, a period of 45 business days. This was the maximum period permitted by r 75-140(3) of the Insolvency Practice Rules (Corporations) 2016 (Cth).
6 Section 438A of the Act provides that, as soon as practicable after the administration of a company begins, the administrator must investigate the company's business, property, affairs and financial circumstances and form an opinion about whether it would be in the interests of the company's creditors (a) for the company to execute a deed of company arrangement; (b) for the administration to end; or (c) for the company to be wound up. Correspondingly, s 439C of the Act provides that at a meeting convened under s 439A, the creditors may resolve (a) that the company execute a deed of company arrangement; (b) that the administration should end; or (c) that the company be wound up.
7 In the present case, the administrators seek orders that will have the effect of extending the period of adjournment of the second meeting beyond the period provided by r 75-140(3), namely until and including 24 April 2020 (a period less than 60 days). Their reason for seeking the extension is to give them the opportunity to sell the remaining business of the company as a going concern and to entertain an anticipated proposal by the company's director of a deed of company arrangement (DOCA) which, as foreshadowed by the directors, would provide for payment of all employee entitlements and also provide for at least a small contribution to unrelated unsecured creditors.
8 In an affidavit made in support of the application, one of the administrators, Mr Holzman, says that if a going concern sale can be effected, and if the foreshadowed DOCA can be entered into, then, based on the current state of negotiations, a return to unsecured creditors (including a return of 100 cents on the dollar to eligible employee creditors) is likely.
9 Mr Holzman's evidence is that the progression of the sale of the company's business would be assisted by the statutory moratorium arising from the continued administration of the company. He says that if the company were to be placed into liquidation now, it would likely adversely affect the sale of its business as a going concern, resulting in a likely lower realisation. He says that the company's present customers (for whom the administrators are currently executing orders) would be less likely to trade with it. He says that, based on a valuation he has received, it would be unlikely that, in a liquidation, the net proceeds from the sale of the company's plant and equipment would be sufficient to pay even its secured creditor. Also, employee creditors would be required to claim their entitlements through the Federal Government's Fair Entitlements Guarantee scheme established by the Fair Entitlements Guarantee Act 2012 (Cth). This would likely result in a shortfall for some employees. He says that, in a liquidation, it is unlikely that the unsecured creditors would receive any dividend.
10 Further, Mr Holzman says that the liquidation of the company would trigger its removal as a trustee of the Aus Confec Unit Trust, necessitating the appointment of receivers to the trust assets, and thus incurring further cost and expense.
11 The administrators have endeavoured to obtain the views of the company's major creditors on extending the period of adjournment of the meeting. On 5 February 2020, a circular was sent to creditors foreshadowing an application to the Court which would have the effect of extending the time for re-convening the second meeting. With the exception of one creditor (an employee creditor who said that he intended to submit, but has not submitted, an objection to the application), the administrators have received no communication expressing opposition to the application. Importantly, the landlord of the premises from which the company's business is conducted has indicated its preparedness to accept an extension of up to 60 days to enable the company's business to be sold. The administrators have also engaged in direct telephone communications with representatives of the largest unsecured creditors. None have expressed any objection to the application.
12 On the basis of Mr Holzman's evidence, I am persuaded that it is in the interests of creditors generally that the period of the adjournment of the second meeting be extended to 24 April 2020, as the administrators seek. The power to do so resides in s 447A(1) of the Act, which provides that the Court may make such order as it thinks appropriate about how Pt 5.3A of the Act is to operate in relation to a particular company. A similar application was made in Georges, in the matter of Vical N.S.W. Pty Ltd (Administrators Appointed) [2018] FCA 1974 where, at [25] β [28], I made the following observations that are pertinent to the present case:
25 Section 447A provides that the Court may make such orders as it thinks appropriate about how Pt 5.3A is to operate in relation to a particular company. The extension that is sought is specifically with respect to the period referred to in r 75β140(3) of the Rules which, of course, is not found in Pt 5.3A of the Act. Nevertheless, I am satisfied that I have the power to make the orders that are sought.
26 A similar question arose in Re Porter as joint administrators of Priceright Construction Pty Ltd (admin apptd) (2006) 57 ASCR 206; NSWSC 324. The question in that case was whether s 447A of the Act could be invoked to provide that Pt 5.3A of the Act was to operate in respect of a particular company on the basis that reg 5.6.18(2) of the Corporations Regulations 2001 (Cth) did not apply. Barrett J reasoned that such an order could be made in reliance on s 447A because, even though the time limit was one prescribed by the particular regulation, the orders sought were still about how Pt 5.3A of the Act was to operate in relation to the company concerned. See also Re Keystone Group Holdings Pty Ltd (Receivers & Managers Appointed) (Administrators Appointed) [2017] NSWSC 454, especially at [14]β[15].
27 The same reasoning applies in the present case. Although r 75β140(3) mandates that the period of adjournment in respect of a meeting convened under s 439A of the Act must not be more than 45 business days after the first day on which the original meeting was held, an order invoking the facility provided by s 447A of the Act, and which has the effect of modifying the stipulated maximum period, is still an order about how Pt 5.3 is to operate, particularly in relation to a meeting that is required to be held under s 439A of the Act.
28 Further, making these orders that are now sought will be consistent with the object of Pt 5.3 of the Act, and Sch 2 to the Act (Insolvency Practice Schedule (Corporations)) to the extent that it relates to Pt 5.3A, which is to provide for the business, property and affairs of an insolvent company to be administered in a way that maximises the chances of the company, or as much as possible of its business, continuing in existence or, if it is not possible for the company or its business to continue in existence, results in a better return for the company's creditors and members than would result from an immediate winding up.
13 For these reasons, the orders sought by the administrators will be made. I will reserve liberty to any person claiming to be interested in the orders to apply to vary or discharge them on notice to the administrators and the Court.
I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.
Associate:
Dated: 26 February 2020
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2018-05-11 00:00:00
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Khan v Minister for Immigration and Border Protection [2018] FCA 627
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2018/2018fca0627
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2024-09-13T22:46:29.959599+10:00
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FEDERAL COURT OF AUSTRALIA
Khan v Minister for Immigration and Border Protection [2018] FCA 627
Appeal from: Khan v Minister for Immigration and Border Protection [2017] FCCA 3112
File number: NSD 2155 of 2017
Judge: GRIFFITHS J
Date of judgment: 11 May 2018
Catchwords: MIGRATION β appeal from a judgment of the Federal Circuit Court of Australia β where the appellants applied to the Administrative Appeals Tribunal (AAT) to review four decisions of a delegate of the Minister of Immigration and Border Protection refusing the appellants medical visas β where the AAT determined it lacked jurisdiction because the review application was filed after the deadline had expired β where the deadline for the appellants to lodge their review application was 21 days after notification of the delegate's decisions β where the delegate's decisions were sent by email to the appellants' migration agent, but the emails were deleted from the agent's inbox due to a technical error β whether the primary judge erred in upholding the AAT's decision that it lacked jurisdiction to determine the matter because the review application was filed out of time β held: appeal dismissed
Legislation: Migration Act 1958 (Cth), ss 66, 347, 494B, 494C, 494D
Migration Regulations 1994 (Cth), regs 2.16, 4.10
Cases cited: Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355
Date of hearing: 7 May 2018
Registry: New South Wales
Division: General Division
National Practice Area: Administrative and Constitutional Law and Human Rights
Category: Catchwords
Number of paragraphs: 36
Counsel for the Appellants: The First Appellant appeared in person and on behalf of all Appellants
Counsel for the Respondents: Mr M P Cleary
Solicitor for the Respondents: DLA Piper Australia
ORDERS
NSD 2155 of 2017
BETWEEN: MOHAMMAD SAIFUR RAHMAN KHAN
First Appellant
MANZIR YASMIN EMON
Second Appellant
MARZUQ RAHMAN KHAN
Third Appellant
MUIZZ RAHMAN KHAN
Fourth Appellant
AND: MINISTER FOR IMMIGRATION AND BORDER PROTECTION
First Respondent
ADMINISTRATIVE APPEALS TRIBUNAL
Second Respondent
JUDGE: GRIFFITHS J
DATE OF ORDER: 11 MAY 2018
THE COURT ORDERS THAT:
1. Pursuant to r 9.63 of the Federal Court Rules 2011 (Cth), the first appellant be appointed as the litigation representative of the third and fourth appellants.
2. The appeal be dismissed.
3. There be no order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
GRIFFITHS J:
1 This is an appeal from a decision dated 15 November 2017 of the Federal Circuit Court of Australia (FCCA). The judgment is reported as Khan v Minister for Immigration and Border Protection [2017] FCCA 3112.
2 For the following reasons, the appeal will be dismissed. However, it is appropriate to state at the outset that this is an unusual case. The appellants find themselves in an unfortunate and awkward position through no fault of their own.
Summary of background matters
3 The four appellants are all members of the same family, comprising the husband and wife and their two children. They are Bangladeshi nationals.
4 On 8 June 2016, the husband, acting through a migration agent (Md. Haque from MS Haque & Associates), applied to the Department for a subclass 602 medical treatment visa in relation to treatment of his sinuses. By a Form 956, which was signed by both the husband and the agent, the Department was directed to send written communications about the visa application to the identified migration agent.
5 On 9 June 2016, the wife and two children applied separately for subclass 602 visas on the basis of each being a person who accompanied a person seeking treatment. It was indicated on each of the applications that all written communications about these accompanying persons' applications should be sent to the same migration agent, Md. Haque .
6 On 16 June 2016, the Department sent letters to each of the appellants notifying them of the decision to refuse the grant of the visas. The visa applications of the first and second appellants were refused because they did not satisfy the relevant requirement that their applications be made within 28 days of the last day the appellants had held a substantive visa. The children's applications were refused on the basis that there was no evidence that either of them were seeking medical treatment and also because their father's visa application had been refused. The Department's four letters were all sent by email to the nominated email address of the migration agent as set out in the husband's Form 956. It was not disputed that the emails arrived in the inbox of the migration agent's email account. It appears, however, that the agent did not immediately access those emails and it was only one or two days later that he says he went to the inbox and found that the emails had been deleted because of a technical problem.
7 It appears that the agent did nothing further about the matter until, on 30 June 2016, he sent an email to the Department requesting an update on each of the four applications in circumstances where it was explained in the email that "all correspondence has been deleted regarding this client". The agent asked the Department to resend all correspondence to him regarding the client and he provided his mobile telephone number and email address.
8 The agent sent another email to the Department on 4 July 2016 in which he informed the Department that he had not received a reply to his earlier email dated 30 June 2016. On 5 July 2016, the agent sent a letter by facsimile to the Department. The letter stated that the agent believed that the applications had been decided by the Department and that an email had been sent to the agent but that, unfortunately, "we missed the email or it was deleted from our email". The letter referred to the fact that other emails had been sent to the Department but no reply had been received. The letter contained a fresh request for the Department to send the agent "the decision of all applicants at your earliest" [AB 267].
9 The primary judge noted at [8] of his reasons for judgment that the material before him suggested that, on 7 July 2016 the Department reprinted the notification letters and delivered them to the migration agent on that day, and that perhaps it also gave copies of the letters to the first appellant on 8 July 2016 after he said that he drove to the Department's offices in Canberra to collect them. The Court Book included a copy of an internal Departmental Case Note dated 18 July 2016, which included the following statement:
ICSE notes that original decision record had a mistake and notification letter was reprinted and hand delivered to MA on 7/7/16. It is unclear from ISCE whether the MA/RA were officially re-notified or the reprint was just a courtesy.
10 Another Departmental Case Note dated 12 August 2016 states:
Please disregard content of previous Jurisdiction Note made on 18/07/16 which states that there are ICSE records which suggest that the original decision record contained an error and was renotified to the migration agent. The original decision records do not contain errors and no re-notification has occurred (only a copy of the original decisions were [sic] provided to the migration agent).
11 The appeal book contained a handwritten letter dated 7 July 2016 headed "Authorisation" in which the agent gave authority to the husband to obtain "all of his documents", including those of his wife and two children, because the agent had left Australia for overseas for a fortnight. There was also some material before the FCCA, in the form of an email dated 30 August 2016 from the husband to the Department, which stated that the husband had collected copies of the four letters from the Department's Canberra office on 7 July 2016. On 13 July 2016, the four appellants lodged an application for review of the Department's decisions with the Administrative Appeals Tribunal (AAT).
12 On 17 August 2016, the AAT sent a letter to the appellants informing them of a tentative view that the applications for review were invalid because they were lodged out of time. The appellants were invited to provide written comments on that tentative view. By email dated 30 August 2016, the husband asked that the application be treated as a valid application in view of what had occurred. He added that he had collected the decision personally on 7 July 2016 from the Department's Canberra office.
13 The AAT also received an undated letter from the agent in response to its letter dated 17 August 2016. The agent explained that he recalled seeing the Department's email in his inbox on or shortly after 16 June 2016 and that when he returned to the inbox a day or two later to print and carefully read the decisions, he found that the emails "had disappeared". The agent explained that he had "experienced an IT problem which caused some emails to be permanently deleted from the Inbox". The agent said that he attached to his letter copies of his correspondence to the Department dated 30 June 2016, 4 July 2016 and 5 July 2016. After referring to those three pieces of correspondence, the agent stated in his letter that these documents indicated that:
(a) on 30 June 2016, he informed the Department by email about the deletion and asked the Department to resend all correspondence;
(b) on 4 July 2016, the agent informed the Department by email that he had not received a reply to his 30 June 2016 email; and
(c) on 5 July 2016, he informed the Department by facsimile that the email attaching the Department's decision had been deleted and another request had been made for the decision to be sent to the agent.
14 The agent stated in his letter that he had phoned the relevant office of the Department between 25 and 30 June 2016 and made the same request orally. He further submitted that the Department should take the view that notice of the decision had not been received until 7 July 2016, when the husband said that he had driven to Canberra and collected the decision from the Department.
15 On 7 September 2016, the AAT determined that it lacked jurisdiction because the review applicants had not made their applications for review within the prescribed time. The AAT reasoned that, in accordance with s 494C of the Migration Act 1958 (Cth) (the Act), the review applicants were taken to have been notified of the Department's decision on 16 June 2016 when the Department emailed their agent, and that the prescribed period within which a review application had to be made ended on 7 July 2016. As the review application was not received until 13 July 2016, it was out of time.
FCCA proceeding
16 The appellants contended that the AAT erred in finding that they were notified on 16 June 2016 of the adverse primary decisions within the meaning of reg 4.10 of the Migration Regulations 1994 (Cth) (Regulations). They contended that they were not notified of the primary decision until 7 July 2016, when the husband drove to Canberra and collected the letters. It was argued that the method for notification set out in s 494B(5)(d) did not apply to the two children because they were minors and that the correct provision in relation to them was s 494B(5)(e).
17 The primary judge noted the requirement under s 66 of the Act for the Minister to notify an applicant for a visa of the decision in the prescribed way and that reg 2.16 of the Regulations prescribes, for the purposes of s 66(1), one of the methods specified in s 494B of the Act.
18 It is convenient to interpolate here that, in the case of a decision to refuse to grant a person a visa, reg 2.16(3) provides:
(3) The Minister must notify an applicant of a decision to refuse to grant a visa by one of the methods specified in section 494B of the Act.
Note: If the Minister gives a person a document by a method specified in section 494B of the Act, the person is taken to have received the document at the time specified in section 494C of the Act in respect of the method.
19 Section 494B of the Act provides:
494B Methods by which Minister gives documents to a person
Coverage of section
(1) For the purposes of provisions of this Act or the regulations that:
(a) require or permit the Minister to give a document to a person (the recipient); and
(b) state that the Minister must do so by one of the methods specified in this section;
the methods are as follows.
(1A) If a person is a minor, the Minister may use the methods mentioned in subsections (4) and (5) to dispatch or transmit, as the case may be, a document to an individual (a carer of the minor):
(a) who is at least 18 years of age; and
(b) who the Minister reasonably believes:
(i) has day to day care and responsibility for the minor; or
(ii) works in or for an organisation that has day to day care and responsibility for the minor and whose duties, whether alone or jointly with another person, involve care and responsibility for the minor.
Note: If the Minister gives an individual a document by the method mentioned in subsection (4) or (5), the individual is taken to have received the document at the time specified in section 494C in respect of that method.
(1B) However, subsection (1A) does not apply if subsection 52(3C) (which relates to giving notifications in the case of combined applications) applies in relation to the minor.
Giving by hand
(2) One method consists of the Minister (including by way of an authorised officer) handing the document to the recipient.
Handing to a person at last residential or business address
(3) Another method consists of the Minister (including by way of an authorised officer) handing the document to another person who:
(a) is at the last residential or business address provided to the Minister by the recipient for the purposes of receiving documents; and
(b) appears to live there (in the case of a residential address) or work there (in the case of a business address); and
(c) appears to be at least 16 years of age.
Dispatch by prepaid post or by other prepaid means
(4) Another method consists of the Minister dating the document, and then dispatching it:
(a) within 3 working days (in the place of dispatch) of the date of the document; and
(b) by prepaid post or by other prepaid means; and
(c) to:
(i) the last address for service provided to the Minister by the recipient for the purposes of receiving documents; or
(ii) the last residential or business address provided to the Minister by the recipient for the purposes of receiving documents; or
(iii) if the recipient is a minorβthe last address for a carer of the minor that is known by the Minister.
Transmission by fax, email or other electronic means
(5) Another method consists of the Minister transmitting the document by:
(a) fax; or
(b) email; or
(c) other electronic means;
to:
(d) the last fax number, email address or other electronic address, as the case may be, provided to the Minister for the purposes of receiving documents; or
(e) if the recipient is a minorβthe last fax number, email address or other electronic address, as the case may be, for a carer of the minor that is known by the Minister.
When the Minister hands a document by way of an authorised officer
(6) For the purposes of sections 494C and 494D, a reference in those sections to an act of the Minister includes, if the act is of a kind referred to in subsection (2) or (3) of this section, a reference to an act of the Minister by way of an authorised officer.
Documents given to a carer
(7) If the Minister gives a document to a carer of a minor, the Minister is taken to have given the document to the minor. However, this does not prevent the Minister giving the minor a copy of the document.
20 The primary judge noted the effect of s 494C, which relevantly provides that if the Minister gives a document to a person by the method in s 494B(5) that person is taken to have received the document at the end of the day on which the document is transmitted (see s 494C(5)). Section 494C provides:
494C When a person is taken to have received a document from the Minister
(1) This section applies if the Minister gives a document to a person by one of the methods specified in section 494B (including in a case covered by section 494A).
Giving by hand
(2) If the Minister gives a document to a person by the method in subsection 494B(2) (which involves handing the document to the person), the person is taken to have received the document when it is handed to the person.
Handing to a person at last residential or business address
(3) If the Minister gives a document to a person by the method in subsection 494B(3) (which involves handing the document to another person at a residential or business address), the person is taken to have received the document when it is handed to the other person.
Dispatch by prepaid post or by other prepaid means
(4) If the Minister gives a document to a person by the method in subsection 494B(4) (which involves dispatching the document by prepaid post or by other prepaid means), the person is taken to have received the document:
(a) if the document was dispatched from a place in Australia to an address in Australia β 7 working days (in the place of that address) after the date of the document; or
(b) in any other caseβ21 days after the date of the document.
Transmission by fax, email or other electronic means
(5) If the Minister gives a document to a person by the method in subsection 494B(5) (which involves transmitting the document by fax, email or other electronic means), the person is taken to have received the document at the end of the day on which the document is transmitted.
Document not given effectively
(7) If:
(a) the Minister purports to give a document to a person in accordance with a method specified in section 494B (including in a case covered by section 494A) but makes an error in doing so; and
(b) the person nonetheless receives the document or a copy of it;
then the person is taken to have received the document at the times mentioned in this section as if the Minister had given the document to the person without making an error in doing so, unless the person can show that he or she received it at a later time, in which case, the person is taken to have received it at that time.
21 The primary judge set out the terms of s 494D:
494D Authorised recipient
(1) If a person (the first person) gives the Minister written notice of the name and address of another person (the authorised recipient) authorised by the first person to receive documents in connection with specified matters arising under this Act or the regulations, the Minister must give the authorised recipient, instead of the first person, any documents in connection with those matters that the Minister would otherwise have given to the first person.
Note: If the Minister gives a person a document by a method specified in section 494B, the person is taken to have received the document at the time specified in section 494C in respect of that method.
(2) If the Minister gives a document to the authorised recipient, the Minister is taken to have given the document to the first person. However, this does not prevent the Minister giving the first person a copy of the document.
(3) Subject to subsection (3A), the first person (but not the authorised recipient) may vary or withdraw the notice under subsection (1) at any time, but must not (unless the regulations provide otherwise) vary the notice so that any more than one person becomes the first person's authorised recipient.
(3A) In addition to the first person being able to vary the notice under subsection (1) by varying the address of the authorised recipient, that recipient may also vary that notice by varying that address.
(5) The Minister need not comply with subsection (1) if:
(a) the authorised recipient is not a registered migration agent (within the meaning of Part 3); and
(b) the Minister reasonably suspects that the authorised recipient is giving immigration assistance (within the meaning of that Part); and
(c) the Minister has given the first person a notice, by one of the methods specified in section 494B, stating that he or she does not intend to give the authorised recipient documents as mentioned in subsection (1).
22 The primary judge noted at [16] that, by s 347, an application for review of a Part 5-reviewable decision had to be given to the AAT within the prescribed period, namely a period not later than 28 days after notification of the decision. His Honour noted that the prescribed period in the particular circumstances was that set out in reg 4.10, which "starts when the applicant receives notice of the decision and ends at the end of 21 days after the day on which the notice is received". In other words, there was a 21 day period within which each visa applicant needed to make an application for review after the day on which notice of the adverse decision was received.
23 The appellants contended below that there was an important distinction drawn in ss 494B(5)(d) and (e) between the case of an applicant who is a minor and one who is not. In the case of an applicant who is a minor, the appellants contended that s 494B(5) requires the notification to be by way of a document sent to, relevantly, an email address for a "carer of the minor that is known by the Minister". It was further contended that the migration agent was not a carer of either of the children.
24 The primary judge rejected these contentions in [18] to [21] of his Honour's reasons for judgment:
18. The difficulty with the proposition which lies at the heart of this application, is that sub-section (5) and in fact the whole of s.494D refers not to the applicant, but to a recipient. Sub-section 494B(1A) provides that for the purposes of the provision of the Act or Regulations that "require or permit the Minister to give a document to a person (the recipient)". That means that sub-s.494B(5)(e) of the Act, where it refers to recipient does not necessarily refer to an applicant, but it is a reference to a person to whom the Minister is required, by a provision of the Act or Regulations to give a document.
19. In this case, the requirement in s.494D of the Act provides the answer. That provision, in the circumstances where Md. Haque was given as an authorised recipient by each of the applicants, including the third and fourth applicant, required the Minister to give Md. Haque, instead of each of the applicants, any document in connection with those matters that the Minister would otherwise have given to the first person. That means for the purposes of s.494B, the recipient in question was not each of the applicants, but was Md. Haque. There was no evidence that Md. Haque was a minor. Indeed, it may be inferred from the fact that he has attained several degrees, including two Masters of Law from different universities, that he is not a minor. For that reason, s.494B(5) of the Act did not apply in the facts of this case.
20. Counsel for the applicants argued that the answer to this was in s.66 of the Act, which requires an applicant to be notified of a decision in the prescribed way. The submission is correct, but only insofar as it goes. However, in light of s.494D(2), there is a deeming that that has been complied with. The difficulty with the construction argument put forward by the applicants is that it requires s.494B, together with s.66, to be read in the absence of, rather than to be governed by s.494D of the Act. The plain terms of s.494D undermine that argument.
21. In those circumstances, I find on the uncontested facts, that as the notification of decision by letter 16 June 2016, was sent by email and received on the same day by the authorised recipient, the applicants were taken, pursuant to s.494D, to have been given those documents. Therefore, s.66 of the Act was complied with on that day, and the timeframe for making an application under s.347 of the Act commenced on that day, and finished on the twenty first day after it: namely, 7 July 2016. The application for review was not filed until after that day. Therefore, the application was not properly made and there was no obligation on the Tribunal to review the decisions of the delegate.
25 Accordingly, the judicial review challenge to the AAT's decision that it lacked jurisdiction was dismissed.
Notice of appeal
26 Although the appellants were represented in the FCCA, they did not have legal representation in the appeal. The husband represented each of them. The Court made an order appointing him the litigation representative of the two minor children.
27 The notice of appeal filed on 6 December 2017 contained the following two grounds of appeal (without alteration):
1. The Tribunal (Administrative Appeals Tribunals) the Tribunal erred in finding that the applicants were notified of the primary decision, within the meaning of reg 4.1 0(1)(a), on 16 June 2016. The applicants were not notified of the primary decisions until 7 July 2016, when the first applicant drove to the relevant office of the Department at Canberra to collect the decisions, the trial judge erred in considering this issue.
2. The trial judge erred in considering the deeming provision of the Migration Act of its section 494C(5).
Summary of parties' submissions
28 As noted above, the first appellant represented all the appellants. He failed to provide a written outline of submissions. Mr Khan explained at the commencement of the hearing that he had been very unwell and had been unable to provide any written submissions. I accept that explanation. I invited Mr Khan to make oral submissions in support of the appeal. He restated the unfortunate facts concerning the deletion of the notification emails from his agent's system and explained the other steps he had taken to obtain copies of the notification decisions. The Court explained to Mr Khan that he needed to identify an appealable error in the primary judge's judgment. He candidly stated that he could not do so but he reiterated that what had occurred was beyond his control.
29 It is unnecessary to summarise the Minister's submissions because they are substantially reflected in the reasons given below for dismissing the appeal.
Consideration and disposition of the appeal
30 Given the high volume of decisions made by the Minister and his Department, it is understandable that there is a need for certainty with regard to such matters as to when and how decisions on visa applications are to be notified. It is equally understandable that there is a need to specify time periods within which review applications must be made, by reference to the date when notification of adverse decisions has been made. These kinds of considerations explain why there are quite detailed provisions in both the Act and Regulations dealing with these matters. The legislative scheme includes provisions which deem matters to have occurred if particular actions are taken. The Note to s 494B(1A), s 494B(7), the Note to s 494D(1) and s 494D(5) are examples of such provisions.
31 The public policy rationale for this type of legislative scheme is clear and understandable. As this case well illustrates, however, the need for certainty from a public policy perspective can collide with individual justice considerations. The Minister did not suggest either below or in this Court that the agent's account of what had occurred in respect of the inadvertent deletion of the emails dated 16 June 2016 from his email inbox due to technical problems should be disbelieved. Nor did the Minister contest the agent's claims that from late June 2016 onwards he sought to draw the Department's attention to the problem both in writing and by telephone calls. Nor did the Minister contest the agent's claim that, despite his repeated attempts to rectify the problem, the Department did not respond to his requests that it resend the decision letters.
32 On the face of things, the appellants are justifiably aggrieved by the operation of the legislative scheme in their particular circumstances. The scheme has the potential to operate in ways that can fairly be described as harsh and draconian. It is unfortunate that there is no provision in the regime for discretionary powers to operate in appropriate cases to relieve the draconian operation of the scheme. The evidence strongly suggests that the first appellant has acted responsibly and conscientiously throughout this unhappy saga, which has been occasioned by the inadvertent deletion of the Department's notification letters from the migration agent's email system.
33 Having said that, however, in my respectful view, the primary judge has correctly applied the relevant legislative provisions, for the reasons given by his Honour in [18] to [21] of his Honour's reasons for judgment (which are set out in [24] above). On one view, there is a tension between ss 494B(5) and 494D. As McHugh, Gummow, Kirby and Hayne JJ stated in Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 at [70], where such a tension arises from the language of particular provisions, it must be alleviated, so far as is possible, by "adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions". Their Honours added that such a process of reconciliation often requires the Court to determine what is the leading provision, as opposed to the subordinate provision, the latter of which must give way to the former. In my respectful view, the primary judge was correct to treat s 494D as the leading provision to which s 494B(5) is subordinate. Accordingly, as held by the primary judge, for the purposes of s 494B, the recipient in question was not each of the appellants but rather was the nominated contact person, Md. Haque, who plainly was not a minor.
34 The appellants have failed to establish any appealable error in his Honour's reasons for rejecting their judicial review challenge. Both grounds of appeal must be rejected.
35 The Minister sought costs. Notwithstanding the appellants' failure, I do not consider that they should be ordered to pay the Minister's costs having regard to the very unusual circumstances of this case and, in particular, the Department's failure to respond to the agent's repeated requests that further notifications of the refusal decision be sent during the period for seeking a review, a matter which was not disputed.
Conclusion
36 For these reasons, the appeal must be dismissed. It is to be hoped that the peculiar features of this case will be taken into account by the Minister and those who advise him.
I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths.
Associate:
Dated: 11 May 2018
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Leasing Centre (Aust) Pty Ltd v Shepard [2011] FCA 443
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2011/2011fca0443
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2024-09-13T22:46:30.056124+10:00
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FEDERAL COURT OF AUSTRALIA
Leasing Centre (Aust) Pty Ltd v Shepard [2011] FCA 443
Citation: Leasing Centre (Aust) Pty Ltd v Shepard [2011] FCA 443
Parties: THE LEASING CENTRE (AUST) PTY LTD (ACN 057 766 551) v CRAIG PETER SHEPARD, JOHN RICHARD PARK and FRIGRITE REFRIGERATION PTY LTD (IN LIQUIDATION)
File number(s): NSD 321 of 2011
Judge: ROBERTSON J
Date of judgment: 6 May 2011
Catchwords: CORPORATIONS β Appeal from administrators' decision β Corporations Act s 1321 β Whether administrators wrongly decided that the plaintiff was an unsecured creditor β Leave to proceed β Extension of time
EQUITY β Fraudulent misrepresentation β Standard of proof
SALE OF GOODS βTotal failure of consideration β Action for money had and received - Whether proprietary remedy available
Legislation: Corporations Act 2001 (Cth)
Federal Court (Corporations) Rules 2000Federal Court Rules
Cases cited: Ausintel Investments Australia Pty Ltd v Lam (1990) 19 NSWLR 637
Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 672
Baltic Shipping Co v Dillon (1993) 176 CLR 344
Briginshaw v Briginshaw (1938) 60 CLR 336
Chahwan v Euphoric Pty Ltd [2006] NSWSC 1002
Chahwan v Euphoric Pty Ltd (2008) 245 ALR 780
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89
Global Partners Fund Ltd v Babcock & Brown Ltd (in liq) (2010) 267 ALR 144
Global Partners Fund Ltd v Babcock & Brown Ltd (in liq) (2010) 79 ACSR 383
Martin v Sitwell (1691) 1 Show KB 156; 89 ER 509
Orix Australia Corporation Ltd v Moody Kiddell and Partners Pty Ltd [2005] NSWSC 1209
Re Gordon Grant and Grant Pty Ltd [1983] 2 Qd R 314Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516
Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550
Wambo Coal Pty Ltd v Ariff [2007] NSWSC 589; 63 ACSR 429
Date of hearing: 28 April 2011
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 66
Counsel for the Plaintiff: Mr P Cutler
Solicitor for the Plaintiff: The Leasing Centre (Aust) ) Pty Ltd
Counsel for the Defendants: Mr A Shearer
Solicitor for the Defendants: Maddocks Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 321 of 2011
BETWEEN: THE LEASING CENTRE (AUST) PTY LTD (ACN 057 766 551)
Plaintiff
AND: CRAIG PETER SHEPARD
First Defendant
JOHN RICHARD PARK
Second Defendant
FRIGRITE REFRIGERATION PTY LTD (IN LIQUIDATION)
Third Defendant
JUDGE: ROBERTSON J
DATE OF ORDER: 6 MAY 2011
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The application be dismissed with costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 321 of 2011
BETWEEN: THE LEASING CENTRE (AUST) PTY LTD (ACN 057 766 551)
Plaintiff
AND: CRAIG PETER SHEPARD
First Defendant
JOHN RICHARD PARK
Second Defendant
FRIGRITE REFRIGERATION PTY LTD (IN LIQUIDATION)
Third Defendant
JUDGE: ROBERTSON J
DATE: 6 MAY 2011
PLACE: SYDNEY
REASONS FOR JUDGMENT
1 The substantive issue in this application is whether or not the plaintiff ("TLC") is an unsecured creditor of the third defendant, Frigrite Refrigeration Pty Ltd (In Liquidation) ("Frigrite") in respect of the sum of $110,000 including GST paid by TLC to Frigrite on 28 September 2010 for the supply of 10 new freezers with glass lids and 4 new patch ends ("the goods").
2 This application is brought under s 1321 of the Corporations Act 2001 (Cth) ("the Act"). That section relevantly provides:
(1) A person aggrieved by any act, omission or decision of:
(a) a person administering a compromise, arrangement or scheme referred to in Part 5.1; or
(b) a receiver, or a receiver and manager, of property of a corporation; or
(c) an administrator of a company; or
(ca) an administrator of a deed of company arrangement executed by a company; or
(d) a liquidator or provisional liquidator of a company;
may appeal to the Court in respect of the act, omission or decision and the Court may confirm, reverse or modify the act or decision, or remedy the omission, as the case may be, and make such orders and give such directions as it thinks fit.
3 The first and second defendants were appointed joint and several administrators of Frigrite on 18 January 2011. They are now the liquidators of Frigrite.
4 The first defendant, as administrator by letter dated 2 February 2011, made the following decision:
TLC has claimed title in respect of goods of the Company as at the date of my appointment, on the basis that such goods have been fully paid for ("the Goods").
After giving your claim due consideration, I hereby reject your claim on the basis that the Goods the subject of your claim were not manufactured as at the date of my appointment.
As Administrator, I am not in a position to discharge debts incurred by the Company prior to the date of my appointment. These debts rank as unsecured claims against the Company. Payment of these amounts is dependent on the outcome of the Administration.
5 By its amended originating process, filed in Court on 28 April 2011, TLC advanced various claims. By the first claim TLC sought a declaration that it was not an ordinary unsecured creditor of Frigrite. Two grounds were advanced. The first was based on what was said to be a fraudulent misrepresentation by Frigrite. The second was that there had been a total failure of consideration and Frigrite was liable to make restitution to TLC. In either of those events, it was said, TLC was not a creditor of Frigrite.
6 It is common ground that the freezers had not been manufactured at any relevant date. It is also common ground that TLC paid Frigrite $110,000 including GST for the goods and did not receive at least the 10 freezers.
7 Four affidavits were read in TLC's case. Two affidavits were by David Mark Moses, Chief Financial Officer of TLC, affirmed on 16 March 2011 and 21 April 2011. There was also an affidavit by each of Deborah Shou-Ai Lim, Legal Counsel at TLC, and Nicholas Joseph Aronson, General Manager of TLC, dated 8 April 2011 and 21 April 2011, respectively. None of the affidavits was by an individual with direct knowledge of the transaction.
8 Three affidavits were read on behalf of the defendants: Craig Peter Shepard, official liquidator and partner of the firm KordaMentha, sworn 4 April 2011; Brittany Lincoln, Chartered Accountant employed by KordaMentha, sworn 14 April 2011; and Rodney Bolt, formerly manufacturing manager of Frigrite, sworn 14 April 2011. I refer below in more detail to Mr Bolt's evidence.
9 No deponent, including Mr Bolt, was required for cross-examination.
Was there fraudulent misrepresentation?
10 The basis of this claim is the invoice issued by Frigrite on 3 August 2010. TLC claims that the invoice was or contained a fraudulent misrepresentation that the freezers the subject of that invoice existed at that date. TLC further alleges that it paid the invoice in reliance on the fraudulent misrepresentation.
11 As submitted by Mr Cutler of counsel, who appeared for TLC, the fact that the invoice included serial numbers of 10 freezers was said to constitute a fraudulent misrepresentation that the freezers actually existed. Further, it was submitted, Mr Aronson's evidence was that it was not TLC's usual practice to pay a supplier in advance of manufacture of equipment.
12 Mr Cutler placed no reliance on the paragraph numbered 3 in a letter dated 24 January 2011 from legal counsel at TLC to Mr Shepard, that paragraph referring to the island freezers having been found to be faulty and being retained by Frigrite for rectification.
13 The sequence of events so far as is disclosed by the evidence was that Renee Patterson, senior relationship manager at TLC, sent an email on 2 August 2010 to Rebbecca Hudson of Frigrite attaching an invoice request which stated how TLC needed the invoice to be addressed. The email said in part:
Please find attached an invoice request which states how we need the invoice to be addressed. Could you please prepare a (sic) invoice as follows:
10 x new Island Freezers with Glass Lids β 3750 mm Module 3 deck
Serial Numbers:
4 x new Patch ends
Serial Numbers: (if not appicable (sic) please state N/A next to serial number)
Total Invoice Amount $100k + GST.
14 Ms Hudson of Frigrite on 3 August 2010 sent an email to Ms Patterson at TLC attaching the invoice "as requested". The invoice provided by Ms Hudson to Ms Patterson incorporated the requirements identified by Ms Patterson and included a list of numbers under the heading "Serial No:". Ms Patterson did not give evidence.
15 I do not draw the inference that the invoice constituted a fraudulent misrepresentation. This is particularly so in the absence of any cross-examination of Mr Bolt. His unchallenged evidence, which I accept, was that Frigrite manufactured goods in accordance with design specifications and used an ordering system called SyteLine. SyteLine allocated a unique number to goods when each order was raised. A unique number was allocated by SyteLine upon receipt of each order regardless of whether the goods had yet to be manufactured. This allocated number would remain with the item during the manufacturing process until completion for tracking purposes. Mr Bolt then referred to the relevant invoice and concluded by saying that the allocation of the tracking numbers to the freezers in the invoice was consistent with the Frigrite's ordinary business practices.
16 Bearing in mind the seriousness of the allegation and the assessment required by Briginshaw v Briginshaw (1938) 60 CLR 336 at 362, I reject the submission that the invoice was or contained a fraudulent misrepresentation. I adopt as presently apposite Dixon J's reference in Briginshaw to "inexact proofs, indefinite testimony, or indirect inferences". As I have said, no-one involved in the transaction gave evidence for TLC and Mr Bolt was not cross-examined on his affidavit. Briginshaw was cited in a context similar to the present in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [170],
17 Thus the first limb of TLC's case fails.
Was there a total failure of consideration and, if so, what are the relevant consequences of such a failure?
18 The first issue here is one of fact, that is, whether TLC has failed to establish that the 4 new "Patch ends" were not received by it such that there was not a failure of consideration which was total.
19 In my view it is sufficiently clear that all of the goods referred to in the invoice were paid for. Also the patch ends were dealt with by TLC and Frigrite as part of the invoiced goods which constituted, in the main part, the 10 freezers. There is no separate treatment in the correspondence of the patch ends and I infer, as their name suggests, that once installed they would be attached to the freezers.
20 Thus, although the evidence is unsatisfactory, I conclude that none of the invoiced goods, including the patch ends, was delivered and that there was a total failure of consideration. One of the examples of total failure of consideration referred to in the judgment of Gleeson CJ, Gaudron and Hayne JJ in Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 at [20] is where there has been a prepayment for goods which are never delivered. In that case the duty to make restitution is clear.
21 I therefore reject the submission put by Mr Shearer of counsel, who appeared for the defendants, that on the facts there had been no total failure of consideration.
22 I note that 'consideration' in this context does not have its technical meaning but a colloquial one akin to benefit received under the contract: Martin v Sitwell (1691) 1 Show KB 156 at 157; 89 ER 509 at 510 per Holt CJ; Stoljar SJ A History of Contract at Common Law (Australian National University Press, 1975) at page 182; and Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 350-351.
23 Where this part of TLC's case meets an insuperable obstacle is in respect of the consequences of the total failure of consideration.
24 Mr Cutler, as I understood his submissions, accepted that restitution was a personal right and was not a proprietary remedy.
25 I was referred by Mr Shearer to Mason K, Carter JW, Tolhurst GJ Mason and Carter's Restitution Law in Australia (2nd ed, LexisNexis Butterworths, 2008) p 237 and to Ausintel Investments Australia Pty Ltd v Lam (1990) 19 NSWLR 637. Those references support the conclusion that a total failure of consideration does not support the relief sought by TLC in the present case.
26 Mason, et al (2008) at p 237 state that restitutionary claims deriving from the common money counts, such as money had and received, result in a personal remedy in the form of an order to pay money. See also Australian and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 at 673.
27 In Ausintel, the New South Wales Court of Appeal considered whether the company's obligation to Mrs Lam was a fiduciary duty in reliance on Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567. The argument was that the company, having notionally received Mrs Lam's money, held it as trustee for the sole purpose for which it was advanced, viz, the allotment of shares. Quistclose depends however on a mutual intention that the money advanced should not become part of the assets of the payee but should be used exclusively for a specific purpose. Meagher JA, with whom Gleeson CJ agreed, said at 647G-648C that there was no agreement, express or implied, as to how the money should be treated if no allotment of shares took place, nor was there any evidence of a mutual intention that the moneys should not become part of the company's general funds. In the absence of some special arrangement, where money has been paid to a company for the purpose of obtaining an allotment of shares the payment is made on the basis that the money becomes part of the company's general assets. See also the consideration of this issue by Mahoney JA at 641 B-641E.
28 In my opinion, similar considerations apply here. A striking feature of the present case is that there was no evidence of any written agreement between TLC, on the one hand, and Frigrite, on the other, nor any other specific evidence as to the terms on which the sum of $110,000 in dispute was paid to Frigrite. No doubt there was a promise to supply the goods specified on the invoice but there is an absence of evidence as to any other terms. In respect of goods such as the present, I am not prepared to infer or assume that it was common ground between the parties that the freezers were already in existence. It may or may not be that commercial freezers are made to order, either generally or in this case. Far less am I prepared to infer that there were any special arrangements in relation to the payment of the $110,000 by TLC to Frigrite.
29 Mr Cutler relied wholly on two decisions of White J of the Supreme Court of New South Wales: Orix Australia Corporation Ltd v Moody Kiddell and Partners Pty Ltd [2005] NSWSC 1209 and Wambo Coal Pty Ltd v Ariff [2007] NSWSC 589; 63 ACSR 429. In my view those decisions do not support the relief claimed in the present case under this head.
30 As to Orix, there was a finding of fact in that case that the funds in question had been obtained through fraud. It was in that context that White J held at [155]-[156] that the purchase moneys paid were held on trust. Since I have found, on the present facts, that there was no fraudulent representation the decision in Orix is of no assistance to TLC. As to Wambo, that was a case where the payments were made by mistake and for no consideration. Since no claim of mistake was advanced before me by TLC, the decision in Wambo is of no assistance to it.
31 In my opinion, therefore, there is no basis for the claimed relief flowing from the total failure of consideration and any consequent claim for non-performance of the contract.
32 Indeed, the reasoning of White J at [156] in Orix and at [41] and [43] in Wambo support the view that the remedy requires that there be both fraud and a total failure of consideration and that the claims by TLC are not truly claims in the alternative, as the matter was argued on its behalf.
33 I thus reject the two heads under which the plaintiff claimed relief. It follows that the claims in the Amended Originating Process fail.
Procedural Issues
34 I turn next to consider what were referred to by the parties as three procedural issues. Those issues were: (1) whether the claim had been sufficiently particularised under r 14.1(1) of the Federal Court (Corporations) Rules 2000 ("the Corporations Rules"); (2) whether the Court should allow further time under r 14.1(2) of the Corporations Rules; and (3) whether leave to proceed against Frigrite was necessary and, if so, whether the Court should grant such leave under s 500(2) of the Act.
35 As to the first of these matters, r 14.1(1) provides that all appeals to the Court authorised by the Act must be commenced by an originating process, or interlocutory process, stating:
(a) the act, omission or decision complained of; and
(b) in the case of an appeal against a decision -βwhether the whole or part only and, if part only, which part of the decision it is complained of; and
(c) the grounds on which the complaint is based.
36 The originating process in this matter, in its original form, seems to have been drawn by reference to form 5 of the Federal Court Rules rather than with an eye to the requirements of r 14.1(1). Thus, as originally filed the originating process did not state whether the whole or part only of the decision was complained of (compare r 14.1(1)(b)) and neither did it set out the grounds upon which the complaint was based (compare r 14.1(1)(c)). Instead it referred to "the facts stated in the supporting affidavits" which is closer to the language of form 5.
37 No complaint was made about the failure to specify whether the whole or part of the decision was complained of.
38 In relation to r 14.1(1)(c) that defect was remedied by the amended originating process filed in Court to which I have referred.
39 I need say no more, therefore, about r 14.1(1).
40 Rule 14.1(2) founds the second procedural issue. Under this provision the originating process must be filed within 21 days after the date of the decision appealed against or within any further time allowed by the Court. By r 14.1(3) the Court may extend the time for filing the originating process either before or after the time for filing expires and whether or not the application for extension is made before the time expires.
41 In the present case it was common ground that the 21 days expired on 23 February 2011 but that the originating process was not filed until 22 March 2011.
42 Little was said on behalf of TLC in support of any application to extend the time for filing the originating process. Reference was made to the affidavit of Ms Lim made on 8 April 2011 but that affidavit sets out a chronology to events without endeavouring to explain the reasons for the delay.
43 Although it is not a prerequisite to the allowance of further time that there be an explanation for the delay but the absence of such an explanation makes it difficult for the Court to judge whether or not an extension of time conforms with the justice of the case.
44 Doing the best I can with the limited material put before me on behalf of TLC, I take into account that during the month of February 2011 TLC sought to agitate or re-agitate the correctness of the underlying decision; that the period for which further time is required is a relatively short one; and that no prejudice is asserted by the defendants by reason of the delay.
45 Taking these matters into account, acting under r 14.1(2)(b), I allow until 22 March 2011 as further time within which the originating process must be filed. 22 March 2011 is the date on which the originating process was in fact filed.
46 Nothing that I have said should encourage other plaintiffs making appeals to the Court authorised by the Act to take the risk-filled course in relation to the time limit specified in r 14.1(2) taken by the present plaintiff, TLC.
47 The third procedural issue is the question of leave of the Court to proceed with the application against the Company under s 500(2) of the Act. In this respect Mr Cutler's submission for TLC was that no leave had been sought because the liquidator's decision to treat TLC as a creditor was wrong and TLC was not a creditor. It was also submitted that no leave was necessary because no relief was sought against Frigrite directly. In the alternative, leave under s 500(2) was sought and it was contended that leave should be granted because if TLC was not a creditor then the $110,000 was not property of Frigrite.
48 In my view, merely to say that the relevant decision is wrong is an insufficient basis on which to conclude that leave is unnecessary. On that basis leave would never be necessary. Further, the terms of the amended originating process make leave under s 500(2) necessary. For example, claim 2 is for a declaration that Frigrite holds the sum of $110,000 on trust for TLC. Also, I am not convinced that claim 3, which seeks an order that the first and second defendants cause the third defendant to pay the sum of $110,000 to Frigrite, is not an action or other civil proceeding against the company within the meaning of s 500(2). It is also to be noted that Frigrite is the third defendant. For these reasons, as I have said, in my view leave is necessary.
49 The remaining question is whether leave should be granted.
50 Relevant principles according to which the discretion conferred upon the court under s 500(2) of the Corporations Act is to be exercised were briefly set out by Hammerschlag J of the Supreme Court of New South Wales in Global Partners Fund Ltd v Babcock & Brown (in liq) (2010) 267 ALR 144 at 179 [169]:
(a) The purpose of the prohibition against commencing proceedings against a company in liquidation is to avoid a multiplicity of proceedings when the appropriate procedure is to lodge a verified proof of debt with the liquidator.
(b) The onus is on the claimant to demonstrate why leave should be granted.
(c) The plaintiff must satisfy the court that its claim has a solid foundation and gives rise to a serious dispute (sometimes termed a serious issue to be tried).
(d) Factors relevant to the exercise of the discretion may include but are not limited to:
(i) the degree of complexity of the legal and factual issues involved;
(ii) the prospects that a proof of debt will be rejected; and
(iii) the stage to which the proceedings, if already commenced may have progressed.
51 The court referred to Re Gordon Grant and Grant Pty Ltd [1983] 2 Qd R 314 at 317-318 and to Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550. See also on appeal Global Partners Fund Ltd v Babcock & Brown (in liq) [2010] NSWCA 196; 79 ACSR 383 at [47] and [93].
52 I take into account these factors, in particular the shortness of the matters involved and the stage to which the proceedings have progressed. I also take into account the nature of the claim, being in effect that the sum of $110,000 was not available to creditors. As Barrett J said in Chahwan v Euphoric Pty Ltd [2006] NSWSC 1002 at [40]:
The claim is proprietary and cannot be accommodated within the proof of debt regime. Leave should therefore be granted.
On appeal no issue arose with respect to that grant of leave: Chahwan v Euphoric Pty Ltd (2008) 245 ALR 780 at [8].
53 It was not suggested that the claim by TLC was made other than in good faith.
54 For these reasons I grant leave under s 500(2).
55 As to whether any terms should be imposed under s 500(2) it was submitted on behalf of the defendants that, if leave were granted, the relevant term should be that there be no order as to costs as sought by TLC. I am unpersuaded that this is an appropriate condition. In my view, given the proprietary nature of the claim, the stage which these proceedings have reached and the point at which the question of leave has arisen, no term should be imposed and costs should follow the event.
Objections to Affidavit Evidence
56 I indicated in the course of the hearing that I would deal, in my reasons, with certain objections to the affidavit evidence and I now do so.
57 One affidavit read on behalf of TLC was made by Nicholas Aronson.
58 I admit paragraphs 5 and 6 on the basis that they disclose the negative results of the deponent's search and review and are therefore not hearsay.
59 Paragraph 7 of Mr Aronson's affidavit I rejected on the basis that it was hearsay.
60 Paragraphs 8 and 9 were also objected to on the ground of relevance. It was common ground that the deponent, Mr Aronson, was not involved in the present transaction.
61 As to paragraph 8, I admit it, although I regard it as of little ultimate relevance. It says no more than what Mr Aronson's experience is of TLC's usual practice. It does not bear directly on the transaction in issue.
62 As to paragraph 9, it is not in dispute that TLC paid the full amount of the invoice to Frigrite on 28 September 2010. Since it was common ground that Mr Aronson was not involved in the present transaction, the balance of paragraph 9, consistently with my ruling on paragraph 7, can only relate to the state of the business records Mr Aronson searched and reviewed. On that basis I will admit the balance of paragraph 9.
63 I note as well that there is no reason why the word "thereafter" which the deponent has used should be notionally omitted, as Mr Cutler submitted it should be. The paragraph makes sense with the word "thereafter" included. The result is that the balance of paragraph 9 has nothing to say about communications on or preceding 28 September 2010 which is when TLC alleges the fraudulent misrepresentation was made.
64 As to paragraph 10, I admit the first sentence as referable to the results of the search and review which Mr Aronson conducted. Thus it is admitted on the limited basis that it is a statement of what Mr Aronson did not find. Similarly, in relation to the second sentence in paragraph 10, I admit it as limited to the results of Mr Aronson's search and review. Otherwise it would seek to be evidence of other undisclosed communications with other undisclosed members of TLC.
65 The other outstanding matter of evidence is the objection made to paragraph 6 of the affidavit sworn by Rodney Bolt on 14 April 2011.
66 I admitted the first part of paragraph 6 down to and including the word "practices". This was on the basis that I was satisfied that, as the manufacturing manager of Frigrite, Mr Bolt was qualified to speak about the ordinary business practices of Frigrite in respect of the allocation of tracking numbers to the freezers in the invoice. As to the second part of paragraph 6, I reject it on the basis that the deponent fails to state any of the primary facts on which the conclusory statement made in that part of paragraph 6 is based. I should indicate as well that whether or not, in the circumstances of this case, Frigrite had had previous dealings with TLC is of no ultimate relevance.
I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.
Associate:
Dated: 6 May 2011
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COPYRIGHT TRIBUNAL OF AUSTRALIA
Pocketful of Tunes Pty Ltd v The Commonwealth of Australia
[2015] ACopyT 1
Citation: Pocketful of Tunes Pty Ltd v The Commonwealth of Australia [2015] ACopyT 1
Parties: POCKETFUL OF TUNES PTY LTD
(ACN 005 750 185) and BRUCE WILLIAM WOODLEY v THE COMMONWEALTH OF AUSTRALIA
File number: CT 2 of 2013
Tribunal: BENNETT J (PRESIDENT)
Date of judgment: 3 March 2015
Catchwords: COPYRIGHT β remuneration β Commonwealth use of synchronisation right β terms appropriate to compensate the applicants
COPYRIGHT β assignment of copyright β deeds of assignment β synchronisation right β right of action for infringement of that right is an incident of ownership β right to claim compensation under s 183(5) of the Copyright Act 1968 (Cth)
Legislation: Australian Citizenship Act 2007 (Cth)
Copyright Act 1968 (Cth) ss 10, 119, 183, 196
Cases cited: Copyright Agency Limited v State of New South Wales [2013] ACopyT 1
Equuscorp Pty Ltd v Haxton; Equuscorp Pty Ltd v Bassat; Equuscorp Pty Ltd v Cunningham's Warehouse Sales Pty Ltd [2012] HCA 7
Insight SRC IP Holdings v The Australian Council for Educational Research (2012) 96 IPR 495
Insight SRC IP Holdings Pty Ltd v Australian Council for Educational Research Ltd [2013] FCAFC 62
Marine Engineering and Generator Services Pty Ltd v State of Queensland (Queensland Emergency Services) (1997) 38 IPR 422
Poulton v The Commonwealth (1953) 89 CLR 540
Trendtex Trading Corporation v Credit Suisse [1982] AC 679
Re Application by Seven Dimensions Pty Ltd (1996)
35 IPR 1
Date of hearing: 17 and 18 July 2014
Place: Sydney
Category: Catchwords
Number of paragraphs: 94
Counsel for the Applicants: Mr S Rebikoff
Solicitor for the Applicants: GI & Sanicki Lawyers
Counsel for the Respondent: Mr E Heerey
Solicitor for the Respondent: Australian Government Solicitor
COMMONWEALTH OF AUSTRALIA
Copyright Act 1968
IN THE COPYRIGHT TRIBUNAL OF AUSTRALIA CT 2 of 2013
BETWEEN: POCKETFUL OF TUNES PTY LTD
(ACN 005 750 185)
First Applicant
BRUCE WILLIAM WOODLEY
Second Applicant
AND: THE COMMONWEALTH OF AUSTRALIA
Respondent
Tribunal: bennett J (PRESIDENT)
DATE OF ORDER: 3 march 2015
WHERE MADE: SYDNEY
THE TRIBUNAL DECLARES THAT:
1. The Deed was effective to transfer to Pocketful of Tunes Pty Ltd the synchronisation right and the right of action, future or accrued, for infringement of that right, which includes the right to claim under s 183(5) of the Copyright Act 1968 (Cth).
THE TRIBUNAL ORDERS THAT:
1. The Commonwealth pay to Pocketful of Tunes Pty Ltd a fee for the synchronisation rights of the song "I am Australian" of $149,743.34, exclusive of GST.
2. The parties submit proposed orders as to costs and, if not by consent, written submissions in support of the proposed orders, of less than two pages, by 17 March 2015.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
COMMONWEALTH OF AUSTRALIA
Copyright Act 1968
IN THE COPYRIGHT TRIBUNAL OF AUSTRALIA CT 2 of 2013
BETWEEN: POCKETFUL OF TUNES PTY LTD
(ACN 005 750 185)
First Applicant
BRUCE WILLIAM WOODLEY
Second Applicant
AND: THE COMMONWEALTH OF AUSTRALIA
Respondent
Tribunal: bennett J (PRESIDENT)
DATE OF ORDER: 3 march 2015
WHERE MADE: SYDNEY
REASONS FOR DETERMINATION
1 The applicants, Pocketful of Tunes Pty Ltd (Pocketful of Tunes) and Mr Bruce Woodley, apply to the Copyright Tribunal under s 183(5) of the Copyright Act 1968 (Cth) (the Act) seeking the fixing of terms for the past use by the Commonwealth of the song "I am Australian" co-written by Mr Woodley (the Song).
2 In December 2008, the Commonwealth Department of Immigration and Border Protection (the Department) (formerly the Department of Immigration and Citizenship) engaged Radiowise Media Networks Pty Ltd (Radiowise) to produce an Australian citizenship video montage in DVD format for use in Australian citizenship ceremonies, which included use of the Song (Montage). The Commonwealth paid an amount of $2,954.20 plus GST to Radiowise for music licences through the Australasian Performing Right Association (APRA) and the Australasian Mechanical Copyright Owners Society (AMCOS). It did not, however, obtain a licence to the synchronisation right, the right to reproduce and use the lyrics on the sound-track to a cinematograph film or other audio visual presentation.
3 There is no dispute between the parties that, as the Montage was produced and distributed by the Department for use in public ceremonies for the conferral of Australian citizenship under the Australian Citizenship Act 2007 (Cth), the reproduction of the Song on the soundtrack to the Montage was done for the services of the Commonwealth within the meaning of s 183 of the Act. Section 183 relevantly provides:
(1) The copyright in a literary, dramatic, musical or artistic work or a published edition of such a work, or in a sound recording, cinematograph film, television broadcast or sound broadcast, is not infringed by the Commonwealth or a State, or by a person authorized in writing by the Commonwealth or a State, doing any acts comprised in the copyright if the acts are done for the services of the Commonwealth or State.
β¦
(3) Authority may be given under subsection (1) before or after the acts in respect of which the authority is given have been done, and may be given to a person notwithstanding that he or she has a licence granted by, or binding on, the owner of the copyright to do the acts.
(4) Where an act comprised in a copyright has been done under subsection (1), the Commonwealth or State shall, as soon as possible, unless it appears to the Commonwealth or State that it would be contrary to the public interest to do so, inform the owner of the copyright, as prescribed, of the doing of the act and shall furnish him or her with such information as to the doing of the act as he or she from time to time reasonably requires.
(5) Where an act comprised in a copyright has been done under subsection (1), the terms for the doing of the act are such terms as are, whether before or after the act is done, agreed between the Commonwealth or the State and the owner of the copyright or, in default of agreement, as are fixed by the Copyright Tribunal.
(emphasis added)
4 There is also no dispute that the terms for the use of the Song as part of the Montage have not been agreed between the applicants and the Commonwealth.
5 The issues presently for determination are:
What terms are appropriate to compensate the applicants for the use of the synchronisation right in the Song by the Commonwealth?
To which of the applicants should any payment be made?
6 The parties have filed a statement of agreed facts, to which I have had regard and which is annexed (Annexure A). I will set out some of these matters and facts not in dispute as background.
Facts
The Song
7 There is no need to recite Mr Woodley's history from his time as a member of the group known as "The Seekers" or the national recognition of the Song. It is sufficient to say that Mr Woodley is a well-known composer and is experienced in music licensing. Mr Woodley's experience is not in dispute.
8 Mr Woodley composed the music and, together with Mr Dobe Newton, the lyrics of the Song. Subsistence of copyright is not in dispute. The rights in the Song were purportedly assigned to Pocketful of Tunes in 2013. This assignment is discussed further below.
9 There is also no dispute as to the popularity of the Song, the music and lyrics, throughout Australia. It is an agreed fact that research has found that when a short segment of the Song was played, 97% of the general public in New South Wales and Victoria and 100% of the 4 to 12 year old children surveyed said that they recognised the Song.
10 The Song has been registered with APRA since at least 8 January 1988 in respect of the rights for public performance and communication to the public. Royalties have been received from AMCOS in respect of mechanical reproductions of the Song, as Mr Woodley has been a member of AMCOS since 12 December 1995. Neither APRA nor AMCOS have been authorised to licence the synchronisation right.
The Montage
11 Radiowise delivered 750 copies of the Montage to the Department in January 2009 and a further 1000 copies in May 2010. Each disc contained two versions of the Montage; a short version which used approximately 60 seconds of the Song and a long version which used 60 seconds of the Song as well as the full Song at the end of the Montage. The Song was performed by an artist other than Mr Woodley.
12 The parties agree that the Montage was:
Distributed by the Department to around 565 local government councils (Councils) across Australia for use in citizenship ceremonies, which are held regularly throughout the year;
Distributed to 11 regional offices of the Department across Australia for use in citizenship ceremonies and special events;
Used at citizenship information services conducted by the Department and by contracted course providers;
Made available on request to Australian overseas posts and to community organisations. The number so requested is unknown.
13 Department records indicate that 474 copies of the Montage were distributed by the Department between February 2011 and August 2012.
14 In early August 2012, the Department became aware of a complaint by Mr Woodley in relation to use of the Song and became concerned that appropriate licences may not have been obtained. On 9 August 2012, the Department wrote to all Councils and asked them to cease using the Montage until further notice.
15 On 7 November 2012, the Department again wrote to all Councils and requested that the Montage be returned to it no later than 30 November 2012. A follow up email was sent on 14 February 2013.
16 Ms Christine Evans, Assistant Director of Citizenship Ceremonies and Community Engagement in the Department, said that between November 2012 and March 2013, the Department received a variety of telephone, email and letter responses from Councils in relation to the request for return of the Montage. Ms Evans provided the following summary of those responses:
69 Councils had used the Montage at citizenship ceremonies.
251 Councils did not use the Montage at citizenship ceremonies, or had no record of ever receiving the Montage.
236 Councils either did not provide advice as to whether the Montage was used or were unable to say if it was used at a citizenship ceremony.
17 Between January 2009 and August 2012, approximately 12,700 citizenship ceremonies were conducted by a Council (approximately 10,500 ceremonies) or by a regional office of the Department (approximately 2,200 ceremonies).
Legal principles
18 The principles to be applied in assessing compensation under s 183(5) of the Act are not the same as those to be applied in determining damages for copyright infringement. The determination is of the value of the right that has been exercised by the Commonwealth for which the copyright owner is compensated and not the loss suffered by the copyright owner. There are very few cases relating to s 183(5) of the Act and those that have been decided provide limited guidance on how to proceed with the calculation in this case.
19 The parties agree that the applicable principles are those set out by Sheppard P in Re Application by Seven Dimensions Pty Ltd (1996) 35 IPR 1 (Seven Dimensions):
The intention underlying s 183(5) is that the Tribunal will act fairly and reasonably as between the parties and, by fixing appropriate terms, compensate the copyright owner for what has been done (at 18).
In assessing the amount of compensation, the Tribunal will ordinarily have regard to the going or market rate for the use of the material (at 18).
The analysis involves assuming that the two parties were in an arm's length bargaining situation and reaching a conclusion as to what the parties would have agreed if they had intended to reach a bargain (at 18-19).
In making that assessment, one has to assume that the parties would have done business, even if such an assumption is 'artificial and unreal' (at 19).
Neither party can be heard to say that he, she or it would not have done business on any terms, or that business would only have been done for a sum which was grossly excessive or grossly inadequate (at 19).
The parties must be deemed to have acted reasonably and treated as willing but not anxious parties to the bargain which has to be constructed (at 19).
20 The Tribunal has previously considered these principles and those discussed in Marine Engineering and Generator Services Pty Ltd v State of Queensland (Queensland Emergency Services) (1997) 38 IPR 422 (Marine Engineering) in Copyright Agency Limited v State of New South Wales [2013] ACopyT 1 (at [43]):
The difficulty for the Tribunal in assessing equitable remuneration has often enough been remarked upon: see, for example, the musings of Finkelstein DP in Copyright Agency Ltd v Queensland Dept of Education (2002) 54 IPR 19; [2002] ACopyT 1 at [14] ("It is notorious that ascertaining equitable remuneration is a difficult task in almost all cases".) and the stoicism of Sheppard P in Seven Dimensions at 19 (" I must do the best I can"); and of Lockhart P in [Marine Engineering] at 426 ("I must do the best I can on the basis of the material before meβ¦").
21 Following this, the Tribunal, per Perram AP and Ms Catherine Riorden, concluded that (at [51]):
[I]t is useful to approach the present matter on the basis of a hypothetical transaction between the same parties at arms length where it is assumed the transaction would have proceeded and the rate agreed would not have been excessive or inadequate.
EVIDENCE
Synchronisation right
22 At the hearing, the applicants led expert evidence from Mr Adrian Marchesani. Mr Marchesani is the Course Coordinator for the Bachelor of Business Music Industry at Victoria University and a consultant to Ralph Carr Management, an artist management company and part of the Ralph Carr Group of Companies, an independent entertainment group. Mr Marchesani prepared two expert reports in the proceedings. His expertise in what might generally and relevantly be called "licensing in the music industry", including synchronisation licences, is not in dispute.
23 Mr Marchesani explained that music publishing generates revenue form the copyright which exists in a musical work from three main sources:
Mechanical licences, essentially for the sale of recorded music.
Licences for the public performance and broadcast of musical works.
Licences for the synchronisation of musical works with visual images.
24 According to Mr Marchesani:
It is quite common for synchronisation rights to attract a much higher fee than performance rights, making it difficult to draw a comparison between the value of the two types of usage.
Performance and synchronisation licensing are completely different areas of licensing.
It is difficult to extrapolate a value for a synchronisation licence from a performance licence, as a performance licence is based on performance of the Song at events, whereas the synchronisation of the Song refers to the production of a product whereby the Song is fixed to a specific visual image.
Except in the case of "grand rights" (such as the rights in an opera or musical) the public performance of music is generally licensed on behalf of songwriters and owners of recordings by APRA and the Phonographic Performance Company of Australia Limited (PPCA) respectively.
By example, a radio station may play a song under the blanket licences issued by PPCA and APRA, which carry a relatively low fee for each broadcast. However, if the radio station wants to use a specific song for an on-air promotion of the radio station it must approach the owners of the copyrights and separately license this usage, which may attract a much higher fee than the broadcast of the Song in normal programming. As such, it is difficult to draw a comparison of value between the two types of usage.
25 Mr Marchesani also explained that:
Valuing a licence for a synchronisation right involves consideration of the desired usage and the desired media.
A relevant variable is the type of media involved; for example, a licence relating to nationwide commercial free-to-air network usage will be more expensive than a regional radio station.
The higher the production fee for a campaign, the higher the licence fee.
A higher level of spending on a campaign will usually reflect a desire the reach a large audience.
26 Mr Marchesani conceded that the exposure that he would expect at the citizenship ceremonies would be very much less than the exposure that he would expect by way of nationwide commercial free-to-air network television usage and that this would translate into a licence fee for use at citizenship ceremonies which would be very much less than a licence fee for use on nationwide commercial free-to-air network television. This distinction, between commercial and non-commercial usage that applies generally, is not reflected in Mr Woodley's evidence that the usage did not matter to him and that he would seek to negotiate the same licence fee irrespective of the use.
Commonwealth's evidence as to budget for Montage
27 The Commonwealth relied on evidence from Ms Renelle Foster, Assistant Secretary of the Citizenship branch of the Department. Ms Foster said that the Citizenship branch comprised four sections, one of which was the Citizenship Ceremonies and Promotion section (Section) which was responsible for arranging activities to promote Australian citizenship and assisting in the organisation of citizenship ceremonies conducted in accordance with the Australian Citizenship Act 2007 (Cth). In 2008/2009 the Section had the equivalent of 5.77 full time staff and a salary budget of approximately $538,000.
28 Ms Foster was responsible for approving the expenditure for the Montage. The Department paid an amount of approximately $36,530 on production, licensing and delivery of 750 copies of the Montage from Radiowise in January 2009, and a further $3,905 to procure a further 1000 copies.
29 In response to Mr Marchesani's evidence that the commercial value of the song was in the order of $250,000 to $300,000 per annum and his view that this would have been the likely licence fee negotiated with the Commonwealth, Ms Foster says that the Montage was only one of a range of citizenship promotion activities and that expenditure of such a large sum on a single activity such as this 'would never have been agreed to by the Department nor would have it been approved by me'. Ms Foster considers that, while inclusion of the Song in the Montage was a 'sensible proposal', it was 'definitely not a prerequisite nor a requirement of the Department' and that the Department 'would have been happy to go with another suitable option such as the Australian National Anthem'. Had significant additional synchronisation licence fees been sought above the amount of $3,249.62 paid to Radiowise in respect of licensing costs, then Ms Foster says that the Department would have:
Sought a lower cost background music alternative; or
Made an alternative montage without music; or
Abandoned the citizenship montage proposal.
Previous licences
30 Mr Woodley provided evidence of past synchronisation licences that he has negotiated and the licence fees that he had secured, the details of which are agreed as set out in Annexure A. These licences range from one month to five year terms and cover a broad range of industries, from telecommunications, motor vehicle and manufacturing to government. The licences have generally been used in national broadcasting media campaigns and have been granted exclusively to the licensee for use within a permitted scope.
No Licensee Use XXX Term Year
Non-Synchronisation licences
1 Department The right to authorise the performance of the song and cause sound recordings of the song to be performed at Australian Citizenship ceremonies and related 50th anniversary events endorsed by the Department. X XXXX 12 months 1999
Synchronisation licences
2 AMP Shopping Centres Pty Ltd The exclusive use (in the category of shopping centres) of excerpts of the song in television, radio and non-broadcast media advertising across Australia. XXXX XX XXX 5 years 1996
3 Holden Limited The use of excerpts of the song in television, radio and non-broadcast media advertising across Australia. XXXX XXX XXXX XXX XXXX XXX XX XXX XXXX 5 years (plus 3 year option) 1998
4 Queensland Rail The use of excerpts of the song in television, radio and non-broadcast media advertising in Queensland only. XXXXX 4.5 years 1999
5 Federal Government of Australia ('Yes' vote referendum) The non-exclusive use of excerpts of the song throughout Australia for on free to air TV/Pay TV/Radio and non-broadcast media/video/events and functions. XXXX 1 month 1999
31 However, during the course of the hearing, it emerged that the majority of these licences were of little assistance, as they differed in critical respects from the licence the subject of the present enquiry. For example, the previous licence taken by the Department related to performance rather than synchronisation rights, while the other synchronisation licences related to a different usage.
32 It was ultimately agreed between the parties that the 'best indication of the value of the [S]ong' was a licence which included the synchronisation right, granted to Brisbane City Council in 2007 (the Brisbane licence). The Brisbane licence was to Mr Woodley's recording of the Song, for use on the soundtrack of a DVD video production to be used at Council citizenship ceremonies in Brisbane for a period of 4 years. The licence fee was $3000 per year plus GST.
33 The relevant terms of the Brisbane licence are:
1. The Licensor, Pocketful Of Tunes P/L, grants to the Licensee, Brisbane City Council, a synchronisation licence to use the Bruce Woodley recording of his Song "I Am Australian" as the sound track for a DVD video production, for use at Council citizenship ceremonies, for the Licence Term as stated in the Schedule.
Payments
2. The Licensee must pay the Licensor the licence fee stated in the Schedule at the times and in the manner stated in that item. The licence is not valid until the licence fee is paid in full.
Intellectual Property Rights
3. The intellectual property rights in the Bruce Woodley recording of the Song "I Am Australian" remain exclusively the Licensor's.
β¦
Schedule
Item 1 β The Recording of the Song
The recording of the Song is titled "I Am Australian" as recorded by the writer and artist Bruce Woodley. The recording is owned exclusively by Pocketful Of Tunes P/L.
Item 2 β The Licence Term
The Licence term commences on January 1 2007 and ends at midnight on December 31 2011.
Item 3 β The Licence Fee
The licence fee is $3300 (inclusive of GST) per annum.
The licence fee will be payable in full to Pocketful Of Tunes P/L upon receipt of invoice, and no later than January 1 each year of this licence agreementβ¦
Item 4 β Usage
The Recording of the Song may be used in synchronisation with a DVD production at all citizenship ceremonies conducted by the Brisbane City Council for the term of the agreement.
34 Mr Woodley said that when he licenses the Song, he sometimes attributes greater value to the music than to the recording. The applicants submitted that such unequal division was logical in circumstances where the Song was not associated with any particular recording. Accordingly, they submitted, the synchronisation right could be valued at up to two thirds of the total fee for the Brisbane licence, that is, $2000. The Commonwealth submitted that one half was appropriate. Mr Marchesani's evidence is that industry practice was to split the fee 50/50 between the performance and synchronisation rights, meaning that the synchronisation right in the Brisbane licence would be valued at $1500. In closing submissions, the applicants appeared to accept that $1500 was the appropriate value to be attributed to the synchronisation rights in the Brisbane licence. In my view $1500 was the appropriate value and I shall proceed on this basis.
35 Having accepted the Brisbane licence as a starting point, the enquiry becomes, as the applicants put it: 'how do you extrapolate from synchronisation by one Council to synchronisation by every Council and the Department itself?'.
Logan City Council licence
36 It should be noted that at the commencement of the second day of the hearing, the applicants sought to introduce into evidence a licence that had just been negotiated (but not finally executed) with Logan City Council. Logan City Council is located south of Brisbane in the Gold Coast hinterland and has a population of just over 300,000. The applicants contend that this licence was negotiated on terms similar to those of the Brisbane licence and was for use of the sound recording and the Song at citizenship ceremonies conducted by the Logan City Council. According to an email sent by Logan City Council on 17 July 2014, the Council was prepared to pay $5,000 per year to enter into the licence. Mr Woodley valued the synchronisation right of that licence at 50% of this fee, namely $2,500.
37 Taking this evidence at its highest, it is that in 2014 one other Council was willing to negotiate an individual licence to use the sound recording and the Song. It does not resolve the difficulties in extrapolating the Brisbane licence, nor the questions which arise in a national context, such as differences in size of population, diversity of population, number of citizenship ceremonies held annually by a Council, the amount of money available to a Council for such licences and the price that an individual Council, such as a council in remote or regional parts of Australia, would be prepared to pay.
Number of ceremonies
38 The applicants provided a table that summarises, from available evidence, the conduct of citizenship ceremonies by a number of selected Councils:
39 At its highest, the table demonstrates that Brisbane City Council, while the largest Council in Australia by population, is not "the high water mark" of the numbers of citizenship ceremonies per head of population. However, it cannot be said that the Councils included in the table are representative of Councils around the country, such as those in regional and remote Australia. The Councils in the table could also be characterised, at least as to some of those Councils, as those with higher numbers of migrants taking up citizenship.
SUBMISSIONS
Alternative calculations
40 The parties' ultimate positions as put forth in their final submissions have been summarised below. It is, however, instructive, in order to understand the difficulties of any premium, to note the parties' previous positions and how they evolved during the course of the hearing.
The first alternative calculation
41 Mr Woodley first proposed a calculation as follows: $1500 (the portion of the Brisbane licence applicable to the synchronisation right) x 22% (the proportion of Councils around Australia that actually used the Montage, as estimated by Ms Evans) β a discount of 30% (to take into account the non-commercial nature of the use) = $156,000 per year. This, the applicants submitted, was the minimum fee, based on a maximum discount of 30%. The applicants also proposed a figure of $224,000 per year using an alternative Seven Dimensions approach.
42 The first alternative calculation made no provision for the fact that each Council could have sought to negotiate a licence with Mr Woodley, nor did it acknowledge the evidence, although imprecise, that some Councils did not receive the Montage, or did not respond to requests about whether it was used. However, by applying a discount for the non-commercial nature of the use of the Song, it did attach a lesser value for a licence for the Commonwealth to use the Song. As the evidence of Mr Marchesani bears out, a distinction should be drawn between the types of media campaign or purpose of use attached to the Song, and the particular entity acquiring a licence to use the Song.
Second alternative calculation
43 In the alternative, Mr Woodley relied upon a calculation provided by Mr Marchesani, using a rate that is commonly applied in the music industry for the reproduction of music on a soundtrack to in-house corporate or educational DVDs: $450 per DVD x 565 (the number of Councils to which the Montage was distributed) + 5% per year for inflation = approximately $250,000 per year. This, Mr Marchesani said, would represent a commercially realistic figure.
44 In the applicants' submission in support of this calculation, the critical fact was that the Montage was made available for use or intended use by Councils in citizenship ceremonies conducted across Australia. The applicants submitted that it was not relevant:
Whether the Department distributed, and each Council received, a copy with an invitation to use it in its citizenship ceremonies;
Whether the Montage was used at each of the 12,700 citizenship ceremonies;
Whether individual Councils which received the Montage chose to use it; and
That 17% of citizenship ceremonies were conducted by the Department.
45 This calculation was not based on actual usage, in that it did not take into account that not all Councils used or received the Montage. It was based on the actions of the Department in distributing the Montage to all Councils. Further, a corporate DVD used for in-house education or corporate purposes is not, in my view, a reasonable comparison.
46 In each such case, there would be a negotiation between the parties based upon the value of the licence compared to the specific scope of use.
47 The third alternative calculation was the one finally contended for, as summarised at [53] β [56] below.
Commonwealth's alternative calculation
48 The Commonwealth's initial position was: $1,500 (the value attributed to the synchronisation rights in the Brisbane licence) x 20 (the approximate population of Australia) Γ· 2 (to take into account Mr Woodley's evidence that around half of the Councils would be interested in licensing the song for use in the Montage) = $15,000 per annum x 3.67 years = $55,000.
49 Such an approach made no provision for the differential distribution of citizenship ceremonies conducted by different Councils. It also made no provision for the other uses (such as Departmental use, schools and foreign posts) which was agreed between the parties as 17% of the total use, or for the difference between a licence fee to a single Council and a single licence fee for national use.
50 The Commonwealth altered its position by adding a further 17% to the $30,000 per annum licence for Department use. This figure was intended to reflect the number of ceremonies conducted by the Department (2,200 of a total of 12,700). A further 2% was then added which encompassed other uses by schools, community organisations and overseas posts.
51 This is the final calculation contented for and summarised at [57] β [60] below.
52 As the hearing progressed, it became clear that the imprecision of the evidence meant that the evidence alone could not form an adequate basis to support precise calculations. The parties ultimately agreed that the evidence was imperfect and that the calculation could not be done in a rigorous or systematic way. Concessions were correctly made that reflected the difficulties in determining the appropriate calculation and, ultimately, each of the parties departed from the calculations as initially advanced. I shall consider the submissions as finally advanced.
Applicants' submissions
53 The applicants contend for an extrapolation based on actual usage by the Commonwealth and say that this is the only calculation which properly compensates the copyright owner in the circumstances of this case. If the applicants' approach were to be adopted, this would result in a licence fee of $226,000 per year described as being 'on a conservative basis'. This was obtained by taking the Brisbane licence fee for the synchronisation right, being $1500, multiplied by the 124 Councils in Australia each said to be likely to have taken up a similar hypothetical licence, plus an additional 17% for Commonwealth usage (i.e. usage other than by Councils). The applicants' written submissions seem to contemplate that a discount could be applied to this figure, although they do not elucidate how such a discount could be calculated or when it would be appropriate to be applied.
54 The applicants submit that a usage based approach is consistent with:
The approach adopted by in Seven Dimensions;
The way in which the hypothetical negotiation between a willing licensor and a willing licensee would have been conducted, in circumstances where the Song had previously been licensed on a council by council basis;
The rate reached independently by Mr Marchesani, being $250,000 per year, based on the rate applicable to the synchronisation of in-house corporate DVDs, and described by him as a realistic estimate of the fee that could reasonably have been achieved for the usage by the Commonwealth in this case;
The rate reached based on the average fee paid per ceremony, which they contend would be a rate of $250,825 per year. This seems to be on the basis of the $1500 fee paid by Brisbane City Council, divided by the number of ceremonies conducted (19) and multiplied by the total number of ceremonies conducted across Australia (12,700);
The value of previous synchronisation licences entered into in relation to the Song, which nevertheless would reflect a licence fee as advanced above which is significantly below the "going rate" for the use of the Song in television advertising, being $325,000.
55 The applicants also submit that such an approach takes into account the true value of the Brisbane licence and the likelihood that other Councils would have agreed to licence the Song at the same rate. They rely on the licence negotiated with Logan City Council in support.
56 The applicants further submit that the rate may need to be adjusted in light of the Commonwealth's assertion in opening that the demographics of Brisbane City Council are representative of the demographics of Councils as a whole, together with the evidence that the number of ceremonies conducted by the Brisbane City Council (19 ceremonies) was precisely the same as the average number of ceremonies conducted across Australia during the relevant period (10,500 ceremonies by 565 Councils).
Commonwealth's submissions
57 It is an agreed fact that the population of Australia at the time of the 2011 Census was 21,507,717 and that the population of the Brisbane City Council local government area at that time was 1,041,839. That is, the Brisbane population was approximately 5% of the Australian population. The Commonwealth contends for a calculation based on population size, calculated by taking the $1500 for the Brisbane licence and multiplying it by 20, resulting in $30,000. The Commonwealth submits that the correct multiplier is 20 and not 21, as Brisbane should not be counted twice because it was already licensed.
58 The Commonwealth accepts the applicants' submission that the non-Council, or Departmental use, should be assessed as a further 17%, to reflect the fact that of the 12,700 citizenship ceremonies held, 2,200 of these were conducted by the Department. $30,000 plus 17% of $30,000 yields $35,100 per annum. The Commonwealth also allows for a further 2% to account for use by overseas posts, schools and others. On this basis the total licence fee would be $35,802 per annum.
59 As to the period of the hypothetical licence, the Commonwealth points to s 183(5) of the Act which only gives the Tribunal jurisdiction to assess remuneration in respect of acts done by the Commonwealth. The Commonwealth submits that the relevant period for such acts is 3 years and 8 months (or 3.67 years), presumably based upon the period from January 2009 (when the Department distributed the Montage) to August 2012 (when the Department attempted to recall the Montage). The applicants faintly suggested a four year period but did not really pursue this alternative.
60 $35,802 multiplied by 3.67 years would yield a total licence fee of $131,274.
CONSIDERATION
61 On the basis of what has been conceded to be "imperfect evidence", I must, as Sheppard P said, do the best that I can.
62 As stated in Marine Engineering (at 426), in fixing the amount of compensation, the 'licence fee must be equivalent to the amount which the applicant would have required the respondent to pay to it for permission to use the [work] in the manner in which the respondent did use it'. Accordingly, the fact that it would have been possible for the Commonwealth to achieve the same aim of a Montage without using the applicants' copyright material, or by using it in a way which did not infringe, is irrelevant to the value of the compensation to be paid (Seven Dimensions at 20).
63 As Mr Woodley submits, the licence fee must be objectively determined, on the hypothetical basis that the parties would have agreed to enter into a licence agreement. The starting point is the ordinary or market rate for using the Song in the manner in which it was actually used (Marine Engineering at 426). However, the amount which the Commonwealth had available, or would have spent, for any such licence is also relevant.
64 It should be emphasised that the application only concerns the reproduction of the Song on the soundtrack to the Montage. It does not concern the subsequent public performance of the Song through the playing of the Montage at citizenship ceremonies. Although a licence was also required for this performance of the Song, the fee for that licence was payable, and paid, to APRA and not to the applicants.
65 The synchronisation right is an independent and valuable right and is not governed by a scheme that fixes royalties payable for the exercise of the right. Thus, it is determined by negotiation and may be affected by the nature of the song and the extent and nature of the proposed use. It follows that actual use at a time subsequent to the assumed time of negotiation cannot be taken into account, unless it can be shown to have been in the mind of the parties at the time.
66 On the basis of the evidence, which includes the amount that Mr Woodley says that he would have demanded and the amount that the Department had available and would have been prepared to pay, it is evident that it is most unlikely that any agreement for the licensing of the Song would have been reached.
67 Mr Woodley gave evidence as to past synchronisation licences that he had granted for the Song. While these other synchronisation licences provide some insight into the licence fees that Mr Woodley has secured in the past, it has been agreed between the parties, and I accept, that the only comparable licence fee is the Brisbane licence. It is this licence that forms the best evaluative basis for the appropriate annual licence fee. The Brisbane licence should be considered as comprising one half for performance rights and one half for synchronisation rights. Accordingly, the synchronisation right was valued at $1500.
Conclusion on licence fee
68 I accept that, as identified by the parties, there are deficiencies in extrapolating from the Brisbane licence, either based on numbers of Councils, actual or known usage or based on a population multiplier. However, I find the Commonwealth's submissions more persuasive, that the extrapolation be based on a population factor, for the following reasons:
β’ The Brisbane licence provides a significant sample size of approximately 5% of Australia's population.
β’ Brisbane City Council can be said to represent a broad range of Australia's population with a diverse demographic. It is a large Council that administers a large part of a major urban area in Australia.
β’ A population basis factors in the likelihood the Commonwealth would have sought to negotiate a national licence with Mr Woodley.
β’ This basis cures some of the deficiencies in extrapolating the licence fee based on known or actual usage, where evidence of such usage is deficient.
β’ It has not been established, nor propounded, that every Council in Australia would have sought to negotiate an individual licence for the synchronisation rights in the Song.
69 The applicants' calculations made no provision for the likelihood that different licence fees would have been negotiated with Councils in different parts of the country, in different cities and more remote areas or, indeed, that some of the Councils would not have been interested in taking a synchronisation licence. An approach based on an acceptance that each Council in Australia would have licensed the synchronisation right to the Song for the same fee as the Brisbane licence does not take into account the fact that some Councils, such as large urban Councils, may have had more use for the Montage than did other Councils. Accepting the evidence of the Commonwealth, that 251 Councils did not use, or had no record of ever receiving, the Montage and that a further 236 Councils either did not provide advice as to whether the Montage was used or were unable to say whether it was used at a citizenship ceremony, it is not appropriate, in my view, to use as a multiplication factor the number of Councils in Australia.
70 I recognise that individual Councils may have approached Mr Woodley for an exclusive licence, as did Logan City Council as one example, but also that, while some Councils may have conducted many citizenship ceremonies, others may not have conducted any. This makes a calculation based on actual usage, established in evidence or asserted, inappropriate.
71 The applicants criticise a population based approach on a number of bases, including that such an approach did not accord with:
actual uses of the Montage; and
previous licence fees negotiated by Mr Woodley.
72 As to previous licence fees negotiated by Mr Woodley, these relate to either different rights to a purely synchronisation right, or different usages, which means that they are of little utility in the present enquiry.
73 The applicants' criticism focuses on the assumptions inherent in the Commonwealth's approach. In particular, they say that there is no evidence adduced by the Commonwealth to support the assumption that a larger population of a local government area will equate to greater use of the Montage in that area. They point to the analysis that they advanced as shown in the table in [38] above, which suggests that Councils with larger populations did not use the Montage as extensively as Councils with smaller populations. The table also demonstrates, they say, that an assumption that no Council used the Montage more than Brisbane is contradicted by evidence which shows that Brisbane held a number of ceremonies that was the same as the national average during the relevant period.
74 The evidence is not complete as to the number of ceremonies carried out in different Councils across Australia. There is no sufficient evidence to determine an approach based on actual usage of the Montage or the anticipated use of the Montage as at the time that an agreement for the licence of the synchronisation right. I do not accept that the evidence of usage in Brisbane can be treated as a national average for other Councils. Nor can it provide a basis for an assumption that that underpins the applicants' approach, that every Council would have licensed the Song. The evidence is to the contrary.
75 To the extent that the applicants rely on previous licences for performance rights, those licences are not helpful. The evidence is that performance rights are valued equally to, not greater than, synchronisation rights, as the applicants submit, and they are different rights. Further, the applicants rely on licences for those rights to support a per Council or per ceremony basis, which is not an appropriate basis for the reasons already discussed and for which there is insufficient evidence. The same applies to an approach based on corporate DVDs.
Period of licence
76 The applicants propose that the hypothetical licence that would have been negotiated between the parties would have been for a period of four years. The evidence of the Commonwealth is that, once it became known that the Department did not have permission to use the Song, efforts were made to stop its use. The Commonwealth submits that there is no evidence to suggest that the Councils would disobey a direction from the Department after this message was communicated to each Council. On the basis of the evidence in the context of the present task, it is appropriate to calculate the licence based on the period during which the Commonwealth had the opportunity to use the Song, which is 3 years and 8 months.
The final figure
77 The applicants submit that a licence fee based on population size will be "grossly inadequate" and therefore inconsistent with Seven Dimensions. However, the corollary of this argument is that the fee cannot also be "grossly excessive". The principles in Seven Dimensions require that, in making that assessment, one has to assume that the parties would have done business. The evidence of Ms Foster establishes that she would never had recommended or approved the Commonwealth paying a synchronisation fee of $250,000 for the Song. This evidence is supported by the fact that the salary budget during the relevant period for the entire section was only $538,000, approximately double the various annual licence fees proposed by the applicants.
78 I accept the final calculations proposed by the Commonwealth in its closing submissions. I will also provide for an additional premium to allow for the fact the Commonwealth would have sought to negotiate for a national licence for use by all Councils, for which I propose to add an additional $5,000 per year.
79 Accordingly, the fee that should be paid by the Commonwealth for the synchronisation rights to the Song over the 3 years and 8 months in issue (or 3.67 years) is based on:
The value of the synchronisation right of $1500
To be multiplied by 20 = $30,000
To which is added 17% for Departmental use = $35,100
To which is added 2% for other uses = $35,802
To which is added a premium of $5,000 = $40,802
Which is multiplied by 3.67 years = $149,743.34
80 The final figure for the synchronisation right of $149,743.34 is exclusive of GST.
ASSIGNMENT OF SYNCHRONISATION RIGHT
81 In September 2002, Mr Woodley was assigned all of the synchronisation rights previously owned by Mr Newton in relation to the Song. The agreed facts state that in February 2013, Mr Woodley assigned all of his rights, title and interest in the Song to Pocketful of Tunes, with effect from 1 January 2001. This gives rise to an issue as to which of Mr Woodley and Pocketful of Tunes is the correct applicant in these proceedings and the correct party to be paid the moneys owed by the Commonwealth. Mr Woodley explained that he has proceeded on the assumption that he had assigned the rights to Pocketful of Tunes in 2001 and contends that this assignment was "regularised" in February 2013 through an executed deed of assignment (Deed).
82 After the assignment of copyright, including the synchronisation right, from Mr Newton in September 2002, Mr Woodley owned the copyright in the Song. By the Deed, Mr Woodley assigned all of his rights, title and interest in the Song, and all associated rights, to Pocketful of Tunes. This included the right to bring legal proceedings for any third party infringement. Clause 2.13 of the Deed provided:
Without limiting Clause 1, [Mr Woodley] acknowledges that [Pocketful of Tunes Pty Ltd] has the sole and exclusive right in perpetuity to exercise the following exclusive rights in any medium, material, means or technology whether presently existing or yet to be inventedβ¦to bring legal proceedings for any third party infringement of the [Song] on and from 1 January 2002, including the right to the benefit of any damages or account of profits in respect of such infringementβ¦
83 This proceeding was commenced on 6 September 2013. While related proceedings were apparently commenced in the Federal Court on 18 February 2013, this is also after the execution of the Deed.
84 A demand was first sent to the Commonwealth in 2012, prior to the execution of the Deed. The Commonwealth contends that it is then relevant to ascertain when the cause of action accrued in order to determine which of the applicants was entitled to the cause of action.
85 The right of action for a tort is incapable of assignment, at law or in equity (reaffirmed in Poulton v The Commonwealth (1953) 89 CLR 540 at 602 (Poulton)).
86 However, in Insight SRC IP Holdings v The Australian Council for Educational Research (2012) 96 IPR 495 (Insight), Besanko J considered the assignment of existing rights of action and the relevance of various deeds of assignment of ownership of copyright. His Honour pointed out at [104] that an assignment of copyright must be in writing (s 196(3) of the Act), as must an exclusive licence (ss 10 and 119) and that an assignment of copyright does not, without more, carry with it accrued rights of action for infringement. Prior to the written assignments or licences conferring rights, rights of action for infringement of copyright can only be held if they were assigned by the holder of the rights at the time they accrued.
87 His Honour considered whether the agreement in question in that proceeding purported to assign not only the copyright but also rights of action held by the assignor for infringement of copyright prior to the date of the agreement. The deed of assignment provided that it 'more completely gives effect to those earlier agreements and more perfectly assigns the intellectual property than was achieved by those earlier agreements'. It would seem that the earlier agreements were, or included, oral agreements.
88 Justice Besanko acknowledged the principle in Poulton and then referred to and discussed Equuscorp Pty Ltd v Haxton; Equuscorp Pty Ltd v Bassat; Equuscorp Pty Ltd v Cunningham's Warehouse Sales Pty Ltd [2012] HCA 7 (Equuscorp). In that case, French CJ, Crennan and Kiefel JJ said (at [50] β [51]) that a right of action was assignable if it was an incident of, or subsidiary to, a right of property or if the assignee had a genuine commercial interest in the enforcement of the claim of another. Their Honours gave as an example of the latter where a claim for money had and received was assigned together with contractual rights. Gummow and Bell JJ, together with Heydon J, agreed that there was an exception to the rule against the assignability of a bare or mere right of action and that a genuine commercial interest was a sufficient interest (Trendtex Trading Corporation v Credit Suisse [1982] AC 679). Justice Besanko concluded that: 'it must now be taken to be established in Australia that the circumstances in which a bare or mere right of action may be assigned include a case where the assignee has a pre-existing genuine commercial interest in enforcing the claims of the assignor' (at [119]), and that ownership of copyright is a sufficient genuine commercial interest for the purpose of sustaining an assignment of a bare or mere right of action for infringement of copyright (at [120]). Insight was the subject of an appeal to the Full Court (Insight SRC IP Holdings Pty Ltd v Australian Council for Educational Research Ltd [2013] FCAFC 62) but this conclusion was not disturbed.
89 The Commonwealth submits that the principle in Poulton applies and that the assignment of the right of action for infringement, an action in tort, was not effective but this does not refer to the further consideration in Equuscorp and Insight.
90 The Commonwealth also submits that, by the time that the Deed was executed in February 2013, this was after the facts arose which gave rise to Mr Woodley's entitlement under s 183(5) of the Act and that, accordingly, he could not legally assign that right to Pocketful of Tunes, because it could not be assigned retrospectively. The Commonwealth submits that only Mr Woodley has standing to seek the remuneration sought in the application.
Conclusion on standing
91 I do not accept that the Commonwealth's submissions accord with the facts or principles of Equuscorp or Insight. When the Deed was executed and when this action was commenced, Pocketful of Tunes had a right of action that was an incident of its ownership of the copyright, including the synchronisation right, and a genuine commercial interest in enforcing the claims that previously were available to Mr Woodley and that had also been assigned. The Deed was effective to transfer to Pocketful of Tunes the synchronisation right and the right of action, future or accrued, for infringement of that right. Logically, that includes the right to claim compensation under s 183(5) of the Act.
Conclusion
92 The fee that should be paid by the Commonwealth to Pocketful of Tunes for the synchronisation rights to the Song is $149,743.34, exclusive of GST.
93 The applicants seek costs and stated that they wished to be heard as to the appropriate order. I will give the parties an opportunity to make written submissions as to costs.
94 Finally, Pocketful of Tunes has claimed confidentiality over some of the licencing fees for the Song. Accordingly, the reasons have been redacted to remove confidential figures.
I certify that the preceding ninety-four (94) numbered paragraphs are a true copy of the Reasons for Determination herein of the Honourable Justice Bennett.
Associate:
Dated: 3 March 2015
ANNEXURE A
COMMONWEALTH OF AUSTRALIA
Copyright Act 1968
IN THE COPYRIGHT TRIBUNAL
FILE NO.
RE APPLICATION BY: POCKETFUL OF TUNES PTY LTD (ACN 005 750 185)
First Applicant
and
BRUCE WILLIAM WOODLEY
Second Applicant
Statement of Agreed Facts
This document is not exhaustive of the facts relied upon by the parties. Where the parties rely
upon other factual material they will refer to it in their submissions
Where, in this Statement:
(a) there is reference to a document number, that is a reference to a document behind a divider with a corresponding number in the folder comprising annexure BWW-1 to the affidavit of Bruce William Woodley affirmed 4 February 2014 (the Woodley affidavit); and
(b} there is reference to a track number on Document 1, that is a reference to the audio-visual clip identified by that number on the DVD behind tab 1 of annexure BWW-1 to the Woodley affidavit.
A THE APPLICANTS
1 The First Applicant (Pocketful of Tunes} was incorporated on 9 December 1980.
2 The Second Applicant (Woodley) is and has at all material times been the managing director of Pocketful of Tunes.
3 Woodley has a background in the advertising industry and has been a professional musician for over 50 years.
2
4 From 1962 to 1968, Woodley was a member of the group The Seekers.
5 From 1969 to around 1992, Woodley worked as an independent producer and freelance music writer, writing songs for other musicians and radio and television jingles for commercial clients.
6 Since 1992, Woodley has continued to record and tour with The Seekers, and to pursue his own projects as a writer and performer.
B CREATION OF THE SONG
7 In 1987 Woodley asked Dobe Newton (Newton) to assist him with the composition of a song he was writing entitled "I Am Australian" (the Song).
8 Woodley composed all of the music of the Song.
9 Woodley composed the whole of the first verse and chorus of the Song.
10 Woodley and Newton each composed the lyrics of the remaining verses of the Song.
11 Document 3 is a copy of the lyrics of the Song with the lyrics written by Newton underlined.
12 The Song was first reduced to material form in a recording at Metropolis Audio in South Melbourne in August 1987.
13 At all material limes during the making of the Song, Woodley and Newton were Australian citizens or persons resident in Australia for the purposes of the Copyright Act 1968 (Cth).
14 In September 2002 Woodley was assigned all of Newton's synchronisation rights in relation to the Song.
15 In February 2013, Woodley assigned all of his right, title and interest in the Song to Pocketful of Tunes with effect from 1 January 2001.
C POPULARITY OF THE SONG
16 The Song was originally distributed as part of a promotional album produced by Woodley called "I Am Australian". Document 4 is a copy of this album.
17 Between 1987 and around 1994, the Song was broadcast across Australia on the ABC Radio program "Australia All Over".
18 Since the early 1990s, the Song has been taught in schools across Australia.
19 In 1991, Woodley performed the Song at a drought relief concert at the State Theatre in Melbourne.
20 In 1993, Woodley performed the Song with The Seekers as part of their 25th anniversary reunion tour.
21 In October 1994, Woodley performed the Song with The Seekers at the Australian Football League Grand Final at the Melbourne Cricket Ground.
3
22 In December 1994 and January 1995, the Song was used in a series of community service announcements broadcast on television across Australia. Document 5 is a DVD containing a copy of these announcements.
23 In 1996, the Song was used in television and radio advertising for the Salvation Army's Red Shield Appeal.
24 In 1997, a recording of the Song by Judith Durham, Mandawuy Yunipingu and Russell Hitchcock was released as a single and reached number 15 on the Australian charts. Document 6 is a copy of this recording.
25 In 1999, the Song was used in television advertising for the 'yes' campaign of the republic referendum. Track 3 of Document 1 is an example of this advertising.
26 In 2000, the Song was one of the songs played as the Australian team entered the Olympic Stadium at the Sydney Olympics.
27 In 2001, Woodley performed the Song at the ceremonial sitting of the Federal Parliament in Melbourne to mark the centenary of Federation.
28 In 2000, 2002 and 2003, the Song was used in television advertising by Telstra Corporation Limited (Telstra). Document 26 is a DVD containing copies of the advertisements broadcast by Telstra in 2000. Tracks 4 and 5 of Document 1 are copies of the advertisements broadcast by Telstra in 2002. Tracks 6 and 7 of Document 1 are copies of the advertisements broadcast by Telstra in 2008.
29 In 2003 a recording of the Song by Rai Thistlewayte was released as a single and sold at Telstra Shops to raise funds for drought relief.
30 In 2009, Woodley performed the Song at the national memorial service for victims of the Black Saturday bushfires. Track 2 of Document 1 is a video of this performance.
31 The Song has also been sung at Anzac Day and Australia Day commemorations, at events to mark the Queen's Diamond Jubilee and at other occasions of civic importance.
32 The Song has been translated into Auslan {Australian sign language) and Wongatha, an indigenous language from the Western Desert.
33 From time to time there have been calls in the media and online for the Song to replace "Advance Australia Fair" as the official Australian national anthem.
34 In 2000, research conducted by Quantum Market Research found that with no more prompting than the name of the Song, 73 percent of the general public in New South Wales and Victoria were aware of the Song.
35 The research also found that when a short segment of the Song was played, 97 percent of the general public in New South Wales and Victoria, and 100 percent of the 4-12 year old children surveyed, said that they recognised the Song. Document 14 is a copy of this research.
4
D LICENSING OF THE SONG
36 In the early 1990s, Woodley established a company Known as I Am Australian Licensing Pty Ltd to sub-licence the rights in the Song.
37 At all material times, Woodley was a director of, and the sole shareholder in, I Am Australian licensing Pty Ltd.
38 When the Song was composed in 1987 Pocketful of Tunes and Woodley were members of the Australasian Performing Right Association (APRA).
39 The Song has been registered with APRA since at least 8 January 1988.
40 It is a standard term of membership with APRA that members assign to APRA their rights in respect of the public performance and communication to the public of each registered song (music and lyrics). APRA then collects licence fees for the public performance and communication to the public of those songs, which it distributes to its members, in accordance with its Distribution Rules and Practices, depending on the number of times the song is performed or communicated.
41 Woodley has been a member of the Australian Mechanical Copyright Owners Society (AMCOS) since 12 December 1995.
42 AMCOS collects and distributes mechanical royalties for the reproduction of its members' musical works on record, compact disc or other format, depending on the mandate given by the member.
43 Since 1988 Pocketful of Tunes and Woodley have received royalty payments from APRA and AMCOS in respect of public performances and mechanical reproductions of the Song. These payments have included:
(a) XXXXXXX from APRA for the period January 2000 to December 2012 in respect of public performances in logged venues:
(b) XXXXX from APRA for the period 2005 to 2010 in respect of public performances in unlogged venues; and
(c) XXXXXXX from AMCOS for the period June 2008 to May 2010 in respect of mechanical reproductions.
44 Neither APRA nor AMCOS has ever been authorised to licence the reproduction of the Song on the soundtrack to a cinematograph film (the synchronisation right).
45 In 1996 AMP Shopping Centres Pty Ltd (AMP) licensed excerpts of the Song for use in television, radio and non-broadcast media advertising across Australia for a period of 5 years for a fee of XXXXXX per year. The licence comprised the exclusive right to use and reproduce the Song in the advertising and promotion of shopping centres. Document 21 is a copy of this licence.
46 The licence entered into by AMP was exclusive in the category of shopping centres but not otherwise.
5
47 In 1998 Holden limited (and related companies) (Holden) licensed excerpts of the Song for use in television, radio and non-broadcast media advertising across Australia for a period of 2 years, with an option to extend the licence for a further 3 years, for a fee of XXXXXX on signing of the agreement and XXXXXX for every six months thereafter. The licence comprised the right to reproduce the song in the soundtrack of and in relation to commercials, advertising or promoting Holden Automotive Products. Document 22 is a copy of this licence.
48 The licence entered into by Holden was exclusive in the automotive market but not otherwise.
49 In 1999 Queensland Rail licensed excerpts of the Song for use in television, radio and non-broadcast media advertising In Queensland only for a period of 4.5 years for a fee of XXXXXX. Document 23 is a copy of this licence.
50 The licence entered into by Queensland Rail was exclusive in the category of transport services in Queensland but not otherwise.
51 Pursuant to the licence, Queensland Rail used the Song in advertising in Queensland in 1999.
52 In 1999 the Department obtained a license to authorise the performance of the Song and cause sound records of the Song to be performed at citizenship ceremonies endorsed or conducted by the Department for a period of 12 months for a fee of XXXXX. Document 34 is a copy of the licence.
53 In 1999 the "yes" campaign for the republic referendum licensed excerpts of the Song for use in television, radio and non-broadcast media advertising across Australia for a period of 4 weeks for a fee of XXXXX. Document 24 is a copy of this licence. The "yes" and "no"Β·campaigns were funded but not managed by the Commonwealth.
54 The licence entered into by the "yes"Β·campaign was not exclusive.
55 Pursuant to the licence, the "yes" campaign used the Song in advertising across Australia between October and November 1999.
56 In 2000 Telstra licensed excerpts of the Song for use in any media across Australia for corporate branding or high-level product branding (other than the promotion of specific products or offers) for a period of 3 years, with an option to extend the licence for a further 2 years, for a fee of XXXXXX in the first year and XXXX X X per year thereafter. The licence was an exclusive licence including the right to reproduce, publish, perform, broadcast and cause the Song to be transmitted and adopted and the exclusive rights to enter into a commercial rental agreement in relation to any recording of the Song made by or on behalf of Telstra. Document 25 is a copy of this licence.
57 The licence entered into by Telstra in 2000 was exclusive in relation to commercial use during the term.
58 Pursuant to the licence, Telstra used the Song in advertising across Australia in 2000.
59 In 2002 Telstra licensed excerpts of the Song for use in any media across Australia for corporate branding, commercial branding, or any other commercial, charitable, business or
6
Income producing activity (other than the promotion of specific products or offers) (the permitted purposes) for a period of 7 years, for a fee of XXXXXX in the first year and XXXXXX per year thereafter. The licence was an exclusive licence to use the excerpts in any media for corporate branding, commercial branding or any other commercial, charitable business or income-producing activity. Permitted uses included reproducing all or part of the sound recording or excerpts or rearranged excerpts on promotional, advertising or marketing material and in any material form or format. Document 27 is a copy of this licence.
60 The licence entered into by Telstra in 2002 was exclusive in relation to use for the permitted purposes during the term.
61 Pursuant to the licence, Telstra used the Song in advertising across Australia in 2002, 2003 and 2008.
62 In 2007, Brisbane City Council (the Council) licensed Woodley's recording of the Song for use on the soundtrack of a DVD video production to be used at Council citizenship ceremonies in Brisbane for a period of 4 years, for a fee of $3,000 per year. Document 30 is a copy of this licence.
63 Pursuant to the licence, the Council created and used the DVD containing the Song throughout the period of the licence. Document 31 is a copy of this DVD.
64 In 2009, Telstra licensed excerpts of the Song for use in any media for the permitted purposes across Australia for further a period of 3 years, for a fee of XXXXX per year. Document 29 is a copy of this licence.
65 The licence entered into by Telstra in 2009 was exclusive in the category of telecommunications and internet products but not otherwise.
66 In 2012, the Council licensed Woodley's recording of the Song for a further period of 2 years, for a fee of $5,000 per year. The licence was to use the Bruce Woodley recording of the Song as the soundtrack for a DVD video production for use at council citizenship ceremonies and other occasions of civic importance. Document 32 is a copy of this licence.
67 Pursuant to the licence, the Council continued to use the DVD containing the Song throughout the period of the licence.
E USE OF THE SONG BY THE COMMONWEALTH
68 In December 2008, the Commonwealth Department of Immigration (the Department) engaged Radiowise Media Networks Pty ltd (Radiowise) to produce an Australian citizenship video montage in DVD format for use in Australian citizenship ceremonies (the Montage).
69 The contract between the Commonwealth and Radiowise required Radiowise to obtain all necessary music licences on behalf of the Commonwealth for the use of the Montage in citizenship ceremonies. The Commonwealth paid an amount of $2,954.20 plus GST to Radiowise for music licences through APRA/AMCOS.
7
70 In January 2009 Radiowise delivered 750 copies of the Montage on DVD to the Department.
71 In around May 2010, Radiowise delivered another 1000 copies of the Montage to the Department.
72 Each DVD delivered to the Department contained two versions of the Montage: a short version, which used approximately 60 seconds of the Song during the Montage; and a long version, which used approximately 60 seconds of the Song during the Montage and also used the full Song at the end of the Montage. The version of the Song was performed by an artist other than Woodley.
73 Document 37 is a copy of the Montage.
74 In January 2009, the Department distributed the Montage to around 565 local government councils across Australia for use in citizenship ceremonies conducted on behalf of the Department.
75 Document 38 a list of the councils to whom the Montage was distributed.
76 The Montage was also distributed to 11 regional offices of the Department across Australia for use in citizenship ceremonies and at special events.
77 Citizenship ceremonies are held regularly throughout the year, including in particular on days of national significance such as Australia Day, Harmony Day, Constitution Day and Australian Citizenship Day.
78 Between January 2009 and August 2012, there were approximately 12,700 citizenship ceremonies conducted Australia-wide by local government councils or regional offices of the Department.
79 The Montage was also used at citizenship ceremony information sessions run for local council staff and Australian citizenship courses conducted by the Department and by contracted course providers.
80 The Montage was made available for distribution on request to Australian overseas posts for use as part of Australia Day celebrations or Australian citizenship ceremonies. It is not known how many posts requested copies of the Montage.
81 The Montage was made .available for distribution on request to community organisations and other citizenship stakeholders. It is not known how many organisations or stakeholders requested copies of the Montage. The Montage was made available for distribution on request to primary and secondary schools as an educational resource package. It is not known how many schools requested copies of the Montage.
82 According to the records of the Department, 474 copies of the Montage were distributed by the Department between February 2011 and August 2012.
83 In August 2012, the Department wrote to local government councils and asked them to cease using the Montage until further notice.
8
84 In November 2012, the Department wrote to local government councils and recalled all copies of the Montage.
85 The population of the Brisbane City Council local government area at the time of the 2011 Census was 1,041,839.
86 The population of Australia at the time of the 2011 Census was 21,507,717.
DATED: 2 May 2014
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Rodney Jane Racing Pty Ltd v Monster Energy Company [2019] FCA 923
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FEDERAL COURT OF AUSTRALIA
Rodney Jane Racing Pty Ltd v Monster Energy Company [2019] FCA 923
Appeal from: Monster Energy Co v Rodney Jane Racing Pty Ltd [2018] ATMO 57
File number(s): VID 553 of 2018
Judge(s): O'BRYAN J
Date of judgment: 21 June 2019
Catchwords: TRADE MARKS β registration β opposition β appeal from decision of Registrar of Trade Marks refusing registration β whether appellant had valid claim to ownership of marks at priority date β whether appellant intended to use or authorise use of marks at priority date β whether marks likely to deceive or cause confusion β appeal allowed
EVIDENCE β admissibility of documents downloaded from websites, the Wayback Machine, Facebook and Instagram and data generated by Google Analytics β whether documents constitute business records under section 69 of the Evidence Act 1995 (Cth) β whether Court should exercise its discretion under section 135 of the Evidence Act 1995 (Cth) to exclude the evidence
Legislation: Trade Marks Act 1995 (Cth) ss 7(3), 8, 42(b), 58, 59, 60
Cases cited: ACCC v Air New Zealand Limited (No 1) (2012) 207 FCR 448
ACCC v Air New Zealand Limited (No 5) (2012) 301 ALR 352
ACCC v Coles Supermarkets Australia Pty Ltd (2014) 317 ALR 73
Asden Developments Pty Ltd (in liq) v Dinoris (No 2) (2015) 235 FCR 382
ASIC v Hellicar (2012) 247 CLR 345
Aston v Harlee Manufacturing Co (1960) 103 CLR 391
Australian Meat Group Pty Ltd v JBS Australia Pty Ltd (2018) 363 ALR 113
Australian Postal Corporation v Digital Post Australia Pty Ltd (2013) 308 ALR 1
Berlei Hestia Industries Ltd v Bali Co Inc (1973) 129 CLR 353
Brooks v Fairfax Media Publications Pty Ltd [2015] NSWSC 986
CA Henschke & Co v Rosemount Estates Pty Ltd (2000) 52 IPR 42
Caesarstone Ltd v Ceramiche Caesar SpA (No 2) (2018) 133 IPR 417
Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45
Charan v Nationwide News Pty Ltd [2018] VSC 3
Chong v CC Containers Pty Ltd (2015) 49 VR 402
Coca-Cola Co v All-Fect Distributors Ltd (1999) 96 FCR 107
Colorado Group Limited v Strandbags Group Pty Limited (2007) 164 FCR 506
Crazy Ron's Communications Pty Ltd v Mobileworld Communications Pty Ltd (2004) 209 ALR 1
de Cordova v Vick Chemical Co (1951) 68 RPC 103
Delfi Chocolate Manufacturing SA v Mars Australia Pty Ltd (2015) 115 IPR 82
Dowling v Commonwealth Bank of Australia [2008] FCA 59
Dunlop Aircraft Tyres Ltd v Goodyear Tire & Rubber Company (2018) 134 IPR 220
E & J Gallo Winery v Lion Nathan Australia Pty Ltd (2008) 77 IPR 69
E & J Gallo Winery v Lion Nathan Australia Pty Ltd (2010) 241 CLR 144
Flexopack S.A. Plastics Industry v Flexopack Australia Pty Ltd (2016) 118 IPR 239
Food Channel Network Pty Ltd v Television Food Network GP (2010) 185 FCR 9
Gain Capital UK Ltd v Citigroup Inc (No 4) (2017) 123 IPR 234
Google Inc v ACCC (2013) 249 CLR 435
Hansen Beverage Company v Bickfords (Australia) Pty Ltd (2008) 75 IPR 505
Hansen Beverage Company v Bickfords (Australia) Pty Ltd (2008) 171 FCR 579
Hills Industries Ltd v Bitek Pty Ltd (2011) 214 FCR 396
Hugo Boss AG v Jackson International Trading Co Kurt D Bruhl GmbH & Co KG (1999) 47 IPR 423
Jafferjee v Scarlett (1937) 57 CLR 115
Jones v Dunkel (1959) 101 CLR 298
Lodestar Anstalt v Campari America LLC (2016) 244 FCR 557
Manly Council v Byrne [2004] NSWCA 123
Mars Australia Pty Ltd v Sweet Rewards Pty Ltd (2009) 81 IPR 354
McCormick & Co Inc v McCormick (2000) 51 IPR 102
McMahon v John Fairfax Publications Pty Ltd (No 4) [2012] NSWSC 216
Metro Business Centre Pty Ltd v Centrefold Entertainment Pty Ltd (2017) 127 IPR 1
Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) (1984) 156 CLR 414
National Telecoms Group Ltd v John Fairfax Publications Pty Ltd (No 1) [2011] NSWSC 455
Optical 88 Ltd v Optical 88 Pty Ltd (No 2) (2010) 275 ALR 526
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
Pedavoli v Fairfax Media Publications Pty Ltd (2014) 324 ALR 166
Pfizer Products Inc v Karam (2006) 219 FCR 585
Pham Global Pty Ltd v Insight Clinical Imaging Pty Ltd (2017) 251 FCR 379
Pioneer Kabushiki Kaisha v Registrar of Trade Marks (1977) 137 CLR 670
Polo Textile Industries Pty Ltd v Domestic Textile Corporation Pty Ltd (1993) 42 FCR 227
Qantas Airways Ltd v Edwards (2016) 338 ALR 134
Re Rysta Ltd's Application (1943) 60 RPC 87
Registrar of Trade Marks v Woolworths Limited (1999) 93 FCR 365
Roach v Page (No 15) [2003] NSWSC 939
Roach v Page (No 27) [2003] NSWSC 1046
RPS v R (2000) 199 CLR 620
Saville Perfumery Ltd v June Perfect Ltd (1941) 58 RPC 147
Seven Network Ltd v News Limited [2007] FCA 1062
Shape Shopfitters Pty Ltd v Shape Australia Pty Ltd (No 2) [2017] FCA 474
Shell Company of Australia Ltd v Esso Standard Oil (Aust) Ltd (1963) 109 CLR 407
Shell Company of Australia Ltd v Rohm and Haas Company (1949) 78 CLR 601
Singtel Optus Pty Ltd v Optum (2018) 140 IPR 1
Southern Cross Airports v Chief Commissioner of State Revenue [2011] NSWSC 349
Southern Cross Refrigerating Co v Toowoomba Foundry Pty Ltd (1954) 91 CLR 592
Sports Warehouse Inc v Fry Consulting Pty Ltd (2010) 186 FCR 519
Stone & Wood Group Pty Ltd v Intellectual Property Development Corporation Pty Ltd (2018) 357 ALR 15
Telstra Corp Ltd v Phone Directories Co Pty Ltd (2014) 316 ALR 590
Telstra Corporation Limited v Phone Directories Co Australia Ltd (2015) 237 FCR 388
Tivo Inc v Vivo International Corporation Pty Ltd [2012] FCA 252
Trident Seafoods Corp v Trident Foods Pty Ltd (2018) 137 IPR 65
Vendor Advocacy Australia Pty Ltd v Seitanidis (2013) 103 IPR 1
Vitali v Stachnik [2001] NSWSC 303
Vivo International Corporation Pty Ltd v Tivo Inc (2012) 294 ALR 661
Voxson Pty Ltd v Telstra Corporation Limited (No. 10) (2018) 134 IPR 99
Yarra Valley Dairy Pty Ltd v Lemnos Foods Pty Ltd (2010) 191 FCR 297
Date of hearing: 5, 6, 7 March 2019 and 15, 16 April 2019
Registry: Victoria
Division: General Division
National Practice Area: Intellectual Property
Sub-area: Trade Marks
Category: Catchwords
Number of paragraphs: 206
Counsel for the Appellant: Mr E Heerey QC with Mr P Creighton-Selvay
Solicitor for the Appellant: Kahns Lawyers
Counsel for the Respondent: Mr B Caine SC with Ms S Ryan
Solicitor for the Respondent: Davies Collison Cave Law
ORDERS
VID 553 of 2018
BETWEEN: RODNEY JANE RACING PTY LTD (ATF THE RODNEY JANE RACING TRUST) (ACN 101 266 460)
Appellant
AND: MONSTER ENERGY COMPANY
Respondent
JUDGE: O'BRYAN J
DATE OF ORDER: 21 June 2019
THE COURT ORDERS THAT:
1. The appeal be allowed.
2. The decision of the delegate of the Registrar of Trade Marks given on 26 April 2018 be set aside.
3. Australian trade mark applications numbered 1670840, 1670841 and 1670842 be registered.
4. Until further order and on the ground that it is necessary to prevent prejudice to the proper administration of justice under section 37 AF of the Federal Court of Australia Act 1976 (Cth), publication of the following confidential exhibits be prohibited, other than to external solicitors and counsel retained for the purposes of this proceeding:
(a) Confidential Exhibit SAP-2 to the affidavit of Sam Anthony Pontrelli sworn 4 October 2018;
(b) Confidential Exhibit SPT-2 to the affidavit of Samuel Peter Thiele affirmed 4 October 2018; and
(c) Confidential Exhibit TJK-1 to the affidavit of Thomas J Kelly sworn 4 October 2018.
(d) Confidential Exhibit RBJ-20 to the affidavit of Rodney Bruce Jane sworn 22 November 2018.
(e) Confidential Exhibit RBJ-22 to the affidavit of Rodney Bruce Jane sworn 12 February 2019.
(f) Confidential Exhibit RBJ-23 to the affidavit of Rodney Bruce Jane sworn 12 February 2019.
(g) Confidential Exhibit RBJ-25 to the affidavit of Rodney Bruce Jane sworn 12 February 2019.
(h) Confidential Exhibit RBJ-26 to the affidavit of Rodney Bruce Jane sworn 12 February 2019.
(i) Confidential Exhibit RBJ-30 to the affidavit of Rodney Bruce Jane sworn 12 February 2019.
(j) Exhibit A2 being the email from Dean Hockley dated 2 May 2013.
(k) Exhibit A3 being the email from Phil Weir dated 15 April 2013.
(l) Exhibit A4 being the email from Dean Hockley dated 10 April 2013.
5. The respondent pay the appellant's costs of this proceeding and the proceeding before the Registrar of Trade Marks.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
RULINGS
O'BRYAN J:
1. INTRODUCTION
1 On 27 January 2015, the appellant, Rodney Jane Racing Pty Ltd (RJR), applied for registration under Part 4 of the Trade Marks Act 1995 (Cth) (the Act) of three trade marks (which I will refer to as the RJR marks) in class 12 in relation to "alloy wheels for automobiles excluding motorbikes". The RJR marks are as shown in the following table. As can be seen, each of the RJR marks includes the word "Monster":
No 1670840 No 1670841 No 1670842
2 Registration of the RJR marks was opposed by the respondent, Monster Energy Company (MEC). MEC is a supplier of energy drinks. Since 2002, MEC has promoted and sold its energy drinks and associated products throughout the world under several trade marks, represented below, including in Australia since 2009. On 24 April 2018, a delegate of the Registrar refused registration of the RJR marks pursuant to s 60 of the Act: Monster Energy Co v Rodney Jane Racing Pty Ltd [2018] ATMO 57. The delegate concluded that MEC had made out the ground of opposition in s 60 of the Act in respect of several of its trade marks.
3 By notice of appeal filed 14 May 2018, RJR appeals against the decision of the delegate under s 56 of the Act, joining MEC as respondent to the appeal. The appeal involves a hearing de novo: Registrar of Trade Marks v Woolworths Limited (1999) 93 FCR 365 at [32] (Woolworths). The onus is borne by the opponent to registration: Woolworths at [45]. The standard of proof is the balance of probabilities: Telstra Corporation Limited v Phone Directories Co Australia Ltd (2015) 237 FCR 388 at [133]. It is common ground between the parties that the date on which the grounds of opposition must be established is the filing date of the application for registration (27 January 2015), which I will refer to as the priority date: Southern Cross Refrigerating Co v Toowoomba Foundry Pty Ltd (1954) 91 CLR 592 (Southern Cross); Pham Global Pty Ltd v Insight Clinical Imaging Pty Ltd (2017) 251 FCR 379 (Pham Global).
4 MEC maintains its opposition to registration of the RJR marks. It relies on the ground of opposition found by the delegate of the Registrar, s 60, as well as the further grounds stated in its amended notice of contention dated 31 January 2019 being ss 42(b), 58 and 59 of the Act. MEC did not press ground 2 of its amended notice of contention.
5 In respect of its opposition under ss 42(b) and 60 of the Act, MEC relies on its reputation in each of the following trade marks owned by it (MEC marks):
(a) the word marks "Monster" and "Monster Energy"; and
(b) device marks which incorporate a device that is referred to as the "M-icon" (and which resembles a claw mark or scraping that might be made by a figurative monster) either on its own or in conjunction with a stylised depiction of the words "Monster Energy" (using script for the word "Monster" that is suggestive of Gothic script) as shown below:
6 In respect of s 60 of the Act, MEC contends that, before the priority date for the registration of the RJR marks, the MEC marks had acquired a reputation in Australia and, because of that reputation, the use of the RJR marks on alloy wheels for motor vehicles would be likely to deceive or cause confusion. Relying on s 57 of the Act, MEC also opposes registration of the RJR marks on the basis stated in s 42(b) of the Act: that the use of the RJR marks would be contrary to law. In that respect, MEC contends that the use of the RJR marks on alloy wheels for motor vehicles would be likely to mislead or deceive consumers in contravention of ss 18 and/or 29 of the Australian Consumer Law by reason of:
(a) the reputation of MEC in Australia as at the priority date in the MEC marks; and
(b) the similarity between the RJR marks and the MEC marks.
7 In closing submissions, Senior Counsel for MEC acknowledged that if the Court found against it under s 60, it would follow that the Court would find against it under s 42(b) of the Act. As the evidence relied upon in respect of ss 60 and 42(b) is the same, it is convenient to address both sections together.
8 In respect of s 58, MEC contends that RJR did not have a valid claim to ownership of the RJR marks as at the priority date. In respect of s 59, MEC contends that RJR did not have the requisite intention to use the RJR marks as at the priority date. Under both sections, MEC argues that another company closely associated with RJR (through common shareholdings and directors), Bob Jane Corporation Pty Ltd (Bob Jane Corporation), was the owner of the RJR marks and had the requisite intention to use the marks as at the priority date. The evidence relied upon in respect of ss 58 and 59 is the same, and it is also convenient to address both of those sections together.
9 For the reasons that follow, the grounds of opposition are not made out. It is convenient to address the ownership and intended use issues (ss 58 and 59) before addressing the likely to deceive or cause confusion issues (ss 60 and 42(b)).
2. OWNERSHIP AND INTENDED USE
2.1 Overview
10 On these issues, the dispute between the parties is whether RJR or Bob Jane Corporation is to be regarded as the owner of the RJR marks as at the priority date for the purposes of s 58 of the Act, and a corresponding issue as to which of those companies had the intention to use the RJR marks as at that date for the purposes of s 59 of the Act. The dispute arises out of the circumstances in which the RJR marks were created and first used and the corporate and commercial relationship between RJR and Bob Jane Corporation, including particularly the dual positions held by Rodney Jane as the sole director of RJR and as a director and CEO of Bob Jane Corporation.
11 RJR contends that, as at the priority date, it was the owner of the RJR marks because it (through Mr Jane) authored the marks and controlled the first use of the marks as trade marks in respect of alloy wheels by Bob Jane Corporation. RJR argues that all relevant conduct undertaken by Mr Jane was undertaken by him in his capacity as the sole director of RJR and not in his capacity as a director and CEO of Bob Jane Corporation. RJR says that it was always its intention to license Bob Jane Corporation to use the RJR marks under the control of RJR.
12 MEC contends that, as at the priority date, Bob Jane Corporation was the owner of the RJR marks because it authored the marks and had been using the marks since about May 2013. MEC says that, despite Mr Jane's testimony to the contrary, the documentary record shows that all relevant steps taken in the creation and use of the RJR marks before the priority date were taken by or on behalf of Bob Jane Corporation.
13 To resolve the dispute, it is necessary to have close regard to the evidence concerning the creation and first use of the RJR marks. Before turning to that evidence, it is helpful to refer to the applicable legal principles (about which there was no dispute between the parties).
2.2 Legal principles
14 Section 58 of the Act provides that registration of a trade mark may be opposed on the ground that the applicant is not the owner of the trade mark. The word "owner" is not defined in the Act. Its meaning has been established by a number of decisions, reflecting both the common law origins of trade mark rights and the statutory provisions. Most relevant for present purposes are the decisions of the Full Court of the Federal Court in Food Channel Network Pty Ltd v Television Food Network GP (2010) 185 FCR 9 (Food Channel) and Pham Global. Those decisions establish the following principles:
(a) While at common law, rights in a trade mark are established by use, the Act allows an applicant to obtain title to a trade mark prior to use so long as the requirements in s 27 of the Act are met. Those requirements are that the applicant claims to be the owner of the trade mark and the applicant is either using or intends to use (or authorises or intends to authorise another to use) the mark in relation to the goods or services concerned: Food Channel at [49]; Pham Global at [18].
(b) In respect of a mark that has not been used prior to the application for registration, the basis of a claim to ownership has been found in the combined effect of authorship of the mark, the intention to use it upon or in connection with the goods and the application for registration: Food Channel at [52] citing Shell Company of Australia Ltd v Rohm and Haas Company (1949) 78 CLR 601 at 627 per Dixon J; Pham Global at [18] and [19].
(c) In respect of a mark that has been used prior to the application for registration, ownership is established by authorship of the mark and prior use: Food Channel at [55]; Pham Global at [19].
(d) An intention to use the trade mark may be inferred from the making of an application to register the mark: Food Channel at [67], [70] and [72].
(e) The question of ownership is to be determined as at the date of application for registration: Pham Global at [14], [31].
(f) The ground of opposition in s 58 is not confined to a party itself claiming ownership of the trade mark. The ground can be established by any third party showing that the applicant is not the owner: Food Channel at [58]. However, the court should be cautious to allow the legal fiction of the corporate veil to defeat registration in a case where one of a group of companies, all controlled by the same directing mind and will, used the mark prior to the other: Food Channel at [61].
(g) The burden of proof to establish the ground of opposition under s 58 is on the opponent. If the evidence is not sufficiently clear to enable a finding of fact to be made about ownership of the mark at the time of registration, the opponent will fail on that ground of opposition: Food Channel at [48].
15 Authorship of a trade mark involves the origination or first adoption of the word or design as and for a trade mark: Shell Company of Australia Ltd v Rohm and Haas Company (1949) 78 CLR 601 at 628 per Dixon J; applied in Aston v Harlee Manufacturing Co (1960) 103 CLR 391 at 399 per Fullagar J.
16 In E & J Gallo Winery v Lion Nathan Australia Pty Ltd (2010) 241 CLR 144, French CJ, Gummow, Crennan and Bell JJ approved (at [43]) the statement by the Full Court of the Federal Court in Coca-Cola Co v All-Fect Distributors Ltd (1999) 96 FCR 107 at [19] (Coca-Cola) that:
"Use 'as a trade mark' is use of the mark as a 'badge of origin' in the sense that it indicates a connection in the course of trade between goods and the person who applies the mark to the goods β¦ That is the concept embodied in the definition of "trade mark" in s 17 β a sign used to distinguish goods dealt with in the course of trade by a person from goods so dealt with by someone else."
17 As observed by their Honours (at [42]), the essential characteristics of a trade mark are distinguishing goods of a registered owner from the goods of others and indicating a connection in the course of trade between the goods and the registered owner. A use of a mark in an advertisement of goods is a use in the course of trade and is a use in relation to the goods advertised: Shell Company of Australia Ltd v Esso Standard Oil (Aust) Ltd (1963) 109 CLR 407 at 422 per Dixon J; Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) (1984) 156 CLR 414 at 433-434 per Deane J (Gibbs CJ and Mason, Wilson and Dawson JJ agreeing).
18 Ownership based on first use of a trade mark can be established through use by an authorised user. Section 7(3) of the Act provides that: "An authorised use of a trade mark by a person (see section 8) is taken, for the purposes of this Act, to be a use of the trade mark by the owner of the trade mark".
19 The expressions "authorised user" and "authorised use" are defined in s 8 of the Act in the following terms:
(1) A person is an authorised user of a trade mark if the person uses the trade mark in relation to goods or services under the control of the owner of the trade mark.
(2) The use of a trade mark by an authorised user of the trade mark is an authorised use of the trade mark to the extent only that the user uses the trade mark under the control of the owner of the trade mark.
(3) If the owner of a trade mark exercises quality control over goods or services:
(a) dealt with or provided in the course of trade by another person; and
(b) in relation to which the trade mark is used;
the other person is taken, for the purposes of sub-section (1), to use the trade mark in relation to the goods or services under the control of the owner.
(4) If:
(a) a person deals with or provides, in the course of trade, goods or services in relation to which a trade mark is used; and
(b) the owner of the trade mark exercises financial control over the other person's relevant trading activity; and
the other person is taken, for the purposes of sub-section (1), to use the trade mark in relation to the goods or services under the control of the owner.
(5) Sub-sections (3) and (4) do not limit the meaning of the expression under the control of in sub-sections (1) and (2).
20 Sections 8(2) and (3) are deeming provisions that identify a number of situations in which a person will be taken to use a registered mark under the control of the owner: Dunlop Aircraft Tyres Ltd v Goodyear Tire & Rubber Company (2018) 134 IPR 220 at [75] per Nicholas J (Dunlop). However, by virtue of s 8(5), ss 8(3) and 8(4) are not exhaustive of what may constitute control for the purpose of s 8(1) and (2): Caesarstone Ltd v Ceramiche Caesar SpA (No 2) (2018) 133 IPR 417 at [592] per Robertson J (Caesarstone).
21 Control must be exercised by a putative trade mark owner over the activities of the trade mark user such that the essential function of the trade mark, set out in s 17, is maintained. In Pioneer Kabushiki Kaisha v Registrar of Trade Marks (1977) 137 CLR 670, Kitto J stated that (at 683):
β¦the essential requirement for the maintenance of the validity of a trade mark is that it must indicate a connexion in the course of trade with the registered proprietor, even though the connexion may be slight, such as selection or quality control or control of the user in the sense in which a parent company controls a subsidiary. Use by either the registered proprietor or a licensee (whether registered or otherwise) will protect the mark from attack on the ground of non-user, but it is essential both that the user maintains the connexion of the registered proprietor with the goods and that the use of the mark does not become otherwise deceptive.
22 Control under s 8 of the Act means actual control in relation to the use of the trade mark, which involves questions of fact and degree. There must be control as a matter of substance. The mere fact that the registered owner granted a licence to use the trade mark is not sufficient to establish control within s 8: Lodestar Anstalt v Campari America LLC (2016) 244 FCR 557 at [97] per Besanko J (Allsop CJ, Greenwood and Nicholas JJ agreeing) (Lodestar). His Honour also observed:
[95] The meaning of "under the control of" in s 8 is informed by the principle stated by Aickin J in Pioneer, that is to say, that the trade mark must indicate a connection in the course of trade with the registered owner. The connection may be slight, such as selection or quality control or control of the user in the sense in which a parent company controls a subsidiary. It is the connection which may be slight. Aickin J was not saying the selection or quality control or financial control which may be slight.
β¦
[98] As I have said, actual control will be a question of fact and degree. A licence agreement may contain a term that sets out in detail a quality standard to be achieved. The details in the agreement may be such that it is not necessary for the registered owner to give directions or instructions from time to time. The licensee, aware of its obligations, may faithfully comply with those obligations without any entreaties or demands from the licensor.
23 Control for the purposes of s 8 may be established by many factors. As set out above, s 8(3) stipulates that exercising quality control over the relevant goods or services establishes control; and s 8(4) stipulates that exercising financial control over the trading activities of the user establishes control. In Caesarstone, Robertson J observed that it was sufficient that the registered owner was responsible for the manufacture of the goods (Caesarstone slabs) and gave instructions to the user as to how the goods should be transported to ensure their quality (at [595]); in that manner, the registered owner provided sufficient control over the wholesaling and retailing of the goods (at [597]). In that case, the control went further and included many obligations as to the promotion, fabrication and installation of the goods (described at [598] and [599]). In Dunlop, Nicholas J found that control was established by virtue of the financial and managerial control that the parent company (being the registered owner) exercised over its Australian subsidiary (being the relevant trade mark user) (at [85]-[88]).
24 In contrast, a licence agreement without more may be insufficient to establish control, at least where it has no effect on the way in which the user conducts its business: Lodestar at [97] and [103]. Similarly, a commonality of directors does not, without more, establish control, in circumstances where the registered owner is a subsidiary of the relevant trade mark user: Trident Seafoods Corp v Trident Foods Pty Ltd (2018) 137 IPR 65 at [100] per Gleeson J.
2.3 Factual history
25 The evidence concerning RJR and the history of the creation and use of the RJR marks was primarily given by Mr Jane.
26 Mr Jane is the son of Bob Jane who founded the business which trades as "Bob Jane T-Marts". The business began in around 1965 with a single automotive tyre store in Melbourne. In 1972, the first Bob Jane T-Marts franchise was granted to a franchisee in New South Wales. In the 1970s and 1980s the business grew, with outlets being established in Brisbane, Sydney and the Australian Capital Territory and elsewhere. The business is now one of Australia's leading automotive tyre and wheel retailers. It is comprised of company owned stores operated by Bob Jane Corporation and franchised stores operated by third parties under licence from Bob Jane Corporation. Bob Jane T-Marts stores are located in every capital city and major regional area throughout Australia and, as at January 2015, there were approximately 135 stores in Australia (of which approximately 45 were company owned stores and the balance were franchise stores). At all relevant times, all of the shares in Bob Jane Corporation have been held by Bob Jane Holdings Pty Ltd and all of the shares in that company have been held by Mr Jane's mother, Geraldine Jane. Mr Jane has been a director of Bob Jane Corporation since 2000, and is one of two directors today, the other being Alex Ying-Lee Chung. Mr Jane has also been the Chief Executive Officer of Bob Jane Corporation since 2002 and, in that capacity, has responsibility for the management of Bob Jane Corporation and the Bob Jane T-Marts business.
27 RJR was incorporated in 2002. Mr Jane is the sole director of the company and responsible for all aspects of its business. RJR has no employees. Since 2006, RJR has been owned by Mr Jane's mother, Geraldine Jane. Following its incorporation, the principal activity of RJR was the development and promotion of the Rodney Jane Racing motorsport brand including the brand name "RJR Wheels", which has been used in relation to wheels on performance vehicles.
28 On 22 June 2009, RJR and Bob Jane Corporation entered into a licence agreement (2009 Agreement) by which RJR granted Bob Jane Corporation an exclusive licence to use the "RJR Wheels" brand and Bob Jane Corporation agreed to promote that brand as its principal brand of wheels across all Bob Jane T-Marts stores. The 2009 Agreement was executed by Mr Jane on behalf of RJR and by Alex Chung (the other director of Bob Jane Corporation) and Mr Jane on behalf of Bob Jane Corporation. Mr Jane gave evidence that, thereafter, a range of brands and logos were developed for RJR to use to market various models of wheels. The development of wheel designs became a "pet project" for Mr Jane and he kept this work within RJR, being the company bearing his name, rather than Bob Jane Corporation.
29 Mr Jane gave evidence that he began giving serious consideration to the idea of developing a range of "Monster" branded wheels in about early 2010. Mr Jane explained that his interest in "Monster" as a brand name emanated from an interest he had with Monster Trucks when he was younger. In particular, he recalled that, in about 1987, Bob Jane Corporation modified a Holden Rodeo pick-up to create the Bob Jane Monster Truck which was used in events and for promotional purposes. Monster Truck events have been held at Calder Park Raceway, of which Mr Jane is a director. Mr Jane recalled attending a Monster Truck event at Calder Park Raceway in early 2010 at which the crowd was estimated to be in the tens of thousands. Mr Jane gave evidence that:
For me, the word "Monster" in an automotive context always conjured up images in my mind of Monster Trucks and what they represent β big, strong, car-crushing vehicles with oversized tyres and wheels. About a decade ago, I became aware of the growing market in Australia for pick-up style utes, 4WDs and off-road vehicles β¦. I considered that the owners of such vehicles would be attracted to alloy wheels and chunky tyres that enhanced the appearance of their vehicles and matched the image of their vehicles.
30 When cross-examined, Mr Jane explained his conception of "Monster" as a brand in the following terms:
I had grown up around monster trucks. We had, you know, a Holden Rodeo monster truck with a 455 Oldsmobile motor in it that I used to drive...
β¦we used to have monster shows at β monster truck shows out at Calder. The orientation of the brand "Monster", you know, for me growing up, you know, every kid thought a monster truck was the coolest thing they had ever seenβ¦
β¦I had an F250 when my son, Max, was born, that we used to tow a race car around with, and ultimately I kept driving after that. You know, he used to call it a monster truckβ¦he was obsessed with two things β monster trucks and football. And, you know, I think that really reignited my interest in this β this concept of pickup trucks with, you know, monster, and you know, the fact that the the emerging vehicle at the time was a, you know, was a Hilux. It was becoming the biggest selling car in Australia, and at the same time there was a massive decline in Commodore and Falcon, you know, coming at us, which was our biggest wheel market. So you know, it worked perfectly, Monster as a brand, to fit that market, as β as a monster truck, you know.
31 In February 2011, RJR lodged a trade mark application in class 12 for the word "Monster". The application did not pass examination and lapsed in September 2012. Notwithstanding the lapse of that application, Mr Jane remained interested in the brand name "Monster" for a new range of tyres and wheels to appeal to the 4WD and off-road vehicle market. Mr Jane considered that the word "Monster" complemented the image he had already developed in relation to the Rodney Jane Racing wheels but directed more towards pick-up style vehicles.
32 In about March 2013, Mr Jane requested the assistance of Zsuzsanna Zalatnai in developing logos to be used in conjunction with the "Monster" brand on a range of alloy wheels. At all times since February 2013, Ms Zalatnai has been the National Marketing Manager for Bob Jane T-Marts. She was initially employed by Bob Jane Corporation; however, on a date she could not recall, Ms Zalatnai became an employee of Advertising Development Services Pty Ltd (while continuing to perform the role of National Marketing Manager for Bob Jane T-Marts). Mr Jane gave evidence that he is "the shareholder" of Advertising Development Services Pty Ltd but not a director and that Advertising Development Services Pty Ltd provides marketing services to the Bob Jane T-Marts business. Mr Jane requested Ms Zalatnai to have someone draw up some possible logos for the "Monster" brand. Mr Jane instructed Ms Zalatnai that a prominent colour used in the "Monster" brand should be red and that the logo should conjure up a visual suggestion of a monster with eyes and a mouth.
33 Ms Zalatnai gave evidence that she engaged a graphic designer, Drafthouse Creative Studio, and that they sketched out four draft logos which they provided to Ms Zalatnai in early April 2013. Their work was billed to Strohfeldt Consulting, which was the advertising agent for the Bob Jane T-Marts business. Strohfeldt Consulting managed the designers ordinarily engaged by the Bob Jane T-Marts business and Drafthouse Creative Studio was one of those designers.
34 Mr Jane gave evidence that, in early April, Ms Zalatnai provided him with some draft logo designs. There is no documentary record of that but, on 9 April 2013, Ms Zalatnai sent an email to Mr Jane which appears to assume an earlier communication. The email was sent to the address [email protected] and attached four designs for the "Monster" logo. The email had the subject line "Feedback please β Monster logo" and stated (in part):
Hi Rodney,
Sorry to hassle you with this, but I am just cautious of the deadline for the logo. We would really need some feedback/direction from you. (My understanding is that we need to finalise this by Friday)
35 Mr Jane replied by email later that day in the following terms (errors in the original):
HI Zsuzsa
Sorry for delay I like 4 the most and kids think iys the best also.
I would consider in the cap logo adding some Red maybe the symbol and use a black background with silver monster and Bob Jane writting.
Thanks Rod
36 The logo selected by Mr Jane became the marks the subject of this proceeding. Having selected the logo, Mr Jane requested Ms Zalatnai to have three dimensional mocks-ups of alloy wheels with the logo on the hubcap created for his review. On 15 April 2013, Strohfeldt Consulting issued an invoice in an amount of $1,980 for "Monster wheels logo. Four concepts developed plus selected concept mock up for wheel example centre cap". The invoice was addressed to "Advertising Development Services Pty Ltd | Bob Jane T-Marts". Pictures of the three dimensional mock-ups of alloy wheels with the logo on the hubcap were attached to the invoice.
37 Mr Jane gave evidence that, in the period March to May 2013, he had various discussions with Dean Hockley, who was then the National Sales Development Manager for Bob Jane T-Marts, and Phil Weir, who was the International Sales and Marketing Manager for Mullins Wheels Pty Ltd (Mullins Wheels), regarding the production and sale of wheels bearing the RJR marks. Mullins Wheels distribute alloy wheels in Australia. Mr Jane had known and dealt with Mr Weir and Mullins Wheels since the late 1990s. The effect of Mr Jane's evidence was that, in these discussions, he was seeking to develop and have produced a "Monster" wheel style for RJR, he wanted the wheel to be produced by Mullins Wheels and he wanted the wheel to be marketed and sold exclusively through Bob Jane T-Marts stores. Hence it was necessary for Mr Jane, Mr Weir and Mr Hockley to meet and discuss the commercial arrangements. Mr Jane stated that his discussions with Mr Weir concerned the appearance of the wheel (which was to be an aggressive, black, four wheel drive wheel for utes) and the characteristics of the wheel (load ratings, diameter and width). Mr Jane was confident that Mullins Wheels would produce a wheel that complied with all Australian standards and legal requirements and was safe and would not fail because he had dealt with Mullins Wheels for a long time. Correspondingly, the discussions involving Mr Hockley concerned the number of wheels that Mr Hockley believed could be sold through Bob Jane T-Marts, which dictated minimum manufacturing quantities and the production cost, which in turn affected the commercial viability of the product. Mr Jane selected a wheel offered by Mullins Wheels called the "Jackal".
38 On 10 April 2013, Mr Hockley sent an email to Mr Jane with respect to a proposed program for the ordering, production and supply of "Monster" wheels by Mullins Wheels to Bob Jane T-Marts stores. Although the email commences with the sentence "Hello Rod and I have attached the proposed pricing schedule for the new Monster Wheels 'Black-Jack' program", it is apparent that Mr Jane was the intended recipient of the email (the word "and" being a typographical error). The email contains proposed details for the commercial arrangements for the production of the "Monster" wheels including pre-ordering, lead times, delivery, management of inventory and pricing, and concludes with a request for Mr Jane's approval as follows (error in original):
Rod I do believe that this is a good opportunity for BJC and the stores and if you are happy with the pricing matrix and the overall program we can commence the pre-sell to gauge store commitment to the program as Mullins will need to see that 600 unit initial commitment from stores to get the program rolling.
Can discuss when your available.
39 On 15 April 2013, Mr Weir sent an email to Mr Hockley titled "Bob Jane Black Jackal" asking, amongst other things, whether Mr Hockley had obtained the "decal sign off for the black (sic) Jackal".
40 On 29 April 2013, Mr Hockley sent an email to John Kulikowski who worked in telesales for Bob Jane Corporation. The email was a copy of the email that Mr Hockley had sent to Mr Jane on 10 April 2013.
41 On 1 May 2013, Mr Hockley sent an email to Mr Jane, at his email address [email protected], and copied to Mr Kulikowski, containing a draft email proposed to be sent to Bob Jane T-Marts stores to announce and promote the "Monster" wheels and to seek pre-orders from the stores. The email had the title "Monster Wheels Program" and commenced as follows (error in original):
Hello Rod and below is the draft email for the stores on the Monster Wheel Program. Can you please review as I would like to send this out today to get the pre-orders rolling. The artwork has been sent to the factory to get the decal underway and they will send a sample for sign off as soon as it is completed.
42 The draft email to Bob Jane T-Marts stores followed that opening paragraph, and commenced as follows (errors in original):
Hello T-Marts,
I am very excited to release the new Monster Wheels brand to the RJR stable. This new brand will be targeted at the 4x and SUV market. The 1st style to be introduced into the Monster Wheels range is the "Black-Jack". The "Black-Jack" will be supplied by Mullins wheels as an exclusive product for Bob Jane T-Marts. Size and pricing details are on the attached. The wheels will be warehoused and distributed by Mullins Wheels.
43 Mr Jane gave evidence that he amended the draft email to Bob Jane T-Marts stores because he did not consider that Mr Hockley "had described well enough what Monster was really standing for" and Mr Jane wanted to "make a statement to the stores of the market we were chasing with this product". Mr Jane stated that the market he wanted to chase was the "ute and 4x4 marketβ¦with an aggressive wheel which typically comes with an aggressive tyre" and that the "Rodney Jane Racing concept of Monster was to go and chase that market". After Mr Jane had amended the draft email, the email was then sent by Mr Hockley to Bob Jane T-Marts stores on 2 May 2013 in the form approved by Mr Jane. The email commenced as follows (errors in original):
Hello T-Marts,
We are very excited to release the new Monster Wheels brand to the RJR stable. This new brand will be targeted at the 4x4 and SUV market. The lst style to be introduced into the Monster Wheels range is the "Black-Jack". The "Black-Jack" will be supplied by Mullins wheels as an exclusive product for Bob Jane T-Marts. This is a trial program and will require everyone's support to ensure its success, the ongoing exclusivity is dependent upon continued volume. The 4x4 / SUV segment continues to grow and some of our competitors are very strong within this arena. The new "Black-Jack" covers a large range of vehicles and todays best sellers. Such as Toyota Hi-Lux, FJ Cruiser, Mitsubishi Triton & Holden Colorado just to name a few. In the 16x8 we have the 45 offset to suit new Few Ford Ranger and Mazda BT50. This fitment is currently being developed in 17x8 also and we expect to have this ready for July production. This market segment represent a great opportunity as the demand to dress up these vehicles is strong, dealer work is also great as they looking for that point of difference to attract both tradies and 4x4 enthusiasts alike.
Size and pricing details are below and also attached. The range has been priced aggressively with the "Black Jack" being $30 to $40 per wheel cheaper than the YHI Crawler. The wheels will be warehoused and distributed by Mullins Wheels.
44 Mr Jane gave evidence that he approved the email "from the Rodney Jane Racing perspective" to ensure that it represented what Mr Jane was trying to do from an RJR point of view. Mr Jane also said that he is not ordinarily involved in approving product announcements relating to Bob Jane Corporation products. The implication of his evidence was that he was involved in the product announcement relating to the "Monster" wheels because they were an RJR product.
45 On 22 May 2013, RJR filed trade mark application numbers 1558366, 1558367 and 1558368. Those applications were identical to the marks the subject of this proceeding, save that the applications sought to register the marks in classes 12, 35, 37 and 41.
46 On 17 June 2013, Mr Weir of Mullins Wheels sent an email to Mr Kulikowski stating that Mullins Wheels required a letter from Bob Jane Corporation authorising it to commence production of wheels bearing the RJR marks. Mr Jane gave evidence that that authorisation was not given until RJR had licensed the use of the marks to Bob Jane Corporation. That occurred two days later.
47 On 19 June 2013, RJR and Bob Jane Corporation entered into a further licence agreement (2013 Agreement) pursuant to which RJR granted Bob Jane Corporation a non-exclusive, non-assignable, worldwide licence to use various trade marks listed in Schedule 1 to the agreement (which included the RJR marks) in respect of the promotion and sale of goods and services for which the marks were registered or sought to be registered. The recitals to the 2013 Agreement recorded that RJR was the owner of all of those trade marks. Bob Jane Corporation agreed to pay RJR licence fees for its use of the RJR marks and provided RJR with the right to exercise quality control over Bob Jane Corporation's use of the marks. In respect of quality control, cl 5.1 stipulated that:
BJC will use its best endeavours to protect the integrity of the RJR brand and ensure the highest quality of manufacture promotion and display of any goods or services sold or promoted under the RJR Marks pursuant to this Agreement. BJC shall also use its best efforts to ensure that goods and services sold or promoted by BJC under the RJR Marks shall comply with all applicable laws and standards.
48 Clause 5.6 stipulated that:
RJR shall have the right to exercise quality control over BJC's use of the RJR Marks to a degree reasonably necessary to maintain validity of the RJR Marks and to protect the goodwill associated therewith. BJC shall use the RJR Marks only on or in connection with goods and services that conform to the specifications and standards of quality which RJR prescribes, and will not deviate materially from such standards without prior written approval from RJR. In order to verify compliance, RJR may from time to lime require BJC to submit samples and other marketing or promotional items bearing the RJR Marks for approval.
49 Also on 19 June 2013, and according to Mr Jane after the 2013 Agreement had been executed, Mr Chung (a director of Bob Jane Corporation) sent a letter to Mullins Wheels formally authorising it to arrange production of up to 2,500 alloy wheels bearing the RJR marks.
50 There was no evidence that RJR had ever prescribed specifications or standards for the wheels on which the RJR marks were to be used in writing, as contemplated by cl 5.6 of the 2013 Agreement. However, Mr Jane gave evidence that he selected Mullins Wheels as the producer of the Monster wheels because he had dealt with them for a long time and Mr Jane believed that Mullins Wheels were very familiar with the requirements for wheels to suit vehicles in Australia, from a safety and quality perspective. Mr Jane also gave the following evidence with respect to his supervision of the quality of the "Monster" wheels, in his dual capacities as a director of RJR and the CEO of Bob Jane Corporation:
(a) Mr Jane conducted personal inspections to check the quality of "Monster" wheels that were being supplied, as part of his regular visits to Bob Jane T-Marts stores.
(b) At various times since June 2013, Mr Hockley consulted Mr Jane in relation to various wheel designs, including in relation to designs featuring the possible use of the RJR marks. Before Mr Hockley could order any new "Monster" wheel model from Mullins Wheels, he was required to consult with Mr Jane and obtain his approval.
(c) In about 2016, PDW Group replaced Mullins Wheels as the preferred manufacturer of "Monster" wheels. During that process, Mr Jane attended and participated in meetings with the PDW Group to satisfy himself that they were capable of producing alloy wheels of a sufficiently high quality for sale under the RJR marks.
(d) Mr Jane continued to review sample wheel designs from time to time to determine which styles would be future models to be sold in the Bob Jane T-Marts system as "Monster" wheels.
51 Pursuant to the Franchising Code of Conduct, Bob Jane Corporation is required to update its Disclosure Document for franchisees and potential franchisees each year. The 2015 Disclosure Document lists the three RJR marks on the list of trade marks used in the Bob Jane T-Marts business and records that the marks are owned by RJR.
52 Bob Jane Corporation paid RJR licence fees, in accordance with the 2013 Agreement, in return for RJR granting it permission to use the RJR marks. For the period from August 2013 to January 2015, the licence fees paid by Bob Jane Corporation to RJR totalled $4,918.55.
53 In August 2013, the trade mark applications that had been filed in May 2013 met with adverse reports, primarily due to the existence of the word mark 701401 "Monster" in class 12 owned by Ducati Motor Holding SpA. The adverse reports were not answered by their deadline of 23 October 2014 and Mr Jane decided to allow those applications to lapse, and then instructed his solicitors to file fresh applications. Applications for the marks the subject of this proceeding were then filed on 27 January 2015 in the name of RJR. Those applications were only filed in class 12 and were in relation to alloy wheels for automobiles excluding motorbikes. On 10 February 2015, RJR and Bob Jane Corporation signed an "Addendum" to the 2013 Agreement that substituted the 2015 trade mark application numbers for the original 2013 trade mark application numbers.
2.4 Disposition of the section 58 issue β RJR is the owner of the RJR marks
54 As at the priority date, there had been prior use of the RJR marks by Bob Jane Corporation. The parties are agreed that the first use of the RJR marks occurred through the email sent by Mr Hockley to Bob Jane T-Marts on 2 May 2013. There was then further use of the RJR marks before the priority date through the promotion and sale of alloy wheels bearing the marks. In those circumstances, ownership is established by the authorship of the RJR marks and the prior use. The relevant questions are:
(a) was RJR or Bob Jane Corporation the author of the RJR marks; and
(b) was the use of the RJR marks by Bob Jane Corporation use as an owner or as an authorised user under the control of RJR as owner?
Authorship
55 In relation to authorship, the evidence establishes that Mr Jane conceived the idea of "Monster" branded wheels and directed the creation of the logos which became the RJR marks. MEC argues that the evidence supports the conclusion that, in doing so, Mr Jane was acting in his capacity as the CEO of Bob Jane Corporation and not in his capacity as the director of RJR. In support of that contention, MEC relies principally on the fact that Mr Jane asked Ms Zalatnai to help him develop the logos, Ms Zalatnai being the National Marketing Manager for Bob Jane T-Marts, and that Ms Zalatnai engaged Drafthouse Creative Studio to create the logos, which was a design firm used by Bob Jane T-Marts' advertising agency, Strohfeldt Consulting. The invoices for the work were addressed to Bob Jane T-Marts. Various communications about the logos were sent by email to Mr Jane at the address [email protected], the domain name for which is owned by Bob Jane Corporation.
56 Taken on their own, the foregoing facts might support a conclusion that Mr Jane was acting in his role as CEO of Bob Jane Corporation in directing the creation of the RJR marks. The facts cannot, however, be taken on their own. Mr Jane gave evidence that he created the RJR marks in his capacity as director of RJR and the surrounding facts, outlined earlier, are consistent with and corroborate his evidence. The key facts are the following.
57 First, the RJR business includes responsibility for the management of some of the intellectual property relating to the Bob Jane T-Marts business. Upon its incorporation, RJR's principal activity was the development and promotion of the Rodney Jane Racing motorsport brand and associated intellectual property, including the brand "RJR Wheels". In 2009, RJR entered into a licensing agreement with Bob Jane Corporation in respect of that brand (the 2009 Agreement). Under that agreement, Bob Jane T-Marts sold wheels bearing that brand. Thus, prior to the creation of the RJR marks, there had been a commercial relationship between RJR and Bob Jane Corporation for the licensing of trade marks owned by RJR.
58 Second, in 2011 RJR applied for registration of the word "Monster" as a trade mark. That act corroborates Mr Jane's evidence that, in taking steps to create the "Monster" trade mark, Mr Jane was doing so on behalf of RJR.
59 Third, on 22 May 2013, RJR filed the original trade mark applications in respect of the RJR marks. Again, that act corroborates Mr Jane's evidence that his prior actions in creating the RJR marks were undertaken by him in his capacity as director of RJR and not in his capacity as CEO of Bob Jane Corporation.
60 Fourth, shortly after the creation of the RJR marks, RJR and Bob Jane Corporation entered into a licence agreement in respect of the marks (the 2013 Agreement). While entering into that Agreement cannot, of itself, change the facts that occurred prior to the date of the Agreement, it sheds light on the proper characterisation of the prior events. It confirms Mr Jane's belief, and an understanding between the corporate entities, that the creation of the RJR marks had been undertaken by Mr Jane in his capacity as director of RJR, not in his capacity as CEO of Bob Jane Corporation.
61 Fifth, Bob Jane Corporation has complied with the 2013 Agreement, paying royalties to RJR in accordance with the Agreement. Bob Jane Corporation has never challenged RJR's ownership of the RJR marks.
62 Given the above facts, there is no reason to doubt Mr Jane's evidence that in creating the RJR marks he was acting in his capacity as director of RJR. I accept his evidence. That evidence is not contradicted by the fact that Mr Jane utilised the services of employees and contractors of Bob Jane Corporation in order to undertake design work. Given the corporate and commercial relationship between RJR and Bob Jane Corporation, and Mr Jane's intention that the RJR marks would be licensed to Bob Jane Corporation, it is understandable that RJR might utilise design services available through Bob Jane Corporation while creating trade marks that would be owned by RJR. The fact that various communications were sent to Mr Jane at his email address [email protected] is of little moment. There is no evidence that RJR had a domain name for emails or that Mr Jane had any other email address (although the evidence shows that RJR had letterhead). Mr Jane's evidence was that he rarely used emails and preferred to communicate directly with people in the office using printed documents where necessary.
63 For the reasons given above, I am satisfied that RJR was the author of the RJR marks. MEC has the onus of proving that RJR was not the owner, either by proving that RJR was not the author of the RJR marks or was not the first user. It has failed to discharge the onus of proving that RJR was not the author.
Prior use
64 In relation to prior use, the evidence establishes that Mr Jane selected the producer of the wheels that would bear the RJR marks, Mullins Wheels, selected the style of wheel to be produced, directed the first communication and promotion of the "Monster" wheels to Bob Jane T-Marts stores and then continued to review and control alterations to wheel styles and the producer of the wheels. Again, MEC argues that the evidence supports the conclusion that, in undertaking those tasks, Mr Jane was acting in his capacity as the CEO of Bob Jane Corporation and not in his capacity as the director of RJR. The evidence relied upon by MEC in support of that argument are the facts that: Mr Hockley, the National Sales Development Manager of Bob Jane T-Marts, was involved in establishing the commercial arrangements with Mullins Wheels for the supply of wheels bearing the RJR marks; the "Monster" wheels were first promoted to Bob Jane T-Marts stores through an email sent on 2 May 2013 by Mr Hockley; a director of Bob Jane Corporation, Mr Chung, authorised Mullins Wheels to apply the RJR marks to the wheels being supplied by Mullins Wheels; and the "Monster" wheels were sold through Bob Jane T-Marts stores.
65 There is no dispute between the parties that Bob Jane Corporation was a user of the RJR marks. The dispute is whether Bob Jane Corporation was an authorised user of the marks under the control of RJR as owner such that its use is taken, for the purposes of the Act, to be a use of the marks by RJR (pursuant to s 7(3) of the Act). The evidence, outlined above, supports the conclusion that Bob Jane Corporation was an authorised user of the RJR marks under the control of RJR as owner. The key facts concerning RJR's control of the use of the RJR marks are the following.
66 First, Mr Jane selected the producer of the wheel to which the RJR marks would be applied, and selected the type of wheel (in terms of appearance and characteristics) that would be supplied. For the reasons explained in the context of the authorship of the RJR marks, in my view the evidence establishes that, in selecting the supplier and type of wheels to be supplied, Mr Jane was acting in his capacity as director of RJR.
67 Second, whilst dealing with Mr Weir from Mullins Wheels, Mr Jane was also directing Mr Hockley in relation to the commercial arrangements for the supply of wheels bearing the RJR marks. In doing so, it may be accepted that Mr Jane was acting in two capacities: as director of RJR and as CEO of Bob Jane Corporation. There was no necessary inconsistency or conflict in Mr Jane performing both roles. The circumstances are consistent with the apparent intention of the parties that Bob Jane Corporation would be an authorised user of the RJR marks.
68 Third, Mr Jane controlled the form of the email sent to Bob Jane T-Marts stores by Mr Hockley on 2 May 2013. The parties agree that that email constituted the first use of the RJR marks as trade marks. That is because the email involved the advertising and promotion of goods bearing the marks to Bob Jane T-Marts franchise stores. Mr Jane's control over that communication is clear from the fact that Mr Hockley sent a draft to him for his approval on 1 May 2013 and Mr Jane made material changes to the draft email. The changes made by Mr Jane were to describe more fully the target market for the "Monster" wheels. The email itself identified RJR as the owner of the "Monster" wheels brand: it commenced with the sentence "We are very excited to release the new Monster Wheels brand to the RJR stable". The evidence of Mr Jane was that he approved the revised email in his capacity as director of RJR and not in his capacity as CEO of Bob Jane Corporation. In my view, Mr Jane's evidence is consistent with the surrounding facts and circumstances, and I accept his evidence.
69 MEC advanced a Jones v Dunkel submission in respect of the failure by RJR to call Mr Hockley as a witness, to the effect that an inference can be drawn that Mr Hockley's evidence would not have been helpful to RJR's case. I reject the submission. The rule in Jones v Dunkel permits, but does not require, a tribunal of fact to infer that the evidence of an absent witness, if called, would not have assisted the party who failed to call that witness: Jones v Dunkel (1959) 101 CLR 298 at 308 per Kitto J and 321 per Windeyer J; RPS v R (2000) 199 CLR 620 at [26] per Gaudron ACJ, Gummow, Kirby and Hayne JJ. However, the rule does not entitle a court to speculate about "what other evidence might possibly have been led": ASIC v Hellicar (2012) 247 CLR 345 at [165] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ. The rule will not support an adverse inference unless the evidence otherwise provides a basis upon which that unfavourable inference can be drawn: Chong v CC Containers Pty Ltd (2015) 49 VR 402 at [208] per Redlich, Santamaria and Kyrou JJA. Further, the rule does not operate to require a party to give merely cumulative or corroborative evidence: Manly Council v Byrne [2004] NSWCA 123 at [61]-[65] per Campbell J (Beazley JA and Pearlman AJA agreeing); Seven Network Ltd v News Limited [2007] FCA 1062 at [473] per Sackville J. In the present case, Mr Jane gave direct evidence concerning the control he exercised over the use of the RJR marks by Bob Jane Corporation and the capacity in which he exercised that control. The documentary evidence and surrounding facts and circumstances were consistent with Mr Jane's evidence. In those circumstances, there was no requirement for RJR to call Mr Hockley and there was no gap in the evidence required to be filled by Mr Hockley.
70 Fourth, on 19 June 2013, RJR and Bob Jane Corporation entered into a licence agreement in respect of various trade marks including the RJR marks. While that Agreement cannot alter the character of actions undertaken prior to the Agreement, it provides corroboration of the characterisation that is otherwise open on the evidence. In my view, the entry into the 2013 Agreement corroborates the fact that the earlier actions undertaken by Mr Jane controlling the use of the RJR marks by Bob Jane Corporation were undertaken in his capacity as director of RJR (as owner of the marks). That conclusion is also supported by the evidence showing that Bob Jane Corporation complied with the 2013 Agreement by paying royalties to RJR, and that Mr Jane continued to control the selection of the wheels bearing the RJR marks and the selection of the producer of those wheels.
71 For the reasons given above, I am satisfied that Bob Jane Corporation was, from the outset, an authorised user of the RJR marks under the control of RJR and that, as a consequence, RJR was the first user of the marks. MEC has failed to discharge the onus of proving that RJR was not the first user of the marks.
2.5 Disposition of the section 59 issue β RJR always intended to use the RJR marks
72 Section 59(a) of the Act provides that a trade mark may be opposed on the ground that the applicant does not intend to use, or authorise the use of, the trade mark in Australia. On this ground of opposition, MEC relies on materially the same evidence and arguments advanced in respect of s 58. It contends that the evidence shows that RJR did not exercise control over the use of the RJR marks by Bob Jane Corporation and never intended to use or authorise the use of the marks within the meaning of the Act.
73 In closing submissions, Senior Counsel for MEC conceded, quite properly, that the determination of the s 58 issue would be largely determinative of the s 59 issue. For the reasons given in the preceding section, I find that, as at the priority date, Bob Jane Corporation was an authorised user of the RJR marks under the control of RJR which is dispositive of the s 59 issue. Indeed, as at the priority date, RJR's intention to authorise the use of the RJR marks in Australia is readily established by the combined effect of: the filing of the original applications for registration of the marks and the subsequent applications; the entry into the 2013 Agreement granting a licence to use the marks to Bob Jane Corporation; and the control (through Mr Jane) of the use of the marks exercised by Bob Jane Corporation.
3. LIKELY TO DECEIVE OR CAUSE CONFUSION
3.1 Overview
74 MEC also opposes registration of the RJR marks under ss 42(b) and 60 of the Act. On these grounds of opposition, the dispute between the parties is whether the use of the RJR marks would be likely to deceive or cause confusion because of the reputation of the MEC marks. As noted earlier, Senior Counsel for MEC acknowledged that if the Court found against it under s 60, it would follow that the Court would also find against it under s 42(b) of the Act. Accordingly, while some reference is made to s 42(b) below, the primary issue concerns s 60.
75 The evidence shows, and there is no dispute, that MEC has a strong reputation in Australia in its device marks which consist of the M-icon on its own or used in conjunction with the stylised depiction of the words "Monster Energy". That reputation is as a producer of energy drinks and as a sponsor of extreme sports including motorsports. The extent of that reputation, particularly in relation to motorsports, is considered further below. The parties dispute whether MEC has a reputation in the word "Monster" that is distinct from its reputation in its device marks.
76 MEC acknowledges that the RJR marks and the MEC marks are not visually similar (and, contrary to the decision of the Registrar's delegate below, the respective marks do not share "striking similarities"). MEC contends that the use of the RJR marks would be likely to cause confusion because a notional consumer, aware of the reputation of the MEC marks, would (as at the priority date):
(a) perceive the reference to "Monster" as signifying that the RJR marks were associated with MEC;
(b) perceive that the "Monster" design of the RJR marks differed from MEC's M-icon; and
(c) conclude that the design of the RJR marks were those of MEC and another commercial entity with whom MEC had entered into a commercial relationship (and, in the case of the RJR marks bearing the name "Bob Jane", the other commercial entity would be identified as Bob Jane Corporation or its business Bob Jane T-Marts).
77 In other words, MEC contends that the notional consumer would believe, or would be confused as to whether, MEC had entered into a commercial relationship with the producer of wheels bearing the RJR marks in the manner of brand extension, lending the MEC "Monster" name to a different logo.
78 MEC's contention is based on the argument that the word "Monster" is the essential feature in each of the MEC marks (save for the M-icon when used alone); that it is dominant both visually and aurally in the MEC marks; and that the name "Monster" is the way in which the MEC marks would ordinarily be recalled and described by consumers. MEC submits that when the MEC marks are used on its energy drinks and in its extensive marketing activities, the word "Monster" is prominent whether that word is used by itself or in conjunction with the word "Energy". MEC submits that the word "Monster" is reinforced where the M-icon is also used because the M-icon looks like the letter "M" and has a "monster-like vibe".
79 On MEC's case, the strength of MEC's reputation in the word "Monster", being an essential feature of the MEC marks (save for the M-icon when used alone), is such that a notional consumer (aware of that reputation) would be likely to associate the use of the word "Monster" in connection with automotive wheels with MEC, or at least be confused about such an association.
80 RJR contends that there is no likelihood of confusion arising from the use of the RJR marks (as at the priority date). In support of that contention, it makes the following arguments: MEC has a strong reputation in its device marks, but not in the word "Monster" alone; the reputation of the MEC marks is in relation to energy drinks and the sponsorship of extreme sports, but not in relation to the sale of automotive wheels; the word "Monster" has a descriptive meaning and there has been extensive third party use of that word as a trade mark in relation to a range of goods and services; there are striking dissimilarities between the RJR marks and the MEC marks; and the RJR marks are registered in relation to goods (alloy wheels) that are sold at a relatively high price and for which consumers make a considered purchasing decision.
3.2 Legal Principles
Section 60
81 Section 60 of the Act provides that the registration of a trade mark in respect of particular goods or services may be opposed on the ground that:
(a) another trade mark had, before the priority date for the registration of the first-mentioned trade mark in respect of those goods or services, acquired a reputation in Australia; and
(b) because of the reputation of that other trade mark, the use of the first-mentioned trade mark would be likely to deceive or cause confusion.
82 The purpose of s 60 is to provide protection for prior well-known marks, whether registered or not: Explanatory Memorandum to the Trade Marks Amendment Bill 2006 at [4.10(1)].
83 The ordinary meaning of the word "reputation" is the recognition of a person or thing by the public generally or the estimation in which a person or thing is held by the public generally: McCormick & Co Inc v McCormick (2000) 51 IPR 102 at [81] (McCormick). The reputation of a trade mark has quantitative and qualitative dimensions. The quantitative dimension concerns the breadth of the public that are likely to be aware of the mark, which can be evidenced by the quantum of sales, advertising and promotion of goods or services to which the mark is applied. The qualitative dimension concerns the image and values projected by the trade mark, which affects the esteem or favour in which the mark is held by the public generally: see McCormick at [85]-[86].
84 There was no dispute between the parties as to the following general principles governing the application of s 60:
(a) First, the likelihood of deception or confusion from the use of the opposed mark must arise because of the reputation of the other mark: Delfi Chocolate Manufacturing SA v Mars Australia Pty Ltd (2015) 115 IPR 82 at [29] per Jessup J (Delfi). The Court must compare "mark and reputation" rather than "mark and mark": Tivo Inc v Vivo International Corporation Pty Ltd [2012] FCA 252 at [306] per Dodds-Streeton J (Tivo), citing with approval Pfizer Products Inc v Karam (2006) 219 FCR 585 at [27] per Gyles J.
(b) Second, the reputation of the other mark is to be assessed at the priority date of the opposed application: Southern Cross at 595, cited in Pham Global at [21].
(c) Third, the relevant comparison is between the prior mark as actually used and a notional normal and fair use of the mark sought to be registered: Qantas Airways Ltd v Edwards (2016) 338 ALR 134 at [178] (Qantas). See also Berlei Hestia Industries Ltd v Bali Co Inc (1973) 129 CLR 353 at 362 (Berlei); Vivo International Corporation Pty Ltd v Tivo Inc (2012) 294 ALR 661 at [113]-[115].
(d) Fourth, s 60 is not constrained by the concept of deceptive similarity β the words of s 60 do not refer to resemblance at all. The question is purely one of prior reputation: Qantas at [142].
(e) Fifth, the test for confusion under s 60 is not limited to whether consumers might think that the respective marks are the same. It is sufficient that consumers might wonder whether the respective goods might be connected in the course of trade: Explanatory Memorandum, [4.10(3)]; McCormick at [82]; Southern Cross at 595. It is enough if consumers might think that the product bearing the impugned mark is a variant of, or related to, an existing brand: Southern Cross at 594-595, 597; Woolworths at [50]; Polo Textile Industries Pty Ltd v Domestic Textile Corporation Pty Ltd (1993) 42 FCR 227 at 229-230; Australian Postal Corporation v Digital Post Australia Pty Ltd (2013) 308 ALR 1 at [70] (Australian Postal Corporation).
(f) Sixth, there is no requirement that it be more probable than not that the use of the opposed mark will deceive or cause confusion. All that is required is that there is a real and tangible danger of confusion or deception. It is enough if the ordinary person entertains a reasonable doubt: Southern Cross at 595; Crazy Ron's Communications Pty Ltd v Mobileworld Communications Pty Ltd (2004) 209 ALR 1 at [76] (Crazy Ron's). The creation of an incorrect belief or mental impression and causing confusion "may go no further than perplexing or mixing up the minds of the purchasing publicβ¦": Coca-Cola at [39]; Tivo at [102] per Dodds-Streeton J. In Australian Postal Corporation, the Full Court stated (at [70]):
β¦ the threshold for confusion is not high. Courts must compare the marks visually and aurally in the context of how the marks are used, and decide if there is a reasonable probability that the ordinary person to whom the marks are targeted, entertains a reasonable doubt as to the relationship between the marks. But there must be a realistic assessment, and a mere possibility of confusion is not enough.
(g) Seventh, evidence of actual confusion is not required: Berlei at 355 per Barwick CJ.
(h) Eighth, a mark may acquire a reputation in Australia through indirect exposure in the press, on television and on the internet: Tivo at [336] per Dodds-Streeton J; Hansen Beverage Company v Bickfords (Australia) Pty Ltd (2008) 171 FCR 579 at [64] per Finkelstein J.
85 The parties' submissions were at variance on a number of matters, although the variance was mainly a matter of emphasis.
86 First, the parties placed different emphasis on the significance of the objective similarity of the marks in question. RJR emphasised statements in the cases to the effect that, in assessing the risk of confusion, the "degree of similarity between the allegedly conflicting marks will be a relevant consideration": Qantas at [142] and [172] per Yates J; Singtel Optus Pty Ltd v Optum (2018) 140 IPR 1 at [205] per Davies J (Singtel Optus). Further, when considering a logo mark, all visual features must be considered, including font, the arrangement and use of graphic elements, the use of any corporate name, the orientation of the mark and its constituent parts, whether text is upper case or lower case, and the overall shape, geometricity and stylistic impression of the mark: Australian Meat Group Pty Ltd v JBS Australia Pty Ltd (2018) 363 ALR 113 at [71]-[73] (Australian Meat Group). In contrast, MEC emphasised that, while the respective marks must be considered as a whole, consumers are likely to have an imperfect recollection of the prior mark, retaining only a general recollection of that mark: Re Rysta Ltd's Application (1943) 60 RPC 87 at 108; de Cordova v Vick Chemical Co (1951) 68 RPC 103 at 105-6 (de Cordova); Crazy Ron's at [77]-[79]. For that reason, attention needs to be given to the "essential feature(s)" of the prior mark which would be recalled by the consumer, being the "idea which the mark will naturally suggest to the mind of one who sees it", or a "significant" or "distinctive" element of the mark or aspect(s) of the mark, or the feature "which strikes the eye and fixes itself in the recollection": Jafferjee v Scarlett (1937) 57 CLR 115 at 121-2; Saville Perfumery Ltd v June Perfect Ltd (1941) 58 RPC 147 at 162; de Cordova at 105-106; Crazy Ron's at [74], [79]-[84]; Optical 88 Ltd v Optical 88 Pty Ltd (No 2) (2010) 275 ALR 526 at [108]-[110]. MEC submitted that confusion may result if that feature is then adopted in the trade mark of another. RJR countered with the submission that, under s 60, "a strong reputation is likely to militate against any likelihood of confusion where there are differences between the marks under comparison": Singtel Optus at [205] per Davies J. This is because a consumer "with a stronger awareness of the respondent's mark" is more likely to be "immediately struck by the differences between the two marks": Delfi at [29] per Jessup J.
87 Second, the parties placed different emphasis on the similarity of the goods and services in respect of which the respective marks were used or intended to be used. MEC emphasised that the prior mark need not have established a reputation in Australia that is specific to the goods or services which are the subject of the opposed application: Hugo Boss AG v Jackson International Trading Co Kurt D Bruhl GmbH & Co KG (1999) 47 IPR 423 at 436-7 (Hugo Boss); McCormick at [85]; in Qantas at [143]. While RJR accepted the correctness of that principle, it placed reliance on observations made in a number of cases to the effect that it is a material consideration in the application of s 60: Singtel Optus at [203] per Davies J; Qantas at [143] per Yates J; Gain Capital UK Ltd v Citigroup Inc (No 4) (2017) 123 IPR 234 at [148] per Markovic J; Hills Industries Ltd v Bitek Pty Ltd (2011) 214 FCR 396 at [208] per Lander J. RJR also emphasised the relevance of the nature of the goods or services to which the opposed mark is sought to be registered and the characteristics of the class of consumers for those goods and services, as those factors bear upon the interest and likely attention of the relevant consumers in making a purchase and therefore the likelihood of confusion: Pham at [71]; Stone & Wood Group Pty Ltd v Intellectual Property Development Corporation Pty Ltd (2018) 357 ALR 15 at [19] and [63].
88 Third, there was some disagreement as to whether the use of the RJR marks before the priority date was relevant to the s 60 assessment. MEC submitted that the use or reputation of opposed marks is generally not relevant to the comparison of marks under s 60. The language of s 60 asks simply whether the use of the opposed mark is likely to deceive or cause confusion because of the reputation of the prior mark. The assessment is made by considering a notional normal and fair use of the opposed mark. MEC accepted that account could be taken of the notional consumer's familiarity with an element of the opposed mark where that element has a degree of notoriety or familiarity of which judicial notice can be taken (such as the brand Woolworths): Woolworths at [61] per French J; CA Henschke & Co v Rosemount Estates Pty Ltd (2000) 52 IPR 42 at [52]; Crazy Ron's at [90]; Australian Meat Group at [41]. However, it submitted that that principle has no application to the RJR marks. RJR submitted that it is well established that, when assessing whether a party (here MEC) had acquired a distinctive reputation in a mark, third party usage of that mark "weighs heavily against the conclusion" (Yarra Valley Dairy Pty Ltd v Lemnos Foods Pty Ltd (2010) 191 FCR 297 at [256]-[257] per Middleton J) and that third party usage will make it more difficult for a party to establish that use of that mark is likely to deceive (Telstra Corp Ltd v Phone Directories Co Pty Ltd (2014) 316 ALR 590 at [580] per Murphy J, in the context of passing off and misleading or deceptive conduct). RJR submitted that it followed that use of the RJR marks before the priority date would be relevant to the s 60 assessment in so far as that use diminished the likelihood that the MEC marks had acquired a distinctive reputation in the word "Monster" (also relying on Colorado Group Limited v Strandbags Group Pty Limited (2007) 164 FCR 506 at [136] per Allsop J). That proposition was accepted by MEC.
89 There was no disagreement between the parties that s 60 must be applied separately to each of the RJR marks and in respect of each of the MEC marks. It is therefore necessary to consider: what is the reputation of each of the MEC marks considered separately? In that respect, the primary contentions advanced by MEC recognised that it was MEC's device marks, comprising the M-icon and the stylised depiction of the words "Monster Energy", that had acquired a reputation in Australia, rather than the word mark containing the single word "Monster". MEC's primary contention was that the essential element of its device marks was the word "Monster", such that consumers would be likely to be confused by the use of the RJR marks, which featured the brand "Monster".
Section 42
90 Section 42(b) provides that an application for registration of a trade mark must be rejected if its use would be contrary to law. In that respect, MEC relies on ss 18 and 29 of the ACL. The principles governing the application of ss 18 and 29 are well established and neither party referred to them in any detail. The principles governing s 18 were recently summarised by Beach J in Flexopack S.A. Plastics Industry v Flexopack Australia Pty Ltd (2016) 118 IPR 239 at [259]-[277] (Flexopack). Similar principles govern the application of s 29 of the ACL: Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45 at [97]-[107]; ACCC v Coles Supermarkets Australia Pty Ltd (2014) 317 ALR 73 at [35]-[47]; Flexopack at [259]-[277].
91 There are, however, two important differences in the enquiry required by s 60 of the Act on the one hand and under ss 18 and 29 of the ACL on the other. First, the enquiry under s 60 requires consideration of whether the reputation of a pre-existing mark is likely to deceive or cause confusion; the enquiry under ss 18 and 29 is not so confined and all relevant circumstances can be considered. Second, under s 60 it is sufficient to show that consumers are given "cause to wonder" as to the source of the applicant's goods, but that is not sufficient under the ACL: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198 per Gibbs CJ; Google Inc v ACCC (2013) 249 CLR 435 at [8] per French CJ, Crennan and Kiefel JJ.
3.3 The reputation of the MEC marks
92 MEC adduced a substantial quantity of evidence concerning the use of the MEC marks in connection with the sale of its energy drinks and associated promotional activity in order to show the strength of the reputation in Australia of the MEC marks. That evidence was principally given by Mr Pontrelli, who is the Senior Vice President of Marketing for MEC, and by Mr Thiele, who is the Vice President β Oceania at Monster Energy AU Pty Ltd (the Australian subsidiary of MEC) (MEAU). RJR largely embraced the evidence of Messrs Pontrelli and Thiele, submitting that their evidence showed that each can of Monster Energy drink sold by MEC, and all of its associated promotional activity, whether by way of sponsorships or merchandising, prominently featured the device marks consisting of the M-icon and the stylised depiction of the words "Monster Energy", not the word mark consisting of the plain (i.e. not stylised) word "Monster". RJR argued that it was MEC's device marks that had a strong reputation, not the word mark "Monster", and that the strength of the reputation in the device marks reduced the likelihood of confusion from the use of the RJR marks. RJR's submission is correct.
Energy drinks
93 The original Monster Energy drink was launched by MEC in the USA in April 2002 with a target audience of male consumers in the 18-34 age bracket. Between 2002 and the end of 2014, MEC sold more than 13 billion cans of Monster Energy drink to consumers in 134 countries generating revenues of more than US$14 billion. MEC launched the original Monster Energy drink in Australia in July 2009 through its wholly-owned subsidiary MEAU. The packaging of the original drink had a black background with the M-icon and the word "Energy" coloured green. Also from 2009, MEC, through MEAU, launched variants of the Monster Energy drink which were sold in Australia prior to January 2015. All of the variants featured prominently the M-icon and the stylised depiction of the word Monster. On many of the variants, the word "Energy" was supplemented (or occasionally replaced) by the specific variant name such as "Monster Ripper Energy + Juice" and "Monster Energy BFC", and the variants used different colours on the packaging. By way of illustration, those examples are depicted below:
Monster Energy Original Monster Ripper Monster Energy "BFC"
(sold in Australia since 2009) (sold in Australia between 2009 and 2013) (sold in Australia between 2009 and 2013)
94 Between July 2009 and 27 January 2015, over 90 million cans of Monster Energy drinks were sold throughout Australia. Over 44 million of those were cans of the variants. Monster Energy drinks were distributed and sold in Australia through in excess of 10,000 retail outlets, including at supermarkets, petrol stations, bars and pubs, cafes, milk bars and take away food outlets.
95 In its submissions, MEC sought to emphasise the differences in the product variants that it has sold over time, in support of its overarching submission that the constant and essential element of the Monster Energy products was the name "Monster". In my view, the evidence supports the opposite conclusion: that despite producing many variants of its original Monster Energy drink, MEC has preserved on all of its products the key features of its branding which are the prominent M-icon and the stylised depiction of the word "Monster", usually in conjunction with the word "Energy". Those features are distinctive and make the MEC products instantly recognisable. That view is consistent with the evidence of Mr Thiele. When cross-examined regarding the cans sold in Australia, Mr Thiele agreed that the material appearing on the can had changed very little since 2002 and that the word "Monster" was rendered in a distinctive script with a vertical line through the letter "o". Further, Mr Thiele confirmed, when cross-examined, that:
"Would you agree with this: that the Monster Energy business has never sold a beverage product in Australia displaying the word "Monster" without also displaying that M icon logo; that same distinctive script for Monster, including the vertical line through the letter O; and the word "energy"?---That's true. However, the word "energy" on some variants is much smaller, so, for example, Monster Rehab which we sold prior to 2015."
Marketing and promotion
96 Between 2002 and the end of 2014, MEC's world-wide marketing and promotional spend was more than US$3.1 billion. Between July 2009 and the end of 2014, over US$42 million was spent directly on marketing and promotion in Australia.
97 MEC does not use conventional advertising methods such as paid television, radio, print or on-line advertising. Instead, MEC focuses on promotional activities which allow it to engage more directly with its target market. These methods have been substantially the same since the product was launched in the USA and other overseas markets including Australia. Those promotional activities include:
(a) Sponsorships: MEC sponsors athletes, sporting teams, video gamers, musicians and events. Relevantly, MEC's sponsorships include motorsports. The evidence concerning MEC's sponsorship activities is described in more detail below.
(b) Product sampling: MEC gives away its Monster Energy drinks at MEC sponsored events or events at which MEC sponsored individuals or teams are competing, as well as at other venues including, in Australia, amateur sporting competitions (including motorsports competitions), motorcycle stores, beaches and festivals. In Australia, between 2009 and 2014, MEC spent over US$4.8 million on sampling activities (which incorporates wages for sampling staff, as well as the cost of Monster Energy drinks given away as samples). The MEC sampling teams wear MEC branded apparel and travel in MEC branded vehicles.
(c) Branded apparel and merchandise: MEC distributes to the general public (including by giving away) apparel and merchandise bearing the MEC marks. In doing so, it licenses others to apply the MEC marks to a variety of apparel and merchandise such as items of clothing, caps, beanies, bandanas, belts, water bottles, umbrellas, backpacks, suitcases and cooler bags. MEC also provides the individuals it sponsors with MEC branded apparel and merchandise. Photographs of these individuals (including both Australian and internationally sponsored athletes) wearing MEC branded apparel or holding MEC branded merchandise are uploaded to the MEC social media accounts or to the MEC website, which are followed by a substantial number of Australian consumers. The sponsored athletes also post such photographs onto their own and/or their team's social media accounts which can be accessed in Australia. This approach promotes the MEC brand to its target audience by reinforcing its "cool" and "legitimate" brand image.
(d) Point of sale materials: MEC displays point of sale (POS) materials at most locations where Monster Energy drinks are sold and has distributed large quantities of POS materials featuring the MEC marks. In Australia alone, between 2009 and 2014, MEC spent over US$2.7 million on POS materials.
(e) In-store promotions: MEC conducts in-store promotions and competitions to promote the MEC brand. In Australia, those promotions are carried out largely in petrol stations and supermarkets and usually involve entry into a competition with the purchase of a Monster Energy drink product.
98 MEC adduced in evidence a large array of photographs of its energy drinks, MEC branded apparel and merchandise, MEC branded vehicles and MEC POS materials. The branding on all of that material, without exception, consists of MEC's device marks comprising the M-icon on its own or in conjunction with the stylised depiction of the words "Monster Energy". The plain word "Monster" (i.e. not in a stylised form) is never used on its own as a brand. As discussed further below, MEC draws attention to the occasions on which it, or consumers, use the plain word "Monster" when referring to MEC or its energy drink products. However, the plain word is never used as a brand. It is only ever used in written communications by MEC, such as a brochure that contains a written description of branded merchandise (for example, Monster T-shirt) or point of sale material (Monster cooler), or written communications by consumers on social media writing a response to a post from MEC or a sponsored athlete. Such use is always associated with, proximate to and never separate from, the other distinctive MEC marks, being the M-icon and the stylised "Monster Energy". The evidence of Mr Pontrelli, when cross-examined about the sponsorship and marketing activities undertaken by MEC, was:
"When one reviews your photograph[s] that you have chosen to exhibit to your affidavit, there are no examples of the single word "Monster" being prominently displayed to consumers without either the M icon or the word "energy". Do you accept that proposition?---That is correct."
Sponsorship
99 MEC allocates a large portion of its marketing expenditure to the sponsorship of athletes, teams, sporting events, musicians, music festivals, video gamers and gaming competitions which appeal directly to MEC's target market, which traditionally has been 18 to 34 year old males. Between 2002 and the end of 2014, MEC spent over US$590 million in relation to its international sponsorships. Between July 2009 and 27 January 2015, MEAU spent over US$10 million on Australian sponsorships. MEC's sponsorship of events and athletes is not limited to placing the MEC marks on the athlete's apparel or vehicle. MEC also seeks to "leverage" its sponsorships, including by way of promotions, POS materials, sweepstakes and giveaways, and dressing its sponsored athletes with apparel and gear branded with the MEC marks, both casually and in-competition. As part of MEC's sponsorship deal, the athlete or team may be required to upload photos taken at competitions and events to their personal or team's social media accounts, which are directed to their own personal or team fan base.
100 MEC promotes its sponsorships (both international and Australian) on its own website and social media accounts, including Facebook, Twitter, Instagram and YouTube. Content posted to MEC's website and social media pages is tailored to its target market. This exposure has included the prominent display of the MEC marks on athletes' clothing and equipment (including, in relation to motorsports, on drivers/riders and their vehicles), on banners, posters and signs around the venues and on podiums, merchandise, promotional vehicles and hospitality trailers and staff uniforms. Since at least 2005, MEC has had a specialised digital marketing team responsible for running MEC's social media pages, including by compiling photos and videos and curating content to put on those pages. These pages are viewed by consumers around the world, including from Australia, in significant numbers as set out below:
(a) The Monster Energy Website (www.monsterenergy.com) was launched in 2003. Between 1 September 2010 and 1 January 2016, there were a total of 526,000 visits to the website from Australia.
(b) The Monster Energy Facebook page has been in operation since 2008. By 2010, the Monster Energy Facebook page had received 50,000 likes/follows from Australia. By December 2014, the page had over 430,000 likes/follows from Australia.
(c) In addition to its primary Facebook page, MEC maintains a number of ancillary pages, including (i) a "Monster Energy Girls" page which, by December 2014, had received over 38,000 likes/follows from Australia; (ii) a "Monster Energy Gaming" page which, by December 2014, had received over 12,000 likes/follows from Australia; and (iii) a "Monster Energy Music" page which, by December 2014, had received over 4,500 likes/follows from Australia.
(d) Monster AU also maintains a separate Facebook page, using the account name "MonsterEnergyAUS", which posts uniquely Australian content.
(e) The Monster Energy Twitter account has been in operation since 2009. As at 2013, the Monster Energy Twitter account had over 1 million followers worldwide, including followers from Australia. In addition, MEAU maintains a separate Twitter page, using the handle @MonsterEnergyAU, which posts uniquely Australian content and has done so since at least September 2010.
(f) The Monster Energy Instagram account has been in operation since 2011. By April 2012, the Monster Energy Instagram account had 31,756 followers from Australia. By February 2014, the Monster Energy Instagram account had more than 745,000 followers worldwide (including from Australia).
(g) MEC delivers content through several YouTube channels, including the Monster Energy YouTube channel. The Monster Energy YouTube channel was created in 2006, and Monster Energy began posting content to that channel in 2009. By April 2014, the Monster Energy YouTube channel had received more than 2.4 million views from Australia.
101 As part of its sponsorship activities, MEC also engages female staff known as "Monster Girls" to assist with the marketing and promotion of its products by attending events to hand out samples and merchandise, and to meet and greet fans. MEC also maintains an amateur sponsorship and athlete development program called the "Monster Army". During the period 2009 to 2014, potential applicants worldwide could apply for inclusion in the program through the Monster Army website, at www.monsterarmy.com. By July 2012, more than 3,200 people from Australia had applied to be a part of the Monster Army. Between 1 October 2008 and 31 July 2015, the Monster Army website received more than 48,000 unique visits from Australia. By December 2014, the corresponding Monster Army Facebook page received more than 4,000 likes/follows from Australia.
102 MEC's evidence included a large array of photographs of MEC branded apparel, merchandise, equipment, vehicles, banners, posters, signs and staff uniforms. The observations made earlier apply. The branding on all of that material consists of MEC's device marks comprising the M-icon on its own or in conjunction with the stylised depiction of the words "Monster Energy", not the plain word "Monster".
Motorsports
103 MEC's marketing and promotion has focused on projecting the image that MEC and its products are "edgy and aggressive". MEC perceives that this image appeals to its primary target market. For that reason, MEC has sponsored motorsports and extreme sports which are seen as edgy and aggressive. MEC regards motorsports as an activity of particular interest to its primary target market and one which aligns closely with its image. As a result, since the commencement of MEC's business, a significant focus of MEC's marketing activities has been motorsports including on and off-road car and motorcycle racing, and motorsports related activities such as stunt driving and motorcycle stunts. By sponsoring these drivers, teams and events, the MEC marks receive significant amounts of unsolicited press coverage, creating widespread exposure. This includes television and web broadcast exposure internationally through news outlets, authorised broadcasts, amateur videos and in online and printed publications covering the events.
104 The evidence established that a significant part of MEC's motorsport sponsorships have an Australian audience:
(a) International events such as NASCAR, F1, Dakar Rally, Superbikes, MotoGP, Speedway and the AMA Supercross, at which the MEC brands are displayed on athlete's helmets and uniforms, on track signage and/or on the press conference backdrop, are directly broadcast and/or webcast into Australia.
(b) MEC also sponsors international drivers who have a significant following in Australia including, for example, Valentino Rossi (MotoGP), Lewis Hamilton (F1), Ken Block (Rally Driver / Gymkhana), and Ricky Carmichael (Supercross and Motocross).
(c) In Australia (prior to January 2015), MEC sponsored various events including the V8 Supercars, the Formula 1 Grand Prix (Australian event), Powercruise, the MotoGP (Australian event), Australasian Supercross Championships and the MX Nationals.
(d) MEC has also sponsored a range of Australian drivers in fields such as stunt cars, supercross/motocross, V8 supercars, kart racing, V8 ute racing, drag racing, drift driving, Carrera Cup racing, off-road racing and sprintcars.
105 MEC leverages its sponsorship of these athletes, teams and events by way of cross-promotions, POS materials, sweepstakes and giveaways, dressing its sponsored drivers/riders with apparel and gear branded with the MEC marks and distributing MEC branded motorsports related merchandise.
106 In Australia, MEC has also had a significant presence in Supercross. Between 2009 and 2011, MEC was the naming rights sponsor of the Australian Supercross Championship series, the Super X. During this time, there were at least five Super X events held in Australian cities each year. International MEC-sponsored riders (who had had significant success in the Super X) also competed in the series. In 2012, the Series was relaunched as the Australian Supercross Championship. MEC remained a sponsor of the series, in particular a named sponsor of particular series events. MEC branded merchandise was also sold in Australia, including replica Tim Ferry MEC branded gear, as well as other Supercross related merchandise.
107 MEC has also had significant involvement in Australia in relation to Monster Trucks, including through sponsorship of drivers, such as Damon Bradshaw, who have had considerable success in the Monster Jam series. For example, MEC sponsored athletes in every Monster Jam series event in Australia up to the end of 2014, and that sponsorship has continued.
108 Again, MEC's evidence included a large array of photographs of MEC branded apparel, merchandise, equipment, signs and banners at venues and on podiums. The branding on all of that material consists of MEC's device marks, not the plain word "Monster". The photographs also show that MEC is not the only, or dominant, sponsor of the events, teams or athletes depicted. The trade marks of many other well-known companies such as Vodafone, Samsung, Toshiba, Blackberry, Allianz and Pirelli are commonly displayed on event signage, motor vehicles and uniforms, often in conjunction with MEC's device marks.
Brand extension
109 MEC markets and sells energy drinks in Australia and does not itself sell any other merchandise in Australia. However, it has licensed a number of companies to sell official MEC apparel and merchandise, including in Australia. Most relevantly, since 2002 (and prior to 2015), MEC has licensed others to produce motorsports related products, such as decal kits, helmets, gloves and protective clothing, replica cars, and an MEC edition Kawasaki motorcycle displaying the MEC marks. In Australia, the MEC marks have been used on motorsports related products such as decals, helmets, gloves and protective clothing. Since at least 2013, MEC has also authorised the use of the MEC marks on electronic games involving motorsports that are available across multiple platforms such as Xbox, Play Station, Nintendo and as smart phone apps.
110 Since 2011, MEC has licensed American Tire Distributors Inc. (ATD) to manufacture and distribute MEC branded automotive wheels in the United States and Canada. Pictures of the wheels in evidence show that they have the M-icon on the hubcap. The evidence concerning the sale of MEC branded wheels in Australia was scant and there was no evidence concerning any licensing arrangements for the sale of such wheels in Australia. Nevertheless, MEC relied on the following matters as being relevant to the reputation of its marks in Australia in respect of wheels:
(a) ATD and its distributors (including TIS Wheels) have advertised the MEC branded wheels by way of promotional videos uploaded to TIS's YouTube channel.
(b) Since 2011, the MEC branded wheels have been displayed at the "Monster Energy DUB Show", which is a custom car show and concert tour that occurs in the United States. Advertisements for the MEC branded wheels have appeared in the associated "DUB Magazine" located on the DUB Show website. The MEC Facebook page refers to the DUB Magazine.
(c) MEC sponsored drivers also occasionally fit custom MEC branded wheels on their vehicles. For example, in around April 2013, MEC sponsored the athlete BJ Baldwin who debuted his custom vehicle, fitted with MEC branded wheels, as part of a stunt video called "Recoil" published to MEC's YouTube channel. The first Recoil video received over 8 million views by the end of 2014. BJ Baldwin's custom wheels were also featured in the April/May 2013 edition of the DUB Magazine, which was promoted via the MEC Facebook page.
111 Ms Sapountsis, a lawyer employed by the solicitors for MEC, gave evidence of visiting the "Wheels Gallery" section of the Bob Jane website and accessing and downloading photographs of 9 vehicles with "Crossfire Fang" or "Crossfire Krawler" wheels having the M-icon on the hubcap, each vehicle apparently parked outside an identified Bob Jane T-Marts store. The date on which each photograph was taken was not clear from the website, although at least some of the photographs appeared to have been taken before the priority date.
112 Mr Kulikowski, the Wheel Division Coordinator for Bob Jane T-Marts, gave evidence that the "Wheels Gallery" on Bob Jane's website was created in about 2013 and, from that time, sales staff located at Bob Jane T-Marts stores throughout Australia could contribute photographs to be uploaded. As at December 2018, more than 1,700 photographs had been posted on the "Wheels Gallery". Mr Kulikowski gave evidence that the photographs are not necessarily of wheels being offered for sale at any particular Bob Jane T-Marts store, although I infer that in most cases the photographs would be of vehicles recently fitted with wheels or tyres at the relevant store. In his evidence, Mr Kulikowski identified the dates on which 7 of the photographs exhibited to Ms Sapountsis' affidavit were uploaded to the "Wheels Gallery": Beenleigh (6 June 2014), Toowoomba (28 June 2014), Tweed Heads (30 January 2015), Chermside (2 March 2015), Cleveland (16 March 2015), Chermside (23 May 2015) and Cairns (25 May 2015). Mr Kulikowski confirmed in cross-examination that the wheels would have been sold on a date earlier than the date of the upload. Mr Kulikowski verified that, in each photo, the alloy wheels are two models of "Crossfire" brand wheels: the "Fang" and "Krawler" models. During the period 2013-2016, the only local distributor to Bob Jane T-Marts of Crossfire wheels (including the Fang and Krawler models) was Access Alloys of Virginia, Queensland. A total of approximately 400 Crossfire wheels were supplied by Access Alloys and sold through Bob Jane T-Marts during that period.
113 MEC tendered in evidence 4 invoices issued by Bob Jane T-Marts stores before the priority date in respect of the sale of Crossfire Fang or Krawler wheels. The invoices on their own do not refer to MEC branding on the wheels that were sold. However, the details of the invoices correspond with 4 of the photographs exhibited to Ms Sapountsis' affidavit (3 of which were referred to in Mr Kulikowki's affidavit), supporting an inference that the wheels depicted in the 4 photographs, having the M-icon on the hubcap, were sold by Bob Jane T-Marts before the priority date. Mr Kulikowski was cross-examined about the photographs and the invoices. He agreed with the proposition that the invoices related to the vehicles shown in the photographs with corresponding details. I do not believe that his evidence rises any higher than being a conclusion he has drawn from seeing the apparent correspondence between the invoices and the photographs. Nevertheless, in the absence of contrary evidence, I draw the inference that the invoices do relate to the vehicles shown in the corresponding photographs. However, Mr Kulikowski stated that he was not aware that Bob Jane T-Marts stores had ever offered for sale or sold wheels with the M-icon on the hubcap. He said that, ordinarily, Crossfire wheels come with a "Crossfire" hubcap and he would have expected that Crossfire wheels sold by Bob Jane T-Marts had that hubcap. MEC also tendered in evidence a Bob Jane T-Marts Facebook post dated 30 May 2014 from the Alberton store with a photograph of a Crossfire Fang wheel with the M-icon on the hubcap and a message stating "4x4 just got real β¦ New stock landed and ready to go in aggressive fitments. This is the Fang - in stock to suit Hilux, Colorado, Dmax, Triton, Prado and others". In cross-examination, Mr Kulikowski agreed that it appeared from the post that the Alberton store had the displayed wheel in stock, but Mr Kulikowski was not personally aware of that fact.
114 I infer from the evidence that at least some wheels bearing the M-icon on the hubcap were sold in Australia (through Bob Jane T-Marts) before the priority date. However, there is no evidence as to the quantity of those sales, beyond the 4 invoices referred to above and the Facebook post. Further, there was no evidence that MEC had licensed any wheel manufacturer to produce or sell wheels bearing the M-icon on the hubcap in Australia. It is therefore not clear whether the Crossfire wheels that were sold in Australia were imported from North America; nor is it clear whether MEC approved the use of the M-icon on the wheel hubcaps for sale in Australia. Given the absence of any licensing arrangements for the sale of MEC branded wheels in Australia, it is unsurprising that there was also no evidence that MEC had ever promoted itself as a producer or supplier of automotive wheels in Australia. Overall, the evidence concerning the sale of MEC branded wheels in North America or Australia has no material bearing on the reputation of the MEC marks in Australia.
Findings about the reputation of the MEC marks
115 Having regard to the evidence summarised above, I make the following findings about the reputation of the MEC marks in Australia as at the priority date.
116 First, the evidence establishes that there is a very strong reputation in MEC's device marks which consist of the M-icon on its own, and the M-icon together with the stylised depiction of the words "Monster Energy". The primary reputation is as a producer and seller of energy drinks. However, through its extensive marketing and promotional activities, those marks are also associated with various extreme sports including motorsports. In my view, the type of association in the minds of consumers would be as a sponsor of events, teams and individuals. Some consumers would also associate those marks with a range of merchandise bearing those marks, from apparel through to motorsport equipment such as gloves and helmets. However, the evidence does not establish a reputation in Australia in connection with the sale of automotive wheels.
117 Second, MEC's word marks which contain the plain (i.e. not stylised) words "Monster Energy" are likely to enjoy the same reputation. The extensive marketing and promotion of Monster Energy drinks using the device marks inevitably carries across to the word marks "Monster Energy". Those words, used together in plain text, would immediately identify MEC, its products and sponsorships to a large number of consumers.
118 Third, and related to the preceding findings, MEC's device marks, comprising the M-icon and the stylised depiction of the name "Monster Energy", have remain unchanged since the business was commenced in 2002. While MEC has engaged in some brand extension, by licensing those marks for use on apparel and other merchandise (including certain motorsport apparel and equipment), there has been no change to the appearance of the device marks.
119 Fourth, there is no evidence that MEC has used the word marks which contain the plain (i.e. not stylised) word "Monster" as a brand to sell its energy drinks or for promotional purposes. Any use of the word "Monster" by MEC is subsidiary to the use of its device marks. As such, in my view MEC's word marks which contain the plain word "Monster" have only a limited reputation on their own. Any reputation they enjoy is derived from MEC's device marks. In other words, consumers are likely to associate the word "Monster" with MEC and its products and promotional activities if the word is used in connection with, or in proximity to, MEC's device marks. In that sense, it is the device marks that create the association in the minds of consumers. MEC submitted that the word "Monster" is an integral part of MEC's branding and reputation. That is undoubtedly correct, but it doesn't follow that consumers would associate the word "Monster" used on its own with MEC or its products or sponsorships. It is possible to imagine circumstances in which the use of the plain word "Monster" as a mark might cause consumers to wonder whether the product in question was associated with MEC. An obvious example is if the word was used in connection with soft drinks. However, in my view other uses of the word "Monster" as a mark would be unlikely to cause such confusion.
3.4 Other uses of the word "Monster" as a brand in Australia
120 RJR adduced evidence of the use of the word "Monster" as a brand in Australia before the priority date both by itself (through the use of the RJR marks) and by others. The submission advanced by RJR was that the word "Monster" is a common English word which carries the connotations of large, powerful or wild and its common usage in the course of trade in Australia diminishes the likelihood of a consumer associating the RJR marks with MEC. RJR relied on four categories of evidence.
The word "Monster" is a commonly used mark
121 Mr Fraser gave evidence on behalf of RJR of searches he conducted on the website of IP Australia, which is an Australian Government agency that administers Australia's various statutory intellectual property regimes. Mr Fraser clicked the "Search trade marks" link and typed the word "Monster" into the search function, producing 816 results. He then filtered the results to "trade mark words" and "registered" status, which reduced the number of results to 246, and exhibited the list of results. The resulting trade marks were registered in various classes for which trade marks may be registered, spanning a wide range of products. RJR relied on this evidence to show the common usage of the word "Monster" as a brand in Australia. MEC submitted that the evidence adduced by Mr Fraser does not go that far. First, of the 246 registrations, 57 are after the priority date and 67 are registered to MEC. Second, and more significantly, there is no direct evidence before the Court as to what use, if any, there has been of the remaining marks between the registration date of the marks and the priority date.
The Ducati Monster motorbikes
122 Evidence was given about the Monster brand of Ducati motorbikes. Mr Fraser's searches showed that the trade mark "Monster" had been registered in the name of Ducati Motor Holding SpA since 1995 in respect of, amongst other things, motorcycles and clothing, footwear and headgear. Mr Cuthbert gave evidence on behalf of RJR about those motorbikes. Until March 2003, Mr Cuthbert was Managing Director of Graeme Cuthbert Automotive Pty Ltd, an automotive business, established by Mr Cuthbert in 1971, which undertook repairs, restorations, testing, vehicle sales and valuations. Since 2003, Mr Cuthbert has been a consultant to various aspects of the automotive industry undertaking valuations, insurance assessments and sales and acting as a forensic expert witness. He is presently a director of Cuthbert Auto Sales and Cuthbert Automotive Consulting. Mr Cuthbert's qualifications and experience show that he has wide experience in automotive repairs, brokering and valuations. Mr Cuthbert said that he is familiar with Ducati Monster motorbikes, which Mr Cuthbert described as very well known, widely purchased and an iconic range of motorbikes.
Monster Trucks
123 Evidence was given about "Monster Jam" events that have been held in Australia (and overseas) in which oversized pick-up trucks known as "Monster Trucks" participate. Mr Fraser's searches showed that the trade mark "Monster Jam" has been registered in the name of Feld Motor Sports Inc since 2011 in respect of the production, organisation and provision of sporting events, toy vehicles and clothing.
124 Mr Jane gave evidence that Bob Jane Corporation had a Monster Truck as early as 1987, that he had been interested in Monster Trucks since childhood and that he had attended Monster Truck events in Australia in 2010, 2012 and subsequently, along with substantial crowds of spectators. Mr Worsnop, a solicitor for RJR, gave evidence that he had attended a Monster Truck event at Ballarat in 2006, where the crowd numbered several thousand people, and also at Melbourne in 2010, where the crowd numbered in the tens of thousands. Mr Cuthbert gave evidence that he associated the word "Monster" in an automotive context with Monster Trucks and in particular the monster truck series known as "Monster Jam", that his initial exposure to Monster Trucks was in 2010/2011 via television, and that he had attended a Monster Trucks display at the Royal Melbourne Agricultural Show in about 2012 or 2013.
125 Ms Maartensz, a solicitor for MEC, adduced in evidence documents downloaded from the "Monster Jam" website that were records of Monster Jam events held in Australian cities before the priority date. Those records showed that:
(a) a Monster Jam event was held on 19 October 2013 at ANZ Stadium in Sydney and was attended by "more than 50,000 roaring fans" and a subsequent "pit party" was "sold out" and attended by "more than 12,000 fans";
(b) a Monster Jam event was held on 27 September 2014 at QSAC Stadium in Brisbane and was attended by "over 25,000 fans cheering for each Monster Jam truck to win";
(c) there were two Monster Jam events held on 4 October 2014 at AAMI Park in Melbourne, both of which had a "sell out crowd";
(d) a Monster Jam event was held on 18 October 2014 at ANZ Stadium in Sydney and "for the second straight year Aussie fans turned out in huge numbers at the Sydney Olympic Park Stadium"; and
(e) in the period between 27 June 2013 and 22 January 2015, there was sustained and extensive television coverage of Monster Jam events on free-to-air television in Melbourne. In total, there were 223 discrete televised broadcasts of Monster Jam events over a period of approximately 1.5 years. Put another way, in the 1.5 years immediately before the priority date, a Monster Jam event was, on average, broadcast on free-to-air television in Melbourne approximately every second day.
126 The evidence of Mr Pontrelli, on behalf of MEC, was that the Monster Jam series tours across the United States of America, and also internationally, including to Europe, Japan and (since 2013) Australia, that the series is televised internationally and that the Monster Jam events, teams and athletes create widespread public exposure and awareness.
RJR's Monster wheels
127 The evidence showed that RJR had used the RJR marks on alloy wheels before the priority date. Mr Jane gave evidence that the brand was launched in mid to late 2013 and alloy wheels featuring the RJR marks were promoted in national catalogues and in national television advertising for the Bob Jane T-Marts business as a featured brand. Example pages from the catalogues were in evidence. They depicted wheels bearing the RJR marks alongside many other wheels being offered for sale in Bob Jane T-Marts stores.
128 Mr Jane gave generalised evidence that, by the priority date, alloy wheels featuring the RJR marks had been promoted in many millions of catalogues (which were distributed in Australia either through newspaper inserts or through letterbox drops); however, the evidence did not run to precise numbers. The evidence showed that, by the priority date, a total of 1,839 wheels bearing the RJR marks had been sold, generating sales revenue of approximately $350,000.
129 Ms Zalatnai gave evidence that wheels bearing the RJR marks were featured on the "wheel specials" page of the Bob Jane website during the period October 2013 to January 2015. I infer that the wheels were featured from time to time, not every day. A Google Analytics report showed that, between 2013 and the priority date, there were a total of 119,332 unique views of that page. However, without knowing how often the wheels bearing the RJR marks were shown on the page, it is not possible to form any assessment of the degree of exposure of the brand to the public through that medium.
3.5 The purchase of alloy wheels
130 A number of witnesses gave evidence for RJR in relation to the price of alloy wheels and the factors that influence a purchasing decision by a consumer. The evidence establishes that alloy wheels have a premium price in comparison to other wheels and are generally purchased by engaged consumers making carefully considered purchasing decisions.
131 As stated earlier, Mr Cuthbert's qualifications show that he has wide experience in automotive repairs, brokering and valuations. Mr Cuthbert gave evidence that car owners generally buy alloy wheels for one of two reasons. First, and primarily, car owners buy alloy wheels because they want to improve the look of their vehicles, by having wheels that look more sporty or distinctive in some way. As a result, car owners often spend a great deal of time "shopping around" for alloy wheels, as they compare the look of different sets of wheels and the prices of those wheels. Second, some car owners buy alloy wheels for their performance benefits. There are a range of performance benefits of alloy wheels. In particular, alloy wheels are lighter than conventional steel wheels and lighter wheels allow a vehicle to accelerate faster and brake faster along with improved handling. Mr Cuthbert also stated that alloy wheels are relatively expensive. The price of a typical set of four alloy wheels ranges from $2,000 to $5,000, although specialist sets can cost many times more. In Mr Cuthbert's experience, car owners typically spend quite a lot of time looking for and considering different sets of alloy wheels before making a final purchase, having regard to the considerations set out above.
132 Mr Thomas is a store manager employed by Bob Jane Corporation and presently manages the Bob Jane T-Marts store located at Nunawading in Victoria. He has been employed by Bob Jane Corporation for approximately 25 years in various roles starting from a tyre fitter and aligner to work shop foreman before working his way up through sales and showroom positions to his current position as a store manager. He has been involved in the sales part of the Bob Jane T-Marts business for about 20 years and has been stationed at a number of different stores across Victoria. Mr Thomas gave evidence that, in his experience, a typical Bob Jane T-Marts store will serve hundreds of customers each year who visit the store looking for alloy wheels. Customers who come to a store to purchase alloy wheels are making a carefully considered choice. The typical cost of a set of alloy wheels and matching tyres will be several thousand dollars. Typically, customers want a set of alloy wheels that will enhance the appearance of their motor vehicle, something that will make it look more sporty and edgy. Hence, it is typical in the industry to use product names for alloy wheels such as Monster, Raptor, Venom, Stealth, Rockstar and Bandit, which help to evoke the sporty, edgy flavour which customers are seeking. In Mr Thomas' experience, most customers for alloy wheels are males across a wide band of ages and have investigated different styles and varieties of alloy wheels that are available on the internet before coming into a Bob Jane T-Marts store.
133 Mr Prinzi is the General Manager for PDW Group in Australia. PDW Group is an international alloy wheel and tyre manufacturer founded in 1983. It has a distribution network in over 60 countries, including Australia. It commenced trading in Australia in 2007 and Mr Prinzi has remained with PDW Group since then. Before joining PDW Group, Mr Prinzi was employed in other automotive wheel businesses. In Australia, PDW Group is a wholesale supplier of tyres and alloy wheels that are sold through Bob Jane T-Marts and many other wheel and tyre retailers such as Bridgestone, Beaurepaires, Goodyear and Tyrepower. Mr Prinzi gave evidence that the experience of Mr Thomas, described in the preceding paragraph, was typical for all retailers in the Australian market in his experience. In particular, the process of consumers purchasing alloy wheels tends to involve some time, with consumers paying particular attention to the aesthetic, functional aspects and cost of the alloy wheels they are considering.
3.6 The Bob Jane mark
134 Two of the RJR marks refer to the Bob Jane website address (bobjane.com.au) and thereby incorporate the Bob Jane mark. RJR argues that this further diminishes the possibility of confusion arising from the use of those marks because of the notoriety or familiarity of the Bob Jane mark. Mr Jane gave the following evidence about the Bob Jane T-Marts business.
135 As stated earlier, the Bob Jane T-Marts business, now owned by Bob Jane Corporation, was founded by Mr Jane's father, Robert Frederick Jane. Today, the Bob Jane T-Marts business consists of company owned stores and franchised stores. As at January 2015, there were approximately 135 stores across Australia.
136 Bob Jane Corporation is the registered proprietor of a number of trade marks in Australia, most of which incorporate the words "Bob Jane". Since at least the early 1980's, the Bob Jane mark has been an important component of the marketing and branding strategy of the Bob Jane T-Marts business. The forms of media in which the Bob Jane T-Marts business has been promoted throughout Australia by reference to the Bob Jane mark include store signage, catalogues, online and printed directories, newspapers, magazines, television, sponsorship of major motorsport events, the internet, Bob Jane T-Marts staff uniforms, branded products, trade shows and promotional giveaways. By way of elaboration:
(a) Since at least the 1980's, outlets for the Bob Jane T-Marts business (whether company owned or franchised stores) have used signage that bears the Bob Jane mark in prominent positions.
(b) Since at least the late 1980's, catalogues have been used to promote the Bob Jane T-Marts business and the products and services offered. The catalogues have been produced every month or so and have been distributed through all State and Territory capital cities as well as major regional cities such as Ballarat, Launceston and Albany. The catalogues are generally distributed in national newspapers.
(c) Since at least the 1980's, the Bob Jane T-Marts business has been advertised in newspapers throughout Australia. The business has also been promoted through television commercials on free-to-air television stations throughout Australia usually (but not exclusively) at prime time.
(d) Since at least the early 1980's, the Bob Jane T-Marts business has maintained directory listings in the printed Yellow Pages and White Pages telephone directories published in each of Australia's capital cities and regional centres (where there are Bob Jane T-Marts stores).
(e) From time to time, Bob Jane Corporation has been a major sponsor or naming rights sponsor for major Australian motorsport events such as, from 2002 to 2004, the Bathurst V8 Supercars event and, from 1999 to 2003, the Qantas Australian Grand Prix. In addition, Bob Jane Corporation has in the past sponsored, and continued to sponsor, individual racing cars and drivers in a number of categories at events like the V8 Utes, Carrera Cup, Fujitsu V8 Racing and the V8 Supercars series. As part of that sponsorship, the relevant racing cars bear the Bob Jane mark.
(f) The Bob Jane T-Marts business is also promoted through the Bob Jane website with the address www.bobjane.com.au. Data extracted from Google Analytics by Ms Zalatnai shows that in the period October 2013 to January 2015, the total number of users of that website was approximately 2.5 million and the total number of page views was approximately 11.5 million.
137 The evidence establishes that the Bob Jane T-Marts business is a well-known business in Australia supplying wheels and tyres to consumers.
3.7 Disposition of the section 60 issue β there is no likelihood of deception or confusion
138 As stated earlier, MEC's opposition under s 60 is based on 3 contentions: that the essential feature of the MEC marks is the word "Monster"; that the MEC marks are strongly associated with motorsports and other extreme sports, and it is a brand that is marketed as edgy and aggressive; as a result the use of the RJR marks, which feature the word "Monster", in connection with automotive alloy wheels is likely to deceive or cause confusion. Senior counsel for MEC acknowledged that there were sufficient differences between the RJR marks and the MEC marks that an ordinary consumer would not confuse them. However, MEC argued that there was a real and tangible risk that the ordinary consumer would wonder whether there was a commercial association between the alloy wheels bearing the RJR marks and MEC.
139 In my view, the evidence establishes that the use of the RJR marks, considered separately, would not be likely to deceive or cause confusion because of the reputation of any of the MEC marks. That conclusion is supported by the following factors.
140 First, while the word "Monster" is an integral part of MEC's corporate name and "Monster Energy" brand, the word on its own does not have a strong reputation. Rather, it is MEC's device marks, and the word mark "Monster Energy", which carry its reputation. That is not to say that the use of the mark "Monster" by another person could never give rise to confusion. However, in my view such confusion could only arise if there were aspects of the use of the mark by the third person that suggested a connection to MEC, its products or sponsorships and that was not separately distinctive. Those features are not present in this case.
141 As submitted by RJR:
This is a case where the sheer enormity of MEC's sales, and promotional and marketing activities, tells strongly against any risk that a consumer will confuse a product which is not branded as MONSTER ENERGY, and which does not feature the distinctive M-logo and the rendering of the word MONSTER in a distinctive script, with an unusual vertical line through the letter "O", as a product of MEC. In this sense, MEC is "a victim of its own success".
142 The phrase "a victim of its own success" was used by Perram J in Mars Australia Pty Ltd v Sweet Rewards Pty Ltd (2009) 81 IPR 354 at [32] in relation to the brand "Maltesers". The phrase is used in a figurative sense because the relevant company, here MEC, is hardly a victim, being so successful from a sales and marketing perspective that consumers in general are familiar with its product.
143 The evidence establishes that the word "Monster" has been registered as a trade mark in Australia in respect of a vast array of products. It is an ordinary English word which conveys a range of meanings such as large, strong or wild. It has been used in a motorsport context as the name of a series of motorbikes manufactured by Ducati and as the name of an event, Monster Jam, in which Monster Trucks compete.
144 In my view, the word "Monster" is not distinctive of MEC, its products or sponsorships. That is not to say that MEC does not have any reputation in the word "Monster". MEC inevitably has some reputation because, as it submitted, the word "Monster" is an integral part of MEC's corporate name and brand. However, the risk of deception or confusion from the use of the word "Monster" as a mark by another person is dependent on the appearance of the other mark, the goods in respect of which it is used and the related context in which it is used.
145 Second, in this case, none of the RJR marks bears any resemblance to any of the MEC marks. That is shown by a simple visual comparison of the marks and requires little elaboration. The RJR marks are reproduced below:
No 1670840 No 1670841 No 1670842
146 RJR marks 840 and 842 contain 3 elements, while mark 841 contains 2 elements. The first element, which features prominently in each of the marks, is the stylised depiction of a monster, with two eyes separated from the remainder of its body, comprising two large wings or arms and two small legs. The shape of the monster is broadly circular. It is distinctive and entirely different to the MEC device marks. The second element, which features prominently in marks 840 and 841, and less prominently in mark 842, is the word "Monster". It is that element which lies at the heart of MEC's opposition. However, the marks use the word "Monster" in a plain font and in conjunction with the monster image, removing any real or tangible risk of confusion with MEC. The third element, in marks 840 and 842, is the text BOBJANE.COM.AU. That text makes plain that the mark is connected with the well-known Bob Jane T-Marts business. As to overall visual appearance, marks 840 and 841 are rendered in a horizontal orientation, while mark 842 is rendered in a circular shape.
147 Apart from the word "Monster", the RJR marks do not share any of the distinctive features of the MEC device marks, nor do they use the word "Energy". The M-icon has the appearance of a claw mark made by a figurative monster. It is both jagged and vertically elongated in its appearance. The device marks which incorporate the words "Monster Energy" adopt a distinctive script that is suggestive of Gothic script.
148 Third, the RJR marks are used on alloy wheels. The evidence establishes that alloy wheels are the types of products which are purchased by engaged consumers, making carefully considered purchasing decisions, at a premium price. The typical cost of alloy wheels and matching tyres will be upwards of $2,000. The primary reason why consumers purchase alloy wheels is aesthetic, to enhance the appearance of their vehicle. Consumers typically investigate a range of different styles and varieties.
149 MEC has no reputation in respect of alloy wheels. It does have a strong reputation as a sponsor of motorsports, including teams and individual drivers and riders. It is also associated with motorsport clothing and equipment. However, that reputation does not carry across to alloy wheels.
150 Overall, MEC has failed to satisfy me that the use of the RJR marks is likely to deceive or cause confusion because of the reputation of the MEC marks. In my view, there is no real or tangible prospect of that occurring.
151 It also follows that MEC's opposition under s 42(b) fails. In my view, the use of the RJR marks does not contravene ss 18 or 29 of the ACL.
4. EVIDENTIARY RULINGS
152 During the course of the trial, various objections to evidence were resolved between the parties and I ruled on other objections which do not require separate reasons. These reasons address objections to evidence which were the subject of more substantive argument, concerning the admissibility of various documents downloaded and printed from the internet. Specifically, these reasons explain my rulings that:
(a) paragraphs 42-74 of the affidavit of Emily Maartensz affirmed 5 October 2018, and the exhibits thereto, filed on behalf of MEC, are inadmissible;
(b) paragraphs 4-7, 9-13, 15, 22, 23, 25, 26, 28, 30, 32, 33, 35, 38, 39, 42, 44, 46, 48, 58-67, 69 and 71-76 of the affidavit of Ben Keith Fraser sworn 21 November 2018, and the exhibits thereto, filed on behalf of RJR, are inadmissible (save for paragraph 73 that was not read by RJR); and
(c) paragraphs 6-7 of the affidavit of Zsuzsanna Zalatnai sworn 20 November 2018 and the exhibit thereto, filed on behalf of RJR, are admissible.
4.1 Affidavit of Emily Elizabeth Maartensz
153 RJR objected to paragraphs 42 to 74 to the affidavit of Emily Elizabeth Maartensz affirmed 5 October 2018 and the exhibits referred to in those paragraphs. On 7 March 2019, I ruled that those paragraphs and exhibits were inadmissible. The reasons for that ruling follow.
154 Paragraphs 42 to 74 of Ms Maartensz's affidavit concerned internet, Facebook and Instagram searches undertaken by Ms Maartensz and the results of those searches which were exhibited to the affidavit. With one exception, the evidence was sought to be adduced by MEC to prove that automotive wheels bearing an MEC mark had been offered for sale or sold in Australia. The one exception was a Facebook page which depicted an alloy wheel bearing one of the RJR marks.
155 As discussed earlier in these reasons, MEC adduced evidence that, since 2011, it had licensed a third party, ATD, to manufacture and distribute automotive wheels bearing an MEC mark. A copy of the 2013 licence agreement between MEC and ATD was adduced in evidence. Evidence was also given that ATD distributed those wheels throughout the United States, including through a distributor called "TIS Wheels".
156 Ms Maartensz's online searches fell into a number of categories and it is convenient to consider each of these categories separately.
157 The first category of evidence comprised recent internet searches performed by Ms Maartensz (during September or October 2018) of certain websites that appeared to offer for sale wheels and tyres for automobiles as at the date of the searches. By way of illustration of the first category, one such website had the URL https://www.superperformance.com.au. Ms Maartensz conducted searches of the website in September 2018. She exhibited screenshots of the home page, which represented that Superperformance was a supplier of automotive parts. Ms Maartensz clicked on the "About Us" link and exhibited the results. The page states that the business has been supplying various types of automotive parts since 1979. Ms Maartensz used a search function on the home page and typed in the words "Monster" and exhibited screenshots of the results. Ms Maartensz then clicked on one of the results labelled TIS Wheels and exhibited screenshots of that page. The page appeared to offer for sale automotive wheels produced by TIS wheels which was said to be an American wheel manufacturer. One of the TIS wheels displayed an MEC mark. Ms Maartensz also conducted a "WhoIs" search at the website https://whois.auda.org.au for the domain name "superperformance.com.au" and exhibited a screenshot of the result of that search which represented that the registrant of the domain name was Superperformance Pty Ltd and the contact email was [email protected]. Ms Maartensz then conducted an ASIC search of Superperformance Pty Ltd and exhibited the results which recorded Grant Malseed as the sole director and secretary.
158 The key attribute of this category of evidence is that it concerned offers for the sale of wheels after the priority date. It was not evidence of offers that were current at or before the priority date. Although the "About Us" page contained statements to the effect the business had been operating since 1979, there was no evidence about the period during which the website had been functioning, and no evidence that TIS Wheels bearing an MEC mark had been offered for sale on the website before the priority date.
159 The evidence that fell within this first category comprised the following paragraphs of Ms Maartensz's affidavit and the accompanying exhibits: 42-44 (the Superperformance website), 45-47 and 50 (the Sin City Rims website), 56-60 (the Street Art Wheels website), 61-63 and 65 (the CARiD website), 67-68 (the Hubcap, Tire and Wheel website) and 70-71 (the Monza Imports website). The products offered for sale on the Monza Imports website comprised motorbikes and related articles some of which bore an MEC mark, as opposed to automotive wheels, but the common feature of the evidence is that it concerned offers for sale after the priority date.
160 The second category of evidence comprised recent internet searches performed by Ms Maartensz (during September or October 2018) using the website https://web.archive.org/ (known as the "Wayback Machine") and searches for historical versions of webpages using the functionality of the "archive" website. By way of illustration, Ms Maartensz visited the "archive" website and searched for the URL https://www.sincityrims.com.au/. She exhibited a screenshot of the results of that search. The screenshot depicted a webpage titled "Internet Archive Wayback Machine" with an adjacent statement: "Explore more than 338 billion webpages saved over time". Beneath that statement, the words "Saved 38 times between April 9, 2013 and August 12, 2018" appear, representing that the "archive website" had purportedly captured a record of the Sin City Rims website on 38 occasions during that period. The webpage also depicted a calendar function which enabled each of the 38 dates to be searched to retrieve the captured record of the website. Ms Maartensz clicked on the 23 December 2014 link and exhibited a screenshot of the webpage that appeared as a result of that search. From the webpage, Sin City Rims appeared to be a business that sold automotive wheels. Amongst other things, the webpage depicted a number of brands of wheels or tyres under a heading "Brands", including MEC's M-icon device mark. Ms Maartensz then clicked on the date 28 March 2015 within the timeline and exhibited a screenshot of the webpage that appeared as a result of that search. The webpage displayed offers of wheels, at least one of which bore an MEC mark. Ms Maartensz then clicked on the date 14 January 2014 within the timeline and exhibited a screenshot of the webpage that appeared as a result of that search. She then clicked an eBay link on that page and exhibited a screenshot of the webpage that appeared as a result of that search. The resulting page was dated 6 June 2014, rather than 14 January 2014, indicating that the link on the Sin City Rim webpage that had purportedly been archived did not operate in its original manner. The eBay page displayed offers of wheels, a number of which bore an MEC mark.
161 The key attribute of this category of evidence is the use of the "Wayback Machine" to generate purported historical versions of webpages before the priority date. The evidence that fell within this second category comprised the following paragraphs of Ms Maartensz's affidavit and the accompanying exhibits: paragraphs 48-49 (the Sin City Rims website), 64 and 69 (the CARiD website) and 69 (the Hubcap, Tire & Wheel website).
162 The third category of evidence comprised recent internet searches performed by Ms Maartensz (during September or October 2018) using the Facebook or Instagram links attached to particular websites and searching for current and historical "posts" from those Facebook or Instagram accounts. By way of illustration, Ms Maartensz visited the "Sin City Rims" website in September 2018, clicked on the "Facebook" link and exhibited a screenshot of the landing page for the Sin City Rims Facebook page. That page appeared to depict recent posts. Ms Maartensz then clicked on the "posts" function on the page and, using a search function on the page, typed the word "Monster Energy" and exhibited a screenshot of the results. Amongst other results, this produced a page purportedly depicting a number of posts dated 28 January 2015. The first post contained a picture of a vehicle with a caption "Jarred's PX Ranger rolling out 17x9 Monster Energy 535BM's. Cheers for the pic Jarred." I infer that the post was made by Sin City Rims, but the picture had been sent to Sin City Rims by "Jarred". A subsequent post contained a picture of a vehicle showing a wheel bearing an MEC mark with a caption stating "Jase's FJ & a set of Monster Energy rimsβ¦Very nice". Again, I infer that the post was made by Sin City Rims, but I am unable to determine who took the photo. MEC would wish me to infer that these posts are evidence of the fact that Sin City Rims sold wheels to "Jarred" and "Jase" bearing an MEC mark prior to the date of the posts, being 28 January 2015.
163 The key attribute of this category of evidence is the use of the Facebook and Instagram platforms to search within particular accounts and generate historical posts to those accounts. The evidence that fell within this third category comprised the following paragraphs of Ms Maartensz's affidavit and the accompanying exhibits: 51-52 (the Sin City Rim Facebook account) and 54 (the Tuff AT Wheels Australia Instagram account).
164 The fourth category of evidence comprised recent internet searches performed by Ms Maartensz (during October 2018) on the website https://issuu.com/. Ms Maartensz first conducted searches of the website http://www.monzaimports.com.au/. The website indicated that it sold a range of products, including products in a category called "Moto Division". Ms Maartensz followed links to that section of the website and downloaded current (dated 2018) catalogues titled "Bell Helmets" (which offered for sale motorcycle helmets bearing an MEC mark, amongst others), "FOX M19" (which offered for sale motorcycle clothing bearing an MEC mark, amongst others) and "Pro-Circuit" (which offered for sale motorcycle parts, clothing and accessories bearing an MEC mark, amongst others). I address the admissibility of the current catalogues in connection with the first category of evidence. When searching the Monza Imports website, Ms Maartensz observed that the product catalogues displayed on the website were displayed using an embedded reader called "Issuu". Ms Maartensz then visited that website, typed Monza Imports into the search function and exhibited screenshots of the results. Following further links produced what purported to be historical versions of various catalogues, including the Pro-Circuit and Fox catalogues, in the period before the priority date. The key attribute of this category of evidence is the use of the "Issuu" website to generate what purported to be historic versions of product catalogues.
165 RJR objected to those paragraphs of Ms Maartensz's affidavit on three grounds:
(a) the evidence was irrelevant under s 56 of the Evidence Act 1995 (Cth) (Evidence Act);
(b) the evidence was inadmissible hearsay under s 59 of the Evidence Act; and
(c) the evidence ought be excluded under s 135 of the Evidence Act on the basis that the probative value was substantially outweighed by the danger that the evidence might be unfairly prejudicial to RJR.
166 It is convenient to address each ground of objection separately.
Relevance
167 As to relevance, RJR submitted that the relevant date at which the grounds of opposition must be established is the priority date, 21 January 2015. It followed that a webpage of a business that offered automotive wheels bearing an MEC mark as at 18 September 2018 is irrelevant to the statutory question, which required consideration of the position as at the priority date. As noted earlier, MEC also accepted that the grounds of opposition must be established as at the priority date.
168 I accept RJR's submission that webpages that purported to offer automotive wheels bearing an MEC mark as at 18 September 2018 are irrelevant to the statutory question. For that reason, the paragraphs of Ms Maartensz's affidavit in the first category referred to above, and the accompanying exhibits, are inadmissible on the ground of relevance.
Hearsay
169 All of the website pages sought to be adduced in evidence are hearsay. They are evidence of previous representations and are adduced to prove the facts asserted by the representations. In broad terms, the previous representations were that various products, particularly automotive wheels, bearing an MEC mark were offered for sale on various websites in Australia.
170 MEC submitted that the webpages came within the business records exception in s 69 of the Evidence Act. Relevantly, to satisfy the business records exception, three matters must be shown:
(a) first, that the document either is or forms part of the records belonging to or kept by a person, body or organisation in the course of, or for the purposes of, a business, or at any time was or formed part of such a record;
(b) second, that the document contains a previous representation made or recorded in the document in the course of, or for the purposes of, the business; and
(c) third, the relevant representation in the document was made by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact, or was made on the basis of information directly or indirectly supplied by such a person.
171 The admissibility of website pages under the business records exception has been considered in a number of cases.
172 In Roach v Page (No 27) [2003] NSWSC 1046, Sperling J ruled inadmissible extracts from the websites of two businesses which described the quality control procedures undertaken by each business. His Honour referred to his earlier ruling in Roach v Page (No 15) [2003] NSWSC 939 in which his Honour had observed that not every publication by a business is a "record of the business" within the meaning of s 69. In the earlier ruling (at [5] and [6]), his Honour concluded that:
The records of the business are the documents (or other means of holding information) by which activities of the business are recorded. Business activities so recorded would typically include business operations so recorded, internal communications and communications between the business and third parties.
On the other hand, where it is a function of a business to publish books, newspapers, magazines, journals (including specialised professional, trade or industry journals), such publications are not records of the business. They are the products of the business, not a record of its business activities. Similarly, publications kept by a business such as journals or manuals (say, for reference purposes) are not records of the business.
173 In Roach v Page (No 27), Sperling J concluded that a flyer, media advertisement or a website publication, extolling the virtues of the business, is not a record of a business within the meaning of s 69.
174 The reasoning of Sperling J in Roach v Page (No 15) and Roach v Page (No 27) has been cited on many occasions, including in Hansen Beverage Company v Bickfords (Australia) Pty Ltd (2008) 75 IPR 505 at [133] per Middleton J; National Telecoms Group Ltd v John Fairfax Publications Pty Ltd (No 1) [2011] NSWSC 455 at [70]-[71] per Davies J; McMahon v John Fairfax Publications Pty Ltd (No 4) [2012] NSWSC 216 at [22]-[26] per McCallum J; and ACCC v Air New Zealand Limited (No 5) (2012) 301 ALR 352 per Perram J (ACCC v Air New Zealand Limited (No 5)).
175 Sperling J's rulings were, of course, directed to the specific types of documents in issue before him. In Southern Cross Airports v Chief Commissioner of State Revenue [2011] NSWSC 349, Gzell J cautioned against applying Sperling J's reasoning as a rule of law in place of the statutory test, stating (at [41]-[44]):
I do not understand Sperling J to have spoken categorically about what constituted a business record. In addition to the documents by which activities of a business are recorded I would include as business records documents relevant to the conduct of the business.
The introductory words of s 69(1)(a)(i) of the Evidence Act that the provision applies to a document that is, or forms part of, the records belonging to or kept in the course of, or for the purposes of a business, encompasses more than documents recording the activities of a business.
For example, a valuation of the assets of a business for insurance purposes or for the purpose of determining appropriate depreciation rates does not record the activities of a business but it is kept in the course of, or for the purposes of, the business.
It is preferable, in my view, not to seek to define a business record but to be guided to a decision whether or not a document is a business record by the terms of the statutory provision itself.
176 Similarly, in Charan v Nationwide News Pty Ltd [2018] VSC 3, Forrest J observed (at [463]):
β¦the distinction between "product" and "records" is problematic. It does not appear in the text of s 69(1). The language used in the provision is broad and appears to encompass any documents kept by a person, body or organisation "in the course of, or for the purposes of" a business. To exclude documents that are part of the records of an organisation, however generated and for whatever purpose under this provision (as opposed to a subsequent discretionary exclusion under s 135) involves, I think, an artificial distinction not covered by the wording of the section.
177 As recognised by Perram J in both ACCC v Air New Zealand Limited (No 5) and Voxson Pty Ltd v Telstra Corporation Limited (No. 10) (2018) 134 IPR 99 at [37] (Voxson), there is no invariable rule that pages of a website are not business records within the meaning of s 69. Ultimately, whether the results of an internet search can be shown to be a business record within the meaning of s 69 depends upon the content of the webpage and what is able to be established (whether directly or by inference) about the content of the page. Business records include invoices (as per Asden Developments Pty Ltd (in liq) v Dinoris (No 2) (2015) 235 FCR 382 at [11]-[16] per Reeves J) and contractual terms and conditions and customer communications (as per Dowling v Commonwealth Bank of Australia [2008] FCA 59 at [13], [15] per Reeves J).
178 In my view, documents by which a business offers a product for sale, which typically includes a description of the product and the price and possibly other terms and conditions of the offer, would constitute business records within the meaning of s 69. That would be so whether the documents are made available to potential customers via the company's website or in the company's retail store. However, documents which are merely promotional or descriptive of the activities of a company, such as might be found on an "About Us" link on a website, are unlikely to constitute business records, consistently with the conclusions reached in Roach v Page (No 27) and ACCC v Air New Zealand (No 5).
179 Historic webpages generated through the use of the "Wayback Machine" have been ruled inadmissible in a number of cases: see for example E & J Gallo Winery v Lion Nathan Australia Pty Ltd (2008) 77 IPR 69 at [126] per Flick J; Shape Shopfitters Pty Ltd v Shape Australia Pty Ltd (No 2) [2017] FCA 474 at [23] per Mortimer J; and Voxson at [36]-[37] per Perram J. As observed by Perram J in Voxson, the Wayback Machine website conveys an implicit representation that the website has copied third party webpages into its archive and recorded the date on which it did so and that the webpage which appears in its archive is the webpage which existed on that date. As such, documents produced using the Wayback Machine are necessarily hearsay (indeed, second hand hearsay in the sense that the archived webpage is itself hearsay). In each of the cases referred to above, the business records exception in s 69 was not satisfied as there was no admissible evidence to establish that the archived webpages formed part of the records of the business conducted by the Wayback Machine or that the webpages were created by someone who might be expected to have had personal knowledge of the facts which had been recorded.
180 Turning to the evidence in dispute, it is unnecessary to consider in detail the first category of evidence because I have ruled that it is irrelevant. I observe, though, that if the webpages were relevant, I would have admitted the evidence in so far as it consisted of webpages offering products for sale and where the existence and identity of the business conducting the website was proved.
181 The second category of evidence comprised archived webpages generated by the use of the Wayback Machine. No evidence has been adduced concerning the business of the Wayback Machine. In the absence of such evidence, and consistently with the decisions referred to earlier, I am not satisfied that the archived webpages are business records. I therefore rule them inadmissible.
182 The third category of evidence consists of historical "posts" on Facebook and Instagram accounts maintained by a business. This category raises difficult questions. It is necessary to consider each of the three elements of the definition of business records.
183 The first element is whether the Facebook and Instagram posts sought to be adduced in evidence are or form part of the records belonging to or kept by an entity in the course of, or for the purposes of a business, or at any time were or formed part of such a record. In a business context, the posts are communications by the business concerned to persons who follow the Facebook or Instagram account of the business. I infer that such followers would be past or potential future customers of the business. Taking the Sin City Rims Facebook posts as an example (described above), the posts are not a direct record of a business activity; drawing necessary inferences in favour of MEC, the posts are a form of promotion, publicising the sale of "Monster Energy" wheels. While email communications of a business have been found to be business records (see ACCC v Air New Zealand Limited (No 1) (2012) 207 FCR 448 at [58] per Perram J and the cases there cited), the Sin City Rims Facebook posts are of a different nature in that they are not communications to specific persons but are published more broadly to "followers". Nevertheless, applying the statutory language, it seems to me that the Sin City Rims Facebook posts are documents that form part of the records belonging to or kept by Sin City Rims in the course of or for the purposes of its business. The posts are a record of the communications made by the business to its followers, and are analogous to emails that might be sent to a customer distribution list.
184 The second element is whether the Facebook and Instagram posts contain a previous representation made or recorded in the document in the course of, or for the purposes of, the business. For the reasons already given, I am prepared to find that this second element is also satisfied. I infer that the posts are communications by the business concerned directed to potential customers of the business. However, a more difficult question is to determine what is being communicated by the post, which is relevant to the third element of the definition of business records. MEC asks me to infer that the pictures posted to the Facebook or Instagram accounts display vehicles with wheels bearing an MEC mark sold by Sin City Rims prior to the date of the posts. Certainly that inference is open. But without further evidence, other inferences are also open. It may be that the pictures uploaded to the Facebook and Instagram accounts are pictures taken by "followers" of the businesses concerned, showing products of general interest to the business and other followers, but which were not purchased from the business concerned.
185 The third element is whether the previous representation in the document was made by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact, or was made on the basis of information directly or indirectly supplied by such a person. There are a number of difficulties in satisfying this element in the present case. The first difficulty is identifying what the representation is. The second difficulty, associated with the first, is identifying the source of, and the background to, the photos and information in the posts. As noted above, I infer from the posts that the photos of vehicles that are depicted originated from a third person (Jarred and Jase respectively). That fact does not exclude the application of s 69 (Vitali v Stachnik [2001] NSWSC 303 at [8] per Barrett J). However, given the nature of the Facebook and Instagram posts, there is no basis for the Court to make any clear finding as to what is represented by the post and whether the representation was made by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact, or was made on the basis of information directly or indirectly supplied by such a person.
186 Accordingly, I am not satisfied that the Facebook and Instagram posts are business records and I rule them inadmissible.
187 The fourth category of evidence comprises product catalogues which contained descriptions of various motorcycle related products apparently being offered for sale, some of which bore an MEC mark. In my view, such documents are capable of constituting business records. However, the documents were retrieved from a website called Issuu and there is no evidence concerning that website or any business conducted by it. There is no evidentiary basis to find that the catalogues are business records of Issuu. Nor is there any evidence as to the identity or operation of the businesses that published the catalogues, nor is there any evidence as to whether, where, when and how any such catalogues were made available to members of the public in Australia. For that reason, I am not satisfied that the catalogues are business records and I rule them inadmissible.
General discretion to exclude evidence
188 RJR also submitted that each of the categories of website evidence ought to be excluded under s 135 of the Evidence Act. RJR submitted that the probative value of the evidence was slight for the reason that there was no evidence as to the nature of the businesses that operated the websites, how many customers they might have, or how many people visited their website in a given period. RJR also submitted that admitting the evidence would be unfairly prejudicial to it because it has no opportunity to test the evidence.
189 I accept the submission that the probative value of the contested evidence is slight. At its highest, it presents a snapshot of instances in which automotive wheels or motorcycle related products have been offered for sale and possibly sold in Australia bearing an MEC mark. There is no basis on which to assess the scale of any such offers or sales. For that reason, the evidence has very little probative value to an assessment of the reputation of the MEC marks in Australia.
190 On the other hand, I am not generally persuaded that the admission of the evidence might be unfairly prejudicial to RJR. This is a civil proceeding where the onus rests on MEC. The evidence will be given such weight as it deserves, recognising its shortcomings. Further, it is not entirely the case that RJR could not test the evidence. The evidence was adduced to prove that particular businesses had offered for sale and possibly sold various products in Australia bearing an MEC mark. If it chose, RJR could have subpoenaed the various businesses referred to in the evidence to obtain records of any sales of products bearing an MEC mark. Understandably, RJR has chosen not to do that. But I do not consider that RJR was unable to test the evidence. As such, if the evidence had otherwise been admissible, I would not have exercised the discretion to exclude it under s 135.
4.2 Affidavit of Ben Keith Fraser
191 MEC objected to the whole of the affidavit of Ben Keith Fraser sworn 21 November 2018, other than paragraphs 1 and 50 to 57, on the grounds of relevance and hearsay. Alternatively, MEC asked me to exclude the evidence under s 135. RJR did not read paragraph 73. On 15 April 2019, I ruled inadmissible the following paragraphs and the exhibits thereto: 4-7, 9-13, 15, 22, 23, 25, 26, 28, 30, 32, 33, 35, 38, 39, 42, 44, 46, 48, 58-67, 69 and 71-76. These are my reasons for that ruling.
192 Mr Fraser gave evidence of internet searches he conducted on 23 October 2018 and exhibited screenshots of the results of his searches to his affidavit. Mr Fraser visited the homepage of IP Australia, clicked the "Search trade marks" link and typed the word "Monster" into the search function, producing 816 results. He then filtered the results to "trade mark words" and "registered" status, which reduced the number of results to 246, and exhibited the list of results. Mr Fraser then clicked on the links to several of the listed trade marks, and exhibited a printout of the trade mark details from IP Australia. The details included a depiction of the trade mark, the priority date and the registration date and the goods or services in respect of which the mark was registered.
193 In addition, in respect of some of the listed trade marks, Mr Fraser conducted internet searches of the name of the owner of the mark and/or the mark using Google. By way of illustration, Mr Fraser conducted a search of "Monster Cable", locating a website https://monsterproducts.com.au/, purportedly the Australian website for Monster Cable which described the entity as the largest headphone manufacturer in the world. Mr Fraser then clicked on the "Our Story" tab and exhibited a screenshot of the results, including a page that promoted its collaboration with several brands including the automobile brand Lamborghini. Mr Fraser exhibited screenshots of several other pages of the website that contained promotional descriptions of the business under the "About Monster" link. Mr Fraser repeated this exercise in respect of several other "Monster" marks. In respect of some of the websites visited, Mr Fraser exhibited screenshots of products offered for sale by the business via the website. However, none of the webpages, and therefore none of the offers, were dated before the priority date.
194 RJR submitted that the evidence was adduced to prove the extent to which the word "Monster" had been used by traders in Australia as a trade mark before the priority date. It was submitted that such evidence was relevant to the nature and extent of MEC's reputation in the word "Monster" in the marketplace. To illustrate, it was said that if the evidence showed that there had been extensive use of the word "Monster" as a mark in respect of alloy wheels, and if MEC had not used its marks in that product category, it would be open to the Court to conclude that a notional consumer would not associate the use of the word in that category with MEC. RJR acknowledged that the evidence obtained from the IP Australia website, showing registration of marks, did not directly prove use or extent of use of the marks. However, it submitted that many of the marks were registered before the priority date, in some cases 20 or 30 years earlier, and the Court could draw an inference that at least some of the marks had been used before the priority date. RJR also submitted that the evidence demonstrated that a large number of traders had adopted the name "Monster" with the intention of using the name as a trade mark. RJR also acknowledged that none of the website pages of the businesses that used the "Monster" marks predated the priority date. However, it submitted that the Court could infer that the marks had been used before the priority date because the registration of the marks had been in place well before the priority date.
195 The evidence can be divided into two categories. The first category is the result of searches conducted on the IP Australia website of the trade mark registrations. The objection is that the evidence is irrelevant because registration does not prove use or extent of use before the priority date. I will allow the evidence. I accept that its probative value is limited. Nevertheless, I infer that many of the traders who have registered a "Monster" mark have used the mark at least to some extent, and it follows that there are a significant number of traders who have adopted the "Monster" mark. Although I have not excluded the evidence on the ground of relevance, the evidence has not been material to my overall conclusions in this case.
196 The second category of evidence is the result of Google searches of the name of the owner of the mark and/or the mark. The objection is that the evidence is irrelevant (because it shows use of the marks after the priority date) and is hearsay. I uphold those objections and will not admit that evidence. First, many of the webpages are promotional and descriptive of the businesses (downloaded from the 'About Us' sections of websites). For the reasons explained earlier, such material is inadmissible hearsay. Second, in so far as the webpages are in the nature of offers for products, those offers show use of the marks after the priority date and I cannot infer from the evidence that the relevant company used the marks in a similar manner before the priority date. The evidence is irrelevant for that reason. That evidence is contained in the paragraphs of the affidavit I have ruled inadmissible, and the exhibits thereto.
4.3 Affidavit of Zsuzsanna Zalatnai
197 MEC objected to paragraphs 6 and 7 of the Affidavit of Zsuzsanna Zalatnai sworn 20 November 2018 and exhibit ZZ-3 on the ground of hearsay. On 15 April 2019, I ruled that evidence to be admissible. These are my reasons for that ruling.
198 Ms Zalatnai is the National Marketing Manager for Bob Jane T-Marts. Ms Zalatnai gave evidence that she had collated from Bob Jane T-Marts' computer system data concerning the number of visitors to the Bob Jane website and to pages of that website which featured "Monster" wheels. That data was recorded in exhibit ZZ-3. In further oral evidence in chief, Ms Zalatnai stated that exhibit ZZ-3 was a document printed out from Google Analytics, which was used by Bob Jane T-Marts for measuring traffic to the Bob Jane website. Ms Zalatnai stated that Bob Jane T-Marts had a Google Analytics account which gave access to the information presented in the document. She also stated that Bob Jane T-Marts used the data obtained from Google Analytics to make marketing decisions as to what would be displayed on the Bob Jane website. Bob Jane T-Marts used the data for ongoing marketing campaigns.
199 Exhibit ZZ-3 is hearsay. It is evidence of previous representations (data relating to visits to the Bob Jane website) adduced to prove the facts asserted by the representations. MEC submitted that the document did not come within the business records exception in s 69 of the Evidence Act, in part because it had been prepared in contemplation of litigation within the meaning of s 69(3).
200 Data obtained from Google Analytics by businesses operating websites has been admitted into evidence in a number of cases: Sports Warehouse Inc v Fry Consulting Pty Ltd (2010) 186 FCR 519 at [56]-[57]; Vendor Advocacy Australia Pty Ltd v Seitanidis (2013) 103 IPR 1 at [115]; Pedavoli v Fairfax Media Publications Pty Ltd (2014) 324 ALR 166 at [133]-[134] (Pedavoli); Brooks v Fairfax Media Publications Pty Ltd [2015] NSWSC 986 at [7]; Metro Business Centre Pty Ltd v Centrefold Entertainment Pty Ltd (2017) 127 IPR 1 at [57]-[60], [66]-[68], and [111]; and Pham Global at [62] and [77]. However, in most of those cases, there was no challenge to admissibility.
201 In Pedavoli, an objection was taken to the admissibility of a document recording Google Analytics data. McCallum J concluded that the document was admissible as a business record of the entity that operated the website. Her Honour concluded that the document formed part of the records belonging to the entity for the purposes of its business. Her Honour also found that the document was produced by a computer (using Google Analytics). In accordance with s 146 of the Evidence Act, her Honour considered that it was reasonably open to find that the process used is one that, if properly used, produces the outcome of identifying the number of website page views on the dates in question.
202 With respect, I agree with the conclusions expressed by McCallum J. Although no direct evidence was adduced in relation to the Google Analytics service, I infer from the evidence of Ms Zalatnai and exhibit ZZ-3 that Google Analytics is a service supplied by Google to individual businesses which tracks and records traffic to the business' website. Ms Zalatnai gave evidence that Bob Jane T-Marts has an account with Google Analytics and is able to retrieve such data through the account. Ms Zalatnai also gave evidence that Bob Jane T-Marts uses the data in the course of and for the purposes of the business at Bob Jane T-Marts.
203 I am satisfied that exhibit ZZ-3 satisfies the requirements of the business records exception. Although the data is apparently stored by Google Analytics, and only comes into the possession of Bob Jane T-Marts when it is accessed through the Bob Jane T-Marts account, it is data kept by Google Analytics for Bob Jane T-Marts and is accessible by Bob Jane T-Marts whenever it chooses to access it. The data therefore forms part of the records belonging to Bob Jane T-Marts in the course of and for the purposes of its business. The document contains a previous representation made or recorded in the course of and for the purposes of the business of Bob Jane T-Marts and, given the nature of the Google Analytics service, I infer that the relevant representations in the document were made on the basis of information indirectly supplied by a person who had or might reasonably be supposed to have had personal knowledge of the underlying facts.
204 In my view, s 69(3) is not applicable to exhibit ZZ-3. I infer from the evidence of Ms Zalatnai and exhibit ZZ-3 that Bob Jane T-Marts' account with Google Analytics pre-dated this proceeding. The underlying data was recorded and stored by Google Analytics for Bob Jane T-Marts in an ongoing capacity and the underlying data (which is the relevant representation in the document) was not prepared or obtained for the purpose of conducting, or for or in contemplation of or in connection with, a proceeding.
205 Accordingly, in my view paragraphs 6 and 7 of, and exhibit ZZ-3 to, the Affidavit of Ms Zalatnai are admissible.
5. CONCLUSION AND ORDERS
206 In conclusion, I uphold RJR's appeal against the decision of the delegate of the Registrar of Trade Marks, and I reject each of the grounds of opposition raised by MEC. The orders I will make are to allow the appeal, set aside the decision of the delegate and to order that RJR's trade mark applications proceed to be registered. I will also order that MEC pays RJR's costs of this proceeding and the proceeding before the Registrar of Trade Marks.
I certify that the preceding two hundred and six (206) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Bryan.
Associate:
Dated: 21 June 2019
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Hill, in the matter of Autocare Services Pty Ltd (administrators appointed) [2021] FCA 167
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2021/2021fca0167
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2024-09-13T22:46:38.406687+10:00
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FEDERAL COURT OF AUSTRALIA
Hill, in the matter of Autocare Services Pty Ltd (administrators appointed) [2021] FCA 167
File number(s): NSD 109 of 2021
Judgment of: FARRELL J
Date of judgment: 26 February 2021
Date of publication of reasons: 3 March 2021
Catchwords: CORPORATIONS β application for extension of the convening period for the second meeting of creditors under s 439A(6) of the Corporations Act 2001 (Cth) β application granted
CORPORATIONS β application for modification of operation of s 443A under s 447A of the Corporations Act 2001 (Cth) and s 90-15 of the Insolvency Practice Schedule (Corporations) to limit the liability of administrators under a proposed funding agreement β where funding may be necessary to ensure that the company may pay debts as they fall due during the extended convening period β where administrators not willing to incur personal liability for repayment of debts or satisfaction of liabilities arising under the proposed funding agreement to the extent that the property of the company in administration is insufficient to satisfy those debts and liabilities β application granted
CORPORATIONS β application for directions under s 90-15 of the Insolvency Practice Schedule (Corporations) as to whether the administrators would be justified in entering into the proposed funding agreement β where proposed funder is sole shareholder and possibly is secured creditor and security would apply to advances under the funding agreement β application granted
Legislation: Corporations Act 2001 (Cth) ss 435A, 439A, 443A, 443D, 447A
Corporations Act 2001 (Cth) Sch 2, Insolvency Practice Schedule (Corporations) s 90-15
Federal Court of Australia Act 1976 (Cth) s 37AF
Cases cited: GDK Projects Pty Ltd, in the matter of Umberto Pty Ltd (in liq) v Umberto Pty Ltd (in liq) [2018] FCA 541
Diamond Press Australia Pty Limited [2001] NSWSC 313
In the matter of Harrisons Pharmacy Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) [2013] FCA 458
In the matter of Hawden Property Group Pty Ltd (in liq) (ACN 003 528 345) [2018] NSWSC 481; (2018) 125 ACSR 355
In the matter of Octaviar Administration Pty Ltd (in liq) [2017] NSWSC 1556
In the matter of Renex Holdings (Dandenong) 1 Pty Ltd (administrators appointed) [2015] NSWSC 2002
In the matter of Riviera Group Pty Ltd (admins apptd) (recs & mgrs apptd) [2009] NSWSC 585; (2009) 72 ACSR 352
Re Unlockd Ltd (administrators appointed) [2018] VSC 345
Mighty River International Limited v Hughes [2018] HCA 38; (2018) 265 CLR 480
Re Ansett Australia Ltd (No 3) [2002] FCA 90; (2002) 115 FCR 409
Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 717; (2020) 144 ACSR 347
Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Number of paragraphs: 54
Date of hearing: 25 February 2021
Counsel for the Plaintiffs: Ms T Jonker
Solicitor for the Plaintiffs: Hamilton Locke
ORDERS
NSD 109 of 2021
IN THE MATTER OF AUTOCARE SERVICES PTY LTD ACN 004 497 607 (ADMINISTRATORS APPOINTED)
CHRISTOPHER HILL, JOSEPH HANSELL AND ROSS BLAKELEY IN THEIR CAPACITY AS JOINT AND SEVERAL VOLUNTARY ADMINISTRATORS OF AUTOCARE SERVICES PTY LTD ACN 004 497 607 (ADMINISTRATORS APPOINTED)
First Plaintiff
AUTOCARE SERVICES PTY LTD ACN 004 497 607 (ADMINISTRATORS APPOINTED)
Second Plaintiff
order made by: FARRELL J
DATE OF ORDER: 26 fEBRUARY 2021
THE COURT ORDERS THAT:
1. Pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) and on the ground that the order is necessary to prevent prejudice to the proper administration of justice the following documents are to be marked "confidential" on the electronic court file and are not to be published or accessed, except pursuant to an order of the Court or the written agreement of the plaintiffs until 5 pm on Tuesday, 1 June 2021 or further order:
(a) paragraph 27 and Tab 4 of exhibit CCH-1 to the affidavit of Christopher Clarke Hill sworn on 24 February 2021;
(b) exhibit CCH-2 to the affidavit of Christopher Clarke Hill sworn on 24 February 2021; and
(c) exhibit CCH-3 to the affidavit of Christopher Clarke Hill sworn 25 February 2021.
2. The first plaintiffs (administrators) must file versions of the affidavit and exhibit referred to in Order 1(a) redacted to omit paragraph 27 and Tab 4 by 4 pm on Tuesday, 2 March 2021.
3. Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (Act), the convening period, as defined by s 439A(5) of the Act, with respect to Autocare Services Pty Ltd ACN 004 497 607 (Administrators Appointed) (the Company) be extended up to and including 24 May 2021.
4. Pursuant to s 447A(1) of the Act, Part 5.3A of the Act is to operate in relation to the Company such that the meeting of creditors required by s 439A(1) of that Act, be held at any time during the period as extended under Order 3 above, and the period of five (5) business days thereafter, notwithstanding the provisions of s 439A(2) of the Act.
5. Pursuant to s 447A(1) of the Act, and s 90-15 of the Insolvency Practice Schedule (Corporations) being Sch 2 to the Act (IPSC), Part 5.3A of the Act is to operate in relation to the plaintiffs as if s 443A(1) of the Act provides that:
(a) the liabilities of the administrators (in their capacity as administrators of the Company) incurred with respect to any obligations arising out of, or in connection with any funding agreement substantially in accordance with confidential exhibit CCH-3 to the affidavit of Christopher Clarke Hill sworn 25 February 2021 (Funding Agreement), between the Company, LINX Cargo Care Group Pty Ltd ACN 123 683 885 (LINX) and the administrators are in the nature of debts incurred by the administrators in the performance and exercise of their functions as joint and several administrators of the Company; and
(b) notwithstanding that the liabilities referred to in Order 5(a) are debts incurred by the administrators in the performance and exercise of their functions as joint and several administrators of the Company, the administrators will not be personally liable to repay such debts or satisfy such liabilities to the extent that the property of the Company is insufficient to satisfy the debts and liabilities incurred by the administrators arising out of, or in connection with, the Funding Agreement.
6. Pursuant to s 90-15 of the IPSC, the administrators (in their capacities as administrators of the Company) are justified in causing the Company to borrow monies not exceeding the sum of $6 million pursuant to the Funding Agreement.
7. Pursuant to s 447A(1) of the Act, Part 5.3A of the Act is to operate in relation to the Company such that notice of the second meeting of the creditors of the Company will be validly given to creditors of the Company by:
(a) causing notice to be published on the published notices website of the Australian Securities and Investments Commission (ASIC) at https://insolvencynotices.asic.gov.au;
(b) sending a hyperlink to the notices published on the ASIC published notices website by email to the email address of each creditor at such email address as is recorded in the books and records of the Company;
(c) where an email address is not recorded in the books and records of the Company but a postal address is recorded, sending the notice by posting it to the postal address of each creditor as is recorded in the books and records of the Company; and
(d) where the administrators do not have an email or postal address by publishing the notice on the website maintained by FTI Consulting Australia Pty Ltd (FTI) at https://www.fticonsulting-asia.com/creditors/autocare-services-pty-ltd.
8. The administrators take all reasonable steps to cause notice of these orders to be given, within two (2) business days of making these orders to:
(a) the creditors (including persons claiming to be creditors) of the Company in the following manner:
(i) where the administrators have an email address for a creditor, by notifying each such creditor, via email, of the making of the orders;
(ii) where the administrators do not have an email address for a creditor, but have a postal address for that creditor, by notifying each such creditor, by post, of the making of the orders; and
(iii) where the administrators do not have an email or postal address, by publishing the notice on the website maintained by FTI.
(b) ASIC, by its street address or email address.
9. Liberty to apply be granted to any person, including any creditor of the Company or ASIC, who can demonstrate sufficient interest to vary Orders 3, 4, 7 and/or 8 on the giving of two (2) business days' notice to the plaintiffs, and to the Court.
10. The administrators' costs and expenses of and incidental to the originating process are to be treated as costs in the administrations of the Company.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
FARRELL J:
INTRODUCTION
1 These reasons relate to orders made on 26 February 2021 under s 37AF of the Federal Court of Australia Act 1976 (Cth), ss 439A(6) and 447A of the Corporations Act 2001 (Cth) and s 90-15 of the Insolvency Practice Schedule (Corporations), being Sch 2 of the Corporations Act (IPSC) in relation to the conduct of the administration of Autocare Services Pty Ltd ACN 004 497 607 (administrators appointed) (Company).
2 The material set out below relies on submissions filed on 25 February 2021 (marked MFI-1) and the following evidence:
(a) Two affidavits sworn by Christopher Clarke Hill on 24 February 2021 and exhibits CCH-1 and CCH-2. The first Hill affidavit was filed on 24 February 2021 at 11.47.17 am and the second Hill affidavit was filed on the same day at 11.47.19 am;
(b) The third Hill affidavit sworn and filed on 25 February 2021 and exhibit CCH-3 (proposed funding agreement); and
(c) The affidavit of Emily Grace Pendlebury sworn, affirmed and filed on 26 February 2021.
BACKGROUND
The Company's business
3 The Company provides finished vehicle logistics in the Australian automotive market. Its functions include receipt and delivery of vehicles at the wharf in Australia; processing those vehicles for Australian compliance; storing the vehicles and delivering them to vehicle dealers; as well as providing services to original equipment manufacturers and customs brokerage and freight forwarding. It has capacity to deliver in excess of 600,000 vehicles per annum and 53,000 at any one time on the east coast of Australia.
4 The Company operates in every state and territory in Australia except the ACT. It leases 23 sites from 15 landlords including on-wharf and off-wharf premises covering over two million square meters. The Company has approximately 544 full time or part time employees, 424 of which are subject to enterprise agreements for each State or Territory. A significant number of the employees are represented by trade unions. There are approximately 113 subcontractors.
LINX
5 The Company is a wholly owned subsidiary of LINX Cargo Care Group Pty Ltd ACN 123 683 885 (LINX), an Australian and New Zealand based diversified logistics infrastructure and solutions provider. LINX also claims to be a secured creditor of the Company. LINX provides a range of corporate services to the Company, including finance, treasury and payroll; legal and insurance services; health, safety and environment; information technology; and human resources. It also provides the Company with some senior management on a shared services basis, with the Company being charged for the provision of those services.
Appointment of administrators and committee of inspection
6 On 4 February 2021, Christopher Hill, Joseph Hansell and Ross Blakeley were appointed as joint and several voluntary administrators of the Company pursuant to a resolution of its sole director under s 436A of the Corporations Act.
7 The first creditors' meeting was held on 16 February 2021; a committee of inspection was appointed and the creditors did not choose to appoint another administrator. The committee of inspection comprises:
(a) Robert Mills on behalf of Australian Amalgamated Terminals Pty Ltd (a landlord);
(b) Christine Allsopp on behalf of CG & C Enterprises Pty Ltd (a trade supplier);
(c) Andrew Bruce on behalf of Sea Road Shipping Pty Ltd (a trade supplier);
(d) Tim Hickey on behalf of Alliance Promotions Pty Ltd (a trade supplier);
(e) Jenny Draper on behalf of Port of Brisbane Pty Ltd (a landlord);
(f) Eliza Anning on behalf of LINX (a secured creditor);
(g) Amanda Swan on behalf of Perth Airport Pty Ltd (a landlord);
(h) David Smith of the Australian Manufacturing Workers Union members on behalf of Jason Budd (an employee of the Company);
(i) Claud Chaaya on behalf of AIMS Funds Management (a landlord); and
(j) Graham Harrison on behalf of YMTR Pty Ltd trading as Transport 2000 (a trade supplier).
Company's financial position
8 Based on information available to Mr Hill, the Company has experienced successive years of volatile market conditions, declining vehicle volumes, and increasing operating costs on a proportional basis which have had a significant impact on the Company's ongoing financial viability as a going concern.
9 As at 18 February 2021, the Company had approximately $15,993,014.66 in cash at bank (in pre and post administration accounts) but its income is not sufficient to cover liabilities.
10 The Company's books and records show:
(a) $91,764.91 owing to secured creditors (other than LINX) as at 4 February 2021. That figure was derived by cross-referencing the Company's master creditor list against creditors who have lodged Personal Property Securities Register (PPSR) registrations against the Company;
(b) $734,904 owing to trade creditors as at 4 February 2021;
(c) $3,536,446.14 owing to landlords in relation to lease liabilities;
(d) $2,434,945 owing to subcontractors up to and including 11 February 2021; and
(e) $6,349,525 owed in accrued employee entitlements as at 11 February 2021.
11 However the lodged proofs of debt, invoices and other searches demonstrate a different position:
(a) LINX, which is possibly the senior secured creditor, has lodged a proof of debt for $116,125,649 comprising (1) shareholder loans assigned to LINX in 2016 and 2019 for an aggregate value of $75,130,256 (including interest); and (2) a working capital loan agreement with no limit and a project capital loan facility, with a current liability of $40,995,393 to which Mr Hill understands there are attached 203 PPSR registrations. The Company has also entered into an agreement for a line of credit of $14 million from a subsidiary of LINX but at the date of swearing the first Hill affidavit, Mr Hill was unable to locate a copy of that document;
(b) Secured creditors (other than LINX) have lodged proofs of debt for a total of $555,585.69. There are approximately 80 PPSR registrations in favour non-LINX entities. It is Mr Hill's preliminary view that many of these registrations relate to a range of assets used in the day-to-day operations of the Company, including assets owned by original equipment manufacturers that are being transported and processed by the Company. However, at this stage the administrators have been unable to verify this independently on a case-by-case basis and therefore to audit and value the assets in the possession of the Company.
(c) The Australian Taxation Office has lodged a proof of debt for one dollar but the books and records do not include any amounts owing to the ATO;
(d) The Chief Commissioner of State Revenue has lodged a proof of debt for $72,412.27;
(e) The City of Melbourne is owed $74,365.58 but it has not lodged a proof of debt;
(f) 10 landlords have lodged proofs of debt for $208,891,922.15 (including $188 million claimed by the Port of Brisbane Pty Ltd). As at 24 February 2021, the administrators identified 23 invoices from nine landlords totalling $786,162.02 (including GST) for the period up to and including 3 February 2021 and 33 invoices from 11 landlords totalling $7,380,948.03 (including GST) for the post-appointment period, covering rent, outgoings and other property related charges. The Port of Melbourne has been paid up to 31 March 2021. Before the administrators' appointment, the Company paid 10 landlords up to 31 January 2021 and the next payment of rent was due on or about 1 March 2021. Mr Hill's initial enquiries have established bank guarantees of approximately $17,977,506 in favour of 10 landlords and he is not aware that any bank guarantee has been called upon.
LINX indemnity
12 The administrators have confirmed that LINX and the Company entered into a deed of obligation and indemnity on 23 December 2020 (LINX indemnity) pursuant to which the Company agreed to indemnify LINX for demands made for payment under letters of credit and bank guarantees which have been issued in favour of lessors in relation to property occupied by the Company.
Reasons for the Company's failure
13 The administrators have identified, on a preliminary basis, the following reasons for the Company's failure:
(a) A three year automotive industry market downturn;
(b) Decline in new vehicle sales resulting in less demand for the Company's services;
(c) Structural change in original equipment manufacturer supply chains resulting in disproportionate risk allocation borne by the Company;
(d) Reduced storage commitment from original equipment manufacturers (resulting from reduced demand) resulting in malalignment with the scale of the Company's operational costs, including the number of sites;
(e) Fixed costs have increased above price increases, resulting in a net loss; and
(f) The COVID-19 pandemic and associated economic uncertainty which has exacerbated the previously identified issues as well as causing supply chain disruption for original equipment manufacturers which has had a flow on effect on the Company.
Work done since the administrators were appointed
14 Since their appointment, the administrators have:
(a) Continued to trade the Company with a view to maximising the value available to creditors through a sale of the Company's businesses or recapitalisation;
(b) Investigated the financial position of the Company including obtaining records from the Company's accountant for FY19 and earlier, and management accounts for FY20, analysed historical trading results of the Company and commenced analysis of the Company's solvency and estimated insolvency date as well as preparing forecasts for the administrators to consider the near term prospects of a sale or recapitalisation;
(c) Identified as many of the creditors of the Company as possible and identified and contacted the approximately 80 holders of PPSR registrations against the Company. As at 24 February 2021, the administrators were not able to confirm the total amount of debt owing to unsecured creditors;
(d) Obtained the support of LINX as the major secured creditor for the administration process, including LINX's agreement to continue to provide a variety of critical services to the Company, as well as a potential line of funding for $6 million pursuant to the proposed funding agreement between the Company, LINX and the administrators;
(e) Paid one landlord, the Port of Melbourne, up to 31 March 2021 and commenced negotiations with certain landlords with a view to renegotiating lease terms and, wherever possible, avoiding landlords calling on bank guarantees and letters of credit which would trigger the LINX indemnity;
(f) Engaged in discussions with trade union representatives and subcontractors;
(g) Sought the production of a report on company activities and property (ROCAP) from the directors and officers of the Company, which was to be provided on or before 26 February 2021;
(h) Corresponded with the Company's suppliers to maintain the Company's current trade to preserve the value of the business with key stakeholders;
(i) Corresponded with the Company's customers regarding renegotiation of the terms and conditions of ongoing supply;
(j) Prepared for and held the first creditors' meeting;
(k) Made all necessary filings with the Australian Securities and Investments Commission and notified the Australian Tax Office (ATO) and other government bodies of their appointment;
(l) Engaged insurance brokers to correspond with the Company's insurers in relation to pre-appointment insurance and to advise the administrators with respect to coverage requirements;
(m) Prepared for and launched a process for the sale or recapitalisation of the business (Sale Process), including advertisements placed in the Australian Financial Review and The Australian on 10 and 17 February 2021.
Further work required
15 Further work is required to investigate properly the Company's business, property, affairs and financial circumstances including establishing the quantum of the Company's debts, finalising calculations with respect to employee entitlements as stipulated by a number of enterprise agreements, continuing to investigate various enterprise agreements and engage with trade unions in a productive manner and pursuing debtors for amounts outstanding. There also remain a large number of records and information yet to be received (including the ROCAP).
16 Further, the administrators' timeline for the Sale Process would see interested parties submit indicative offers by the beginning of March, with a short list to be developed and detailed due diligence leading to final bids taking approximately eight weeks. As confirmed by counsel for LINX who appeared at the hearing on 26 February 2021, there is a reasonable prospect of a deed of company arrangement being proposed by LINX. That will also take time to be developed, negotiated, considered and then presented to creditors.
17 Having regard to the stage of the administration and the timeline required to run a Sale Process which tests the market and for the administrators to undertake restructuring initiatives, the administrators are presently unable to provide any meaningful recommendation or proposal to creditors at the second creditors' meeting. Given the complexity of the Company's affairs, Mr Hill considers that a period of up to 90 days to 24 May 2021 is required to carry out the required activities. Without extension, the convening period for the second creditors' meeting under s 439A(5)(a) of the Corporations Act would end on 5 March 2021. Immediate liquidation would not be in the best interests of creditors but there would be no alternative at that time.
Notification of creditors concerning application for extension of the convening period
18 The creditors of the Company were notified of the administrators' intention to seek an extension of the convening period by a newsletter sent to creditors via email on 12 February 2021, at the first creditors' meeting and by an email sent to the known creditors on 22 February 2021. Both Mr Hill and Ms Pendlebury give evidence that no creditor has indicated that they oppose extension of the convening period to 24 May 2021 and LINX supports the application.
Administrators' opinion concerning prejudice to creditors if the convening period is extended
19 It is the administrators' opinion that the creditors will not be materially prejudiced by the extension of the convening period because:
(a) The administrators will be personally liable for rent accrued and services engaged in on behalf of the Company from 11 February 2021 pursuant to s 443B of the Corporations Act until the end of the administration, be it through a recapitalisation, deed of company arrangement or the Company entering into liquidation. Rent accrued during the administration is an expense of the administration and may be afforded a priority on a liquidation of the Company should that occur;
(b) All employee entitlements will be met by the administrators during the administration; wages will be paid in the ordinary course and superannuation contributions will be funded and paid up to date including pre-appointment amounts; and
(c) The administrators will continue to meet all approved supplier expenses incurred after their appointment during which the Company trades,
albeit that the administrators have identified no recoveries which would enable them to further investigate or pursue whether the extension would have an adverse impact on creditors.
Administrators' opinion
20 It is Mr Hill's view that enabling the Company to continue to trade in New South Wales, the Northern Territory, Queensland, South Australia, Victoria and Western Australia while they conclude the further work required in relation to the Sale Process will provide the most value to creditors of the Company and it is therefore in the best interests of the creditors as a whole because:
(a) The Company relies on the ongoing support of its customers and the Company is a critical component in the supply chain of its customers. The ability to maintain business as usual is paramount in maintaining the support of customers, which will greatly preserve the value of the Company and maximise the outcome of the Sale Process;
(b) While the Company has significant assets on its balance sheet, the likely recoveries from the sale of the assets in the event its business was not trading would be significantly less than via the sale of its business as a going concern;
(c) If the Company ceases to trade and it is unable to service its customers, the customers may seek damages against the Company, increasing the quantum of the Company's unsecured debt and further reducing the likelihood of any favourable return to unsecured creditors as a whole. It would also reduce the likelihood of the Company being able to recover any amounts owing from its customers and/or protract the collections of these debts as they are resolved;
(d) If the orders for extension of the convening period were not to be made and the Company were to cease trading, the administrators would be forced to recommend to creditors that they vote at the second creditors' meeting in favour either of an adjournment of the meeting or liquidation as there is unlikely to be any alternative to put forward at that time. A liquidation is likely to create significant challenges in achieving any kind of sale as a going concern, while an adjournment would create both additional costs in terms of multiple reports to creditors and provide a significantly shorter period to achieve a sale or recapitalisation of the Company.
Possible cash deficiency during an extended convening period and proposed funding agreement
21 In the second Hill affidavit, Mr Hill deposes to the fact that exhibit CCH-2 (which was prepared by the administrators with input from finance staff from the Company and LINX) demonstrates a steady decline in the Company's cash balance over the forecast period. While it does not indicate a current funding need, the administrators remain concerned that if they continue to trade the Company's business for the extended convening period, there is a significant risk that they will have temporary cash deficiencies resulting in an inability to meet all liabilities as and when they fall due, particularly during April and May 2021, which might result in the administrators being unable to continue to trade the Company.
22 The causes of concern are the possibility of customers delaying payments beyond contracted terms which could create temporary cash flow deficits towards the end of the month; any additional payments associated with the restructuring of the businesses' cost base (for instance, employee redundancies or property transition costs) which the administrators are currently unable to forecast since they depend on ongoing negotiations; and, potential loss of customers and associated revenue as a consequence of negotiations. Committed funding would provide flexibility to enable the administrators to negotiate rationalisation of sites with landlords.
23 The proposed funding agreement would provide the administrators with up to $6 million, enough funds to continue to trade the Company on an interim basis during the extended convening period. The funding may be provided for working capital and approved capital projects or otherwise as authorised by LINX; or to pay employee wages and entitlements and subcontractor payments, with up to $5 million quarantined to the latter purpose.
24 Mr Hill deposes that that the Company's creditors would not be prejudiced and they would stand to benefit from the Company entering into the proposed funding agreement because:
(a) Ongoing trade creditors will have certainty of payment during the extended convening period, allowing the Company to maintain its relationship with them, and employees and subcontractors will be retained, all of which is beneficial to the prospect of maintaining the Company as a going concern and achieving the best outcome in the Sale Process.
(b) Subject to confirmation of the validity of LINX's asserted security, in a liquidation scenario it is unlikely ordinary unsecured creditors will receive a return because the asserted secured debt exceeds $100 million and it is unlikely that that would be met in full.
(c) LINX's consent is required to the Company entering into any third party funding (in the unlikely event that it would be available) because of LINX's priority position and the administrators have not identified any alternate funding. The proposed interest and borrowing costs are not excessive or uncommercial in those circumstances.
(d) Amounts which may be advanced under the proposed funding agreement will be secured under the LINX indemnity. Amounts may only be advanced under the proposed funding agreement where the administrators can demonstrate a cash deficiency. The second Hill affidavit sets out at [21] the circumstances in which the proposed funding agreement may be terminated.
EXTENSION OF THE CONVENING PERIOD
25 Under s 439A(6) of the Corporations Act, the Court has power to extend the convening period specified in ss 439A(5)(a) or (b) upon an application made during or after that period. Further matters must be addressed where the application is made after the end of the convening period: see s 439A(7) and (8), but those provisions do not apply in this case because the application for extension was made before the end of the convening period.
26 In determining whether and for what period to extend time for convening a second meeting of creditors under s 439A or s 447A of the Corporations Act, the Court must have regard to the objects of Part 5.3A set out in s 435A and reach an appropriate balance between the expectation that an administration will be relatively speedy and summary and the countervailing factor that undue speed should not be allowed to prejudice sensible and constructive actions directed to maximising a return for creditors: In the matter of Diamond Press Australia Pty Limited [2001] NSWSC 313 (Barrett J).
27 The administrator's view on an application of this kind is significant and, particularly where the administration is complex, it should carry weight: see In the matter of Renex Holdings (Dandenong) 1 Pty Ltd (administrators appointed) [2015] NSWSC 2002 (Black J) at [9].
28 Another relevant factor is the need for the administrators to provide a report and recommendation to creditors in a way that would allow them to make an informed decision at the second meeting as to whether the company should be returned to its directors, a deed of company arrangement should be executed (if proposed), or the company should be allowed to pass into voluntary liquidation: In the matter of Harrisons Pharmacy Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) [2013] FCA 458 (Farrell J) at [13] and the cases there cited.
29 As noted by Austin J in In the matter of Riviera Group Pty Ltd (admins apptd) (recs and mgrs apptd) [2009] NSWSC 585; (2009) 72 ACSR 352 at [14]-[18] and approved by Nettle and Gordon JJ in Mighty River International Limited v Hughes [2018] HCA 38; (2018) 265 CLR 480 at [73], where a substantial issue in any of the accepted categories of reasons justifying an extension is established the Court tends to grant an extension and the extension tends to be for the time sought by an administrator provided that the evidentiary case has been properly prepared, there is no evidence of material prejudice to those affected by the moratorium imposed by an administration, and the Court is satisfied that the administrator's estimate of time has a reasonable basis.
30 In this case, the Court accepts that the convening period should be extended for the period proposed by the administrators because:
(a) The administration is complex due to the size and scope of the Company's business. It operates from 23 sites across the country with 15 landlords, some of whom hold guarantees which may trigger the LINX indemnity;
(b) Employee entitlements are attended by complexity as there are 424 of 544 employees who are subject to eight different enterprise agreements, some of which will expire over the next two months. A significant number of employees are represented by trade unions with whom the administrators are negotiating. There are 113 subcontractors;
(c) LINX currently conducts a number of functions which support the Company's business;
(d) The administrators have identified 80 PPSR registrations where it is unclear whether the registrations relate to assets owned by original equipment manufacturers;
(e) LINX claims that it and its subsidiary have made significant intercompany loans in respect of which it claims 203 PPSR registrations. The administrators are still assessing the extent of the security claimed by LINX in relation to these loans and under the LINX indemnity;
(f) The administrators need more time to complete investigations into the business, property and affairs of the Company and to progress the Sale Process, including the possible negotiation of a deed of company arrangement with LINX.
(g) Further work needs to be done so as to put the administrators in a position to make a recommendation to creditors in relation to the course they should adopt at the second creditors' meeting in choosing between returning the Company to its director, entering into a deed of company arrangement or liquidation. In the administrators' opinion, if it were necessary to hold the second creditors' meeting imminently, the administrators would likely need to recommend that the Company be placed in liquidation or the meeting adjourned for a period unlikely to be long enough to conduct an appropriate Sale Process, but they do not consider that either of those outcomes would be in the best interests of the Company's creditors and shareholder. It is their view that the best interests of the Company's creditors are served by them continuing to trade its business and to progress the Sale Process;
(h) For reasons given above, the extension of the convening period is unlikely to prejudice materially the interests of creditors, including landlords and employees. The creditors have been notified of the application for extension of time and they do not oppose it, while LINX (the sole shareholder and a secured creditor) supports it; and
(i) The proposed orders include liberty for any person who can demonstrate sufficient interest to approach the Court to modify or discharge the orders extending the convening period.
LIMITATION OF ADMINISTRATORS' LIABILITY UNDER THE PROPOSED FUNDING AGREEMENT
31 The administrators also seek orders under s 447A of the Corporations Act and s 90-15 of the IPSC modifying the operation of s 443A so as to limit their personal liability with respect to debts and liabilities they incur under the proposed funding agreement to the value of their indemnity against the Company's property under s 443D.
32 Section 443A provides:
443A General debts
(1) The administrator of a company under administration is liable for debts he or she incurs, in the performance or exercise, or purported performance or exercise, of any of his or her functions and powers as administrator, for:
(a) services rendered; or
(b) goods bought; or
(c) property hired, leased, used or occupied, including property consisting of goods that is subject to a lease that gives rise to a PPSA security interest in the goods; or
(d) the repayment of money borrowed; or
(e) interest in respect of money borrowed; or
(f) borrowing costs.
(2) Subsection (1) has effect despite any agreement to the contrary, but without prejudice to the administrator's rights against the company or anyone else.
33 Section 443D provides:
443D Right of indemnity
The administrator of a company under administration is entitled to be indemnified out of the company's property (other than any PPSA retention of title property subject to a PPSA security interest that is perfected within the meaning of the Personal Property Securities Act 2009) for:
(a) debts for which the administrator is liable under Subdivision A or a remittance provision as defined in subsection 443BA(2); and
(aa) any other debts or liabilities incurred, or damages or losses sustained, in good faith and without negligence, by the administrator in the performance or exercise, or purported performance or exercise, of any of his or her functions or powers as administrator; and
(b) the remuneration to which he or she is entitled under Division 60 of Schedule 2 (external administrator's remuneration).
34 Section 447A provides:
447A General power to make orders
(1) The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company.
(2) For example, if the Court is satisfied that the administration of a company should end:
(a) because the company is solvent; or
(b) because provisions of this Part are being abused; or
(c) for some other reason;
the Court may order under subsection (1) that the administration is to end.
(3) An order may be made subject to conditions.
(4) An order may be made on the application of:
β¦
(c) in the case of a company under administrationβthe administrator of the company; or
β¦
35 Section 90-15 of the IPSC relevantly provides:
90-15 Court may make orders in relation to external administration
Court may make orders
(1) The Court may make such orders as it thinks fit in relation to the external administration of a company.
Orders on own initiative or on application
(2) The Court may exercise the power under subsection (1):
(a) on its own initiative, during proceedings before the Court; or
(b) on application under section 90-20.
Examples of orders that may be made
(3) Without limiting subsection (1), those orders may include any one or more of the following:
(a) an order determining any question arising in the external administration of the company;
β¦
Section does not limit Court's powers
(7) This section does not limit the Court's powers under any other provision of this Act, or under any other law.
36 Section 5-20(a) of the IPSC includes an administrator in the definition of "external administrator". An external administrator has a "financial interest" in the external administration of a company under s 5-30(a)(iii). Section 90-20(1)(a) authorises a person with a financial interest in the external administration of a company to make an application for orders under s 90-15.
37 While it is now settled that the Court has wide powers to modify the operation of Part 5.3A in relation to a particular company under s 447A of the Corporations Act and s 90-15 of the IPSC, such orders must be made in pursuit of the objects of Part 5.3A as set out in s 435A as follows:
435A Object of Part
The object of this Part, and Schedule 2 to the extent that it relates to this Part, is to provide for the business, property and affairs of an insolvent company to be administered in a way that:
(a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or
(b) if it is not possible for the company or its business to continue in existenceβresults in a better return for the company's creditors and members than would result from an immediate winding up of the company.
Note: Schedule 2 contains additional rules about companies under external administration.
and where there is recourse to the IPSC, regard should also be had to its objects set out in s 1-1 of the IPSC which relevantly provide as follows:
1-1 Object of this Schedule
β¦
(2) The object of this Schedule is also:
(a) to regulate the external administration of companies consistently, unless there is a clear reason to treat a matter that arises in relation to a particular kind of external administration differently; and
(b) to regulate the external administration of companies to give greater control to creditors.
38 The considerations and case law relevant to an application under s 447A for modification of the application of s 443A were summarised by Sloss J in Re Unlockd Limited (administrators appointed) [2018] VSC 345 (Unlockd Limited) at [60]-[64]:
[60] In the leading case of Secatore, in the matter of Fletcher Jones and Staff Pty Ltd (admins apptd) [2011] FCA 1493 (Secatore), Gordon J stated (at [23]):
Section 447A(1) of the Act empowers the Court, in an appropriate case, to modify the operation of s 443A to exclude personal liability on the part of a voluntary administrator, and to provide that a loan taken by the company via the voluntary administrator is repayable on a limited recourse basis. Orders in similar terms have frequently been made in circumstances where the Court is satisfied that an administrator has entered into a loan agreement or other arrangement to enable the company's business to continue to trade for the benefit of the company's creditors: see, for example, Re Ansett Australia Ltd (No 1) at [49]; Re Spyglass Management Group Pty Ltd (admin apptd) (2004) 51 ACSR 432 at [6]; Sims; Re Huon Corporation Pty Ltd (admins apptd) (2006) 58 ACSR 620 at [12]; Re Malanos [2007] NSWSC 865 at [13].
[61] In such circumstances, courts have held that it is not to be expected that the voluntary administrators should expose themselves to substantial personal liabilities: see e.g. Re Renex Holdings (Dandenong) 1 Pty Ltd [2015] NSWSC 2003, [13] (Black J); Preston, in the matter of Hughes Drilling Limited [2016] FCA 1175 (Hughes Drilling), [18] (Yates J). See also Korda, in the matter of Ten Network Holdings Ltd [2017] FCA 1144, [43]-[44] (Markovic J).
[62] In Secatore, Gordon J also observed (at [29]) that if orders are made relieving administrators from personal liability in respect of borrowings, it will permit them to make commercial decisions about the ongoing operations by focussing on what is in the best interests of the creditors 'uninfluenced by concerns of personal liability.'
[63] In Re Great Southern Infrastructure Pty Ltd [2009] WASC 161 (Great Southern) at [13], Sanderson M observed that:
The material consideration on such an application is whether the proposed arrangements are in the interests of the company's creditors and consistent with the objectives of Pt 5.3A of the Act. To put that proposition positively β the question is whether the court is satisfied the proposed arrangements are for the benefit of the company's creditors. To put it negatively β the question is whether the court is satisfied the company's creditors are not disadvantaged or prejudiced by the proposed arrangement. These principles have been confirmed in a large number of cases.
[64] In Re Mentha (in their capacities as joint and several administrators of the Griffin Coal Mining Company Pty Ltd (admins apptd) (2010) 82 ACSR 142; [2010] FCA 1469, Gilmour J summarized the principles governing the granting of an application for orders under s 447A to vary the liability of administrators under s 443A as follows (at [30]):
(a) the proposed arrangements are in the interests of the company's creditors and consistent with the objectives of Part 5.3A of the Corporations Act: Re Great Southern at [13].
(b) typically the arrangements proposed are to enable the company's business to continue to trade for the benefit of the company's creditors: Re Malanos at [9] and Re View at [17].
(c) the creditors of the company are not prejudiced or disadvantaged by the types of orders sought and stand to benefit from the administrators entering into the arrangement: Re View at [18], and also Re Application of Fincorp Group Holdings Pty Ltd [2007] NSWSC 628 at [17].
(d) notice has been given to those who may be affected by the order: Re Great Southern at [12].
39 In Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 717; (2020) 144 ACSR 347 at [89], Middleton J adopted those passages from Unlockd Limited as the principles to be applied in an application of this kind and went on to say at [90]-[91]:
90 Orders are commonly sought limiting an administrator's personal liability where a company borrows funds from an external financier to fund the ongoing trading of the business during the administration: Korda, in the matter of Ten Network Holdings Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2017] FCA 1144 at [42] ('Ten Network') (Markovic J).
91 There can be no doubt that in the appropriate circumstances, personal liability can be excluded with respect to any arrangement where that enables the company's business to continue to trade for the benefit of the company's creditors. Further, s 447A can also be used to avoid liability before it is imposed: Silvia v FEA Carbon Pty Ltd (2010) 185 FCR 301 at [14] (Finkelstein J).
40 Applying those principles:
(a) I am satisfied that the proposed funding agreement is in the interests of the Company's creditors as a whole and making the proposed orders is consistent with the objectives of Part 5.3A of the Corporations Act because:
(i) I accept the administrators' opinion that it is the best interests of the Company's creditors to enter into the proposed funding agreement so that the administrators may continue to trade the Company's business during the extended convening period.
(ii) The administrators have demonstrated a basis for their view that the Company may not have sufficient cash to meet its liabilities, particularly during April and May 2021 without access to funding. Ceasing trading would significantly jeopardise the prospect of the administrators being able to sell or recapitalise the Company as a going concern. It is their view that the outcome for creditors would be materially worse if the Company's business or assets were to be sold in the course of an immediate liquidation of the Company without the Sale Process being completed.
(iii) Having regard to the terms of s 443A, should the assets of the Company be insufficient to discharge the liabilities of the administrators incurred during the administration, including amounts owing under the proposed funding agreement, there is a risk they would be personally liable to repay amounts advanced under the agreement. They are not prepared to take that risk. Accordingly, they will not enter into the proposed funding agreement unless the Court makes orders modifying the effect of s 443A in relation to the agreement.
(iv) Funding will provide the Company with working capital and funding for capital requirements and other agreed purposes. Approximately eighty per cent of the funding will be reserved to enable the Company to meet employee wages and entitlements and subcontractor payments. It is likely that redundancies consequent on restructuring the Company's business will be paid from these funds.
(b) I am satisfied that creditors will not be materially prejudiced by the administrators entering into the proposed funding agreement because:
(i) LINX will be obliged to advance funds under the proposed funding agreement where the administrators can demonstrate that there will be a deficiency in the cash required to meet forecast expenses of the Company and may refuse to advance funds if that cannot be demonstrated. It is therefore likely not to be utilised unless there is a projected cash deficiency.
(ii) The proposed funding agreement is with LINX. It is the administrators' opinion that, if the Company were to be immediately wound up, the amount realised in the liquidation is unlikely to meet the secured debt that LINX currently claims. Unless funding is available, the Company may need to cease to trade with the likelihood of immediate winding up.
(iii) It is the administrators' view that obtaining funding from any other source is not viable as it would need LINX's consent.
(iv) In their view, the terms of the proposed funding agreement are not excessive or uncommercial.
(c) I am satisfied that notice of the administrators' intention to apply for the relief relating to the proposed funding agreement was sufficiently provided to creditors by way of the notification to creditors dated 22 February 2021, albeit without reference ss 443A or 447A specifically.
ADVICE TO THE ADMINISTRATORS
41 The administrators seek a direction under s 90-15 of the IPSC to the effect that the administrators (in their capacities as administrators of the Company) are justified in causing the Company to borrow monies not exceeding the sum of $6 million pursuant to the proposed funding agreement.
42 Section 90-15(3)(a) confers a broad power on the Court to make "an order determining any question arising in the external administration of the company". Where judicial advice is sought in the context of an administration, the only statutory constraint on the exercise of that power is the need to consider whether or not the provision of that advice advances the objects of Part 5.3A set out in s 435A of the Corporations Act and is not inconsistent with the objects of the IPSC set out in s 1-1(2) with respect to administrations.
43 Courts commonly take some guidance from principles applied to the provision of judicial advice under previous regimes. It is uncontroversial that powers of this kind are intended to facilitate the performance of an external administrator's functions and should be interpreted widely to give effect to that intention where it is advantageous to the administration, but Courts will generally be reluctant to give directions concerning the making or implementation of a business or commercial decision: see In the matter of Octaviar Administration Pty Ltd (in liq) [2017] NSWSC 1556 (Black J) at [9]. Further, the protection afforded by such an order must be predicated on the external administrator having made full and fair disclosure of all relevant facts and circumstances to the Court: see Re Ansett Australia Ltd (No 3) [2002] FCA 90; (2002) 115 FCR 409 at [44] (Goldberg J).
44 Some care should be taken with the application of principles derived from the statutory predecessors of ss 90-15(1) and (3)(a) to ensure that the power conferred by those provisions is not constrained by limitations imposed by no longer enacted requirements. As noted by Gleeson JA in In the matter of Hawden Property Group Pty Ltd (in liq) (ACN 003 528 345) [2018] NSWSC 481; (2018) 125 ACSR 355 at [8], unlike the now repealed ss 479(3) and 511 of the Corporations Act, s 90-15(3)(a) accommodates the determination of substantive rights, provided appropriate notice has been afforded to potentially affected parties. Having said that, as I remarked in GDK Projects Pty Ltd, in the matter of Umberto Pty Ltd (in liq) v Umberto Pty Ltd (in liq) [2018] FCA 541 at [33]: "despite the breadth of s 90-15(1), it is difficult to envisage circumstances where the power would be exercised if the Court could not be satisfied that it would be just and unless the applicant had demonstrated sufficient utility to the external administration".
45 The administrators concede that the decision to enter into the proposed funding agreement is "not uncommercial", but they submit that it is attended by complexity and it is foreseeable, though not foreshadowed, that they would be open to a claim that they had acted unreasonably or inappropriately by causing the Company to enter into and perform obligations under it.
46 While the administration is complex, it is not clear that the decision to enter into the proposed funding agreement is. There may be some complexity arising from the time at which the LINX indemnity was entered into (23 December 2020), at a time when discussions had already commenced about the possibility of the Company entering into voluntary administration. That would confer a priority on LINX for future advances. However, the administrators have indicated that they are not willing to accept risk arising from entering into the proposed funding agreement and they have demonstrated that there is a real benefit to the administration in ensuring that there is sufficient cash available during the convening period to avoid having to make the decision to cease trading, which would likely have an impact on the Sale Process and the value that might be obtained from it. Further, the proposed advice relates to borrowings of $6 million, not a great amount in the scheme of the administration, albeit that its availability may confer significant benefit in allowing the administrators to undertake necessary reconstruction of the Company's business confidently and avoid the need to cease trading during the Sale Process.
47 In all of the circumstances, I am satisfied that the Court has power to give the advice sought under ss 90-15(1) and(3)(a), that it involves no injustice and confers a benefit on the administration which will assist in pursuing the legislated objectives of Part 5.3A such that the Court should make the order sought.
CONFIDENTIALITY ORDERS
48 Mr Hill sought confidentiality orders under s 37AF of the Federal Court of Australia Act in respect of paragraph 27 of the first Hill affidavit and Tab 4 of exhibit CCH-1, exhibit CCH-2 to the second Hill affidavit and the proposed funding agreement which is exhibit CCH-3.
49 Sections 37AE, 37AF, 37AG, 37AH and 37AJ of the Federal Court of Australia Act relevantly provide:
37AE Safeguarding public interest in open justice
In deciding whether to make a suppression order or non-publication order, the Court must take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice.
37AF Power to make orders
(1) The Court may, by making a suppression order or non-publication order on grounds permitted by this Part, prohibit or restrict the publication or other disclosure of:
(a) β¦ ; or
(b) information that relates to a proceeding before the Court and is:
(i) information that comprises evidence or information about evidence; or
(ii) information obtained by the process of discovery; or
(iii) information produced under a subpoena; or
(iv) information lodged with or filed in the Court.
(2) The Court may make such orders as it thinks appropriate to give effect to an order under subsection (1).
37AG Grounds for making an order
(1) The Court may make a suppression order or non-publication order on one or more of the following grounds:
(a) the order is necessary to prevent prejudice to the proper administration of justice;
...
(2) A suppression order or non-publication order must specify the ground or grounds on which the order is made.
37AH Procedure for making an order
(1) The Court may make a suppression order or non-publication order on its own initiative or on the application of:
(a) a party to the proceeding concerned; or
(b) any other person considered by the Court to have a sufficient interest in the making of the order.
(2) Each of the following persons is entitled to appear and be heard by the Court on an application for a suppression order or non-publication order:
(a) the applicant for the order;
(b) a party to the proceeding concerned;
(c) the Government (or an agency of the Government) of the Commonwealth or a State or Territory;
(d) a news publisher;
(e) any other person who, in the Court's opinion, has a sufficient interest in the question of whether a suppression order or non-publication order should be made.
(3) A suppression order or non-publication order may be made at any time during a proceeding or after a proceeding has concluded.
(4) A suppression order or non-publication order may be made subject to such exceptions and conditions as the Court thinks fit and specifies in the order.
(5) A suppression order or non-publication order must specify the information to which the order applies with sufficient particularity to ensure that the court order is limited to achieving the purpose for which the order is made.
37AJ Duration of orders
(1) A suppression order or non-publication order operates for the period decided by the Court and specified in the order.
(2) In deciding the period for which an order is to operate, the Court is to ensure that the order operates for no longer than is reasonably necessary to achieve the purpose for which it is made.
(3) The period for which an order operates may be specified by reference to a fixed or ascertainable period or by reference to the occurrence of a specified future event.
50 The first Hill affidavit at [27] and Tab 4 of CCH-1 relate to underlying trends in the Company's performance since January 2018. Exhibit CCH-2 relates to cash flow forecasts containing information about the Company's operating costs, supplier costs, its customers and debts those customers owe to the Company. Mr Hill has deposed that reliance on the cash flow forecast as at 24 February 2021 in exhibit CCH-2 would be of limited value but may be misleading to creditors or potential Sale Process participants. The forecast contained in exhibit CCH-2 will be updated on a weekly basis and has been prepared on prudent but conservative views on forecast cash, incorporating significant contingency skewed towards the low range of anticipated receipts and a high range of anticipated payments, and does not include any benefit from restructuring or cost savings. While some of this information may be made available to a participant in the Sale Process at the due diligence stage, that will only occur after the participant has executed a confidentiality deed.
51 The funding deed in exhibit CCH-3 includes a copy of exhibit CCH-2 and other information which has been kept confidential, including details of the Company's key customers, the Sale Process and the administrators' preferred next steps in relation to the Sale Process. The proposed funding agreement contains confidentiality provisions.
52 Mr Hill says that it would prejudice an orderly Sale Process and therefore the interests of the Company and its creditors and shareholder if this information became publicly available during the Sale Process. Among other things, Mr Hill says that there may be a difference in the access allowed to this information depending upon whether or not an interested party is a competitor of the Company and that early release of the information may affect the administrators' negotiations with landlords and customers and therefore their ability to undertake necessary restructure of the Company's business and to conclude the Sale Process.
53 The information which the administrators seek to protect is plainly commercially sensitive. The Court accepts Mr Hill's evidence that its premature release may prejudice the interests of the Company and its creditors and shareholder. The Court is satisfied that its premature release would adversely affect the beneficial conduct of the administrations. Further, the failure to protect such information by appropriate confidentiality orders would inhibit the willingness of parties to provide information of that kind to the Court and thus adversely affect the proper administration of justice. I explained this in Vickers, in the matter of J M Kelly Builders Pty Ltd (in liquidation) (No 2) [2019] FCA 1789 at [7] in relation to a funding agreement entered into by liquidators. The below comments are equally applicable here:
There is a clear public interest in the due and beneficial administration of the estates of insolvent companies for the benefit of creditors and to that end commercially confidential information should be protected. While it may be that not every part of the material the subject of the confidentiality order is of a commercially confidential and sensitive nature, it would not serve the interests of justice to require the liquidators to spend time and money to identify particular portions of the material that should be the subject of the order. This is the approach adopted by this Court in Deputy Commission of Taxation v Italian Prestige Jewellery Pty Ltd [2018] FCA 983 at [57]-[63] (Markovic J) relying on Deputy Commissioner of Taxation v ACN 154 520 199 Pty Ltd (No 2) [2017] FCA 755 at [37]-[42] (Gleeson J).
54 The orders I made will protect the confidentiality of the information until 1 June 2021 or further order. The Court is satisfied that such a limited period is justified, calculated as it is by reference to the likely timeframe of the Sale Process and the second creditors' meeting. The provision for "further order" facilitates extension of the confidentiality period if the Sale Process is not concluded by 24 May 2021 and it becomes necessary to further extend the convening period.
I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Farrell.
Associate:
Dated: 3 March 2021
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2023-05-24 00:00:00
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Chopra v Minister for Immigration, Citizenship and Multicultural Affairs [2023] FCA 843
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2023/2023fca0843
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2024-09-13T22:46:39.285014+10:00
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Federal Court of Australia
Chopra v Minister for Immigration, Citizenship and Multicultural Affairs [2023] FCA 843
Appeal from: Chopra v Minister for Immigration & Anor [2020] FCCA 2401
File number: NSD 1050 of 2020
Judgment of: LOGAN J
Date of judgment: 24 May 2023
Catchwords: MIGRATION β where appellant seeks extension of time within which to seek leave to appeal against interlocutory order of the Federal Circuit Court dismissing his application for judicial review of decision made by Administrative Appeal Tribunal (Tribunal) to affirm Minister's decision to refuse applicant a Higher Education visa based on an absence of satisfaction that the applicant was a genuine temporary entrant as required for the visa by cl 500.212(a) of the Migration Regulations 1994 (Cth) (Regulations) β whether, if an extension granted, the proposed grounds of appeal enjoys reasonable prospect of success to warrant a grant of leave to appeal β where the Court's appellate jurisdiction is invoked β whether the primary judge erred in not concluding the Tribunal failed to take into account relevant considerations, namely, the reasons appellant did not complete Bachelor's degree β where the relevant consideration is the visa criterion in cl 500.212 of the Regulations was considered - whether the primary judge denied the appellant procedural fairness by not finding the Tribunal denied the appellant an interpreter β where the appellant, through his migration agent, did not request an interpreter β where the Tribunal reached a state of administrative satisfaction to whether the appellant was a genuine student in terms of cl 500.12 of the Regulations β whether the reasoning which led to the alleged requisite satisfaction was infected by a wrong finding of fact, Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611 considered β where the primary judge found it was open to the Tribunal to conclude that it was not satisfied that the appellant was a genuine student β no error in the primary judge's conclusion - where the proposed grounds of appeal do not provide an arguable basis that an appeal should not be allowed to go forward β where although extension of time granted, leave to appeal refused β application for leave to appeal dismissed
Legislation: Federal Court Rules 2011 (Cth) r 35.13
Federal Circuit Court Rules 2001 (Cth) r 44.12
Migration Regulations 1994 (Cth) cl 500.212
Cases cited: CQG15 v Minister for Immigration and Border Protection (2016) 253 FCR 406
Johnson v Minister for Home Affairs [2018] FCA 1940
Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611
SZLGP v Minister for Immigration and Citizenship (2009) 181 FCR 113
SZSHV v Minister for Immigration and Border Protection [2014] FCA 253
Division: General Division
Registry: New South Wales
National Practice Area: Administrative and Constitutional Law and Human Rights
Number of paragraphs: 35
Date of hearing: 24 May 2023
Counsel for the Appellant: The appellant appeared in person with the assistance of an interpreter
Solicitor for the Respondents: Australian Government Solicitor
ORDERS
NSD 1050 of 2020
BETWEEN: NAVDEEP CHOPRA
Appellant
AND: MINISTER FOR IMMIGRATION, CITIZENSHIP AND MULTICULTURAL AFFAIRS
First Respondent
ADMINISTRATIVE APPEALS TRIBUNAL
Second Respondent
order made by: LOGAN J
DATE OF ORDER: 24 MAY 2023
THE COURT ORDERS THAT:
1. The applicant be granted an extension of time to 21 September 2020 within which to seek leave of appeal in so far as the same be necessary.
2. The consequential leave to appeal application be dismissed.
3. The name of the first respondent be amended to Minister for Immigration, Citizenship and Multicultural Affairs.
4. Applicant pay the first respondent's costs of and incident to the application for the extension of time and the later application for leave to appeal to be fixed by a registrar in a lump sum, if not agreed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(REVISED FROM TRANSCRIPT)
LOGAN J:
1 On 21 September 2020, Mr Navdeep Chopra (Mr Chopra) filed an application for an extension of time within which to seek leave to appeal against interlocutory orders made by the then Federal Circuit Court of Australia (Circuit Court) on 24 August 2020. On that date, for reasons given ex tempore, that is, orally, the Circuit Court dismissed, pursuant to r 44.12(1)(a) of the Federal Circuit Court Rules 2001 (Cth), an application by Mr Chopra for the judicial review of a decision made orally by the Administrative Appeals Tribunal (Tribunal) on 28 November 2019. On 3 February 2020, the Tribunal furnished in writing reasons for that decision.
2 The time limit in which to apply for leave to appeal against the Circuit Court's interlocutory order was 14 days, see r 35.13 of the Federal Court Rules 2011 (Cth).
3 Mr Chopra filed with his application a supporting affidavit. The affidavit has annexed to it a draft notice of appeal. In addition, Mr Chopra relates in his affidavit that he relied on advice given to him by his then migration agent as to the time within which he could challenge the Circuit Court's order. He states that had he realised that the true time limit was 14 days, he would have filed his application for leave to appeal within that time. As it is, the application was filed but 14 days late.
4 The Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (Minister), who is the only active party respondent, candidly acknowledged in submissions made on his behalf by Mr Goodwin of the Australian Government Solicitor's Office that the delay was relatively slight and occasioned no particular prejudice to the Minister. It was recognised in the Minister's submissions, both oral and earlier in writing, that the real issue in respect of the application was not so much whether there was occasion for the granting of an extension of time, but rather whether, in any event, even were an extension granted, the proposed grounds of appeal enjoyed a sufficient prospect of success to warrant a grant of leave to appeal.
5 As to an extension, while there are no different rules of court applicable to litigants in person, I do not doubt that Mr Chopra always intended to seek to challenge the orders made by the Circuit Court within the time allowed under this Court's rules. It is evident that he acted on that understanding in filing the application for an extension of time when he did. So in that sense he has not delayed; it is just that he has been misinformed.
6 Not every inaccurate advice by a lawyer or even, for that matter, migration agent is in itself occasion for the granting of an extension of time; such questions are inherently fact-specific to particular cases. Were the delay gross, as a result of inaccurate advice, that may be occasion for the refusal of an extension nonetheless.
7 In this case, and while prospective merits are relevant to whether to grant an extension, I consider the interests of justice are better served by granting Mr Chopra the requisite extension of time and confronting, directly, in the context of a leave to appeal application, whether or not the proposed grounds enjoy a sufficient prospect of success to warrant a grant of leave to appeal.
8 The proposed grounds of appeal are as follows:
1. His Honour erred by failing to take into account relevant considerations.
Particulars
a) His Honour failed to have regard to the reasons why the Appellant was unable to finish his Bachelor's degree, namely because his College would not let him due to an audit.
2. His Honour erred by not finding that the Second Respondent denied the Appellant procedural fairness.
Particulars
a) The Appellant was not provided an interpreter at the hearing before the Tribunal.
3. His Honour erred by engaging in a merits review of the Appellant's case.
Particulars
a) His Honour found that the need for an interpreter was counter-productive to the Appellant's claim to the Honourable Court.
4. Further, or in the alternative to Ground 3, His Honour erred by taking into account an irrelevant consideration.
Particulars
a) His Honour found that the need for an interpreter was counter-productive to the Appellant's claim to the Honourable Court.
5. His Honour erred by not finding that the Tribunal had made an erroneous finding of fact.
Particulars
a) The Tribunal had found that the Appellant's score of O in one of his subjects demonstrated that he had made no effort to complete the units when in fact his college did not enable him to undertake the subjects whilst it was being audited.
6. Further grounds and particulars to be provided upon obtaining a transcript.
9 It is necessary when considering the grounds of appeal to recall that Mr Chopra seeks to invoke an exercise of this Court's appellate jurisdiction. The original jurisdiction to review, judicially, a decision of the Tribunal is vested in the Circuit Court, not this Court. The issue before the Tribunal was the review of a decision of a delegate of the then Minister on 18 January 2018 to refuse to grant Mr Chopra a class 573 Higher Education visa.
10 That refusal was based on an absence of satisfaction that Mr Chopra was a genuine temporary entrant as required for that class of visa by cl 500.212(a) of the Migration Regulations 1994 (Cth) (Regulations). The Tribunal's role was to decide afresh, and in place of the delegate, whether or not to grant Mr Chopra that visa. In turn, the role of the Circuit Court was to determine whether the Tribunal's decision, which was to affirm that of the delegate, was attended with jurisdictional error. The Circuit Court dealt with that question in a pre-emptory way pursuant to r 44.12(1)(a) of that court's rules.
11 As to the first of the proposed grounds of appeal, it might be said that its focus misconceives the role of the Circuit Court. On one reading of the ground, it seeks to impeach the Circuit Court's judgment on the basis of a failure to make a particular finding of fact. However, it is possible to read the ground, perhaps benevolently, in another way, which is that the Circuit Court should have concluded that the Tribunal had failed to take into account a relevant consideration.
12 One difficulty about that proposed ground, so read, is that the relevant consideration was the visa criterion found in cl 500.212, not in terms, the applicant's inability to finish a bachelor's degree. In any event, if one delves into the reasons of the Tribunal, it is apparent that the Tribunal did take into account the fact that there had been an inability to complete a bachelor's degree course because of an audit or review of the accreditation of the college concerned. So the foundation for the first of the proposed grounds is lacking.
13 The Tribunal stated, at [22], of its reasons:
22. The tribunal accepts the evidence of the applicant [Mr Chopra], which was also emphasised in submissions made by Mrs Agrawal [the migration agent], that there were college closures and issues pertaining to audits of some colleges which has interrupted the applicant's studies such that he has had to transfer from one course provided to another, partway through his studies. But even take into account all of that does not explain why the last four and a half years continued to be a somewhat dismal history for the applicant in terms of educational pursuits (not completely dismal, because I have already referred to the fact that he successfully completed a Diploma of Business).
14 As can be seen, the Tribunal did take into consideration the circumstance, contrary to the basis upon which the proposed ground is predicated.
15 As to the second of the proposed grounds, it may readily be accepted that a failure to conduct a hearing in a language understood by an applicant would amount to jurisdictional error on the part of the Tribunal. The Tribunal would have failed to provide, on request, the required hearing in respect of the application for review. Further, the conduct of a hearing in a language which an applicant did not understand would constitute an egregious denial of procedural fairness to that applicant.
16 All of this was well understood by the learned primary judge, as is evident from his Honour's reasons for judgment. It is just that, as his Honour found, the applicant had, by his migration agent, not indicated a need for an interpreter at the hearing before the Tribunal. That hearing has not been shown on evidence otherwise to have given rise to a basis for a conclusion that there was, nonetheless, a need for an interpreter. As was highlighted on behalf of the Minister in submissions today, Mr Chopra had the benefit of a migration agent to conduct that hearing.
17 The hearing was conducted by the Tribunal via a telephone means. That type of hearing certainly presents limitations in terms of the range of communication as between bench, advocate and witness. In particular, it deprives each of such persons of visual means of communication. Sometimes it can be obvious through observation that a person apparently following a hearing is in truth not, because of particular, observed, non-verbal responses that are given.
18 Even allowing for that, there was no evidence before the Circuit Court, either from the migration agent or Mr Chopra, which admitted of a conclusion that the hearing before the Tribunal had miscarried because of an absence of an interpreter. So ground 2, which seeks to challenge an adverse conclusion by the Circuit Court, does not strike me as having any reasonable prospect of success.
19 Grounds 3 and 4, as was submitted on behalf of the Minister, are, on analysis, really directed to what are in the nature of gratuitous observations made by the Circuit Court, as to why it may well have been that Mr Chopra did not seek to have an interpreter before the Tribunal. Those observations, though, were not dispositive of the procedural-fairness ground of review challenge based on an absence of an interpreter. They may well have been explanatory, but equally they were, with respect, unnecessary observations.
20 Neither of grounds 3 or 4 is of and in itself a basis for a granting of leave to appeal.
21 Before turning to proposed ground 5, I do no more than observe in respect of proposed ground 6 that it anticipates that there may be further proposed grounds of appeal. As it transpired, there were no further proposed grounds.
22 Reverting to proposed ground 5, it may first be said of it that it seeks to raise an issue which was not a ground of review before the Circuit Court. In itself, that will require leave to raise that ground. And it needs to be recalled that parties should bring forward in the original jurisdiction grounds of challenge, rather than seeking to raise for the first time at appellate level, a particular ground upon which it is said that a Tribunal decision was attended with jurisdictional error. To approach the question of whether to grant permission, with any other disposition, would reduce an exercise of original jurisdiction to nothing more than a preliminary skirmish.
23 For all that, there can be cases where in the absence of any prejudice to a respondent the interests of justice in a particular case demand that even though a point was not taken in the original jurisdiction it should, nonetheless, become an issue on appeal.
24 The Tribunal was required in conducting the review to reach a state of administrative satisfaction in relation to whether Mr Chopra was a genuine student in terms of cl 500.212 of the Regulations.
25 Satisfaction-based decisions are not immune from scrutiny on judicial review β see, notably, a discussion on this subject by Gummow J in Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611. One basis upon which a satisfaction-based administrative decision might be impeached on judicial review is where the reasoning process that led to an absence of the requisite satisfaction was infected by a wrong finding of fact.
26 I quashed a decision of the Refugee Review Tribunal on just such a basis in SZLGP v Minister for Immigration and Citizenship (2009) 181 FCR 113 (SZLGP). That case, amongst many others, was taken up by Flick J in a helpful discussion of the means by which credibility-based findings might be reviewed in this Court: see SZSHV v Minister for Immigration and Border Protection [2014] FCA 253. His Honour's statements of principle, which included reference with approval to SZLGP, was regarded as sound by the Full Court in CQG15 v Minister for Immigration and Border Protection (2016) 253 FCR 406. In turn, I referred to each of these cases, and others, in quashing an administrative decision in Johnson v Minister for Home Affairs [2018] FCA 1940.
27 I mention these cases because, in principle, had the Tribunal made a wrong finding of fact in relation to reasons for Mr Chopra's progression or absence of progression and attainments or absence of attainments in his studies, it is just possible that there may be an arguable case that this had infected the absence of satisfaction by the Tribunal as to his being a genuine student.
28 The difficulty for Mr Chopra, as was demonstrated in the submissions for the Minister, is that, on analysis, the statements made by the Tribunal, at [25] and [26], have foundations in supporting material before the Tribunal. At these paragraphs of the Tribunal's reasons the Tribunal stated:
25. The difficulty, again, with all of this is that has occurred between his start in Australia in 2015 and now β November 2019 β he has previously enrolled in another Bachelor's degree, a Bachelor of Accounting. And that appears to be at Universal Business School, Sydney, which the applicant provided a copy of. Group Colleges Australia is the name that he has identified, but it is under the trading name, it appears, on the academic transcripts, to be Universal Business School in Sydney. And it discloses that he attempted or enrolled in four units there in 2018 and 2019. For those units he scored 35 out of 100 in business economics, he scored zero in quantitative methods. He scored 21 out of 100 in dimensions of knowledge society, and he scored a zero in corporate finance.
26. So he has had all this time since he made a poor start in 2015 to get his education back on track and demonstrate that he can perform. The most recent academic transcript that the tribunal has is, quite frankly, appalling. The marks of zero in quantitative methods and corporate finance demonstrate that the applicant has made absolutely no effort whatsoever in attempting to complete these units. The tribunal rejects his evidence that he tried as hard as he could. Based on this evidence this tendency not to achieve at all in his enrolment in Bachelor's courses, the tribunal cannot be satisfied that he intends to comply with the conditions of a visa, were one to be issued to him for his proposed enrolment of a Bachelor of Business and Accounting.
29 The upshot is that none of the proposed grounds of appeal, in my view, enjoys a sufficient prospect of success to warrant a grant of leave to appeal. On examination, it appears to me that the Tribunal's reasons for concluding that it was not satisfied that Mr Chopra was a genuine student were reasonably open. That accords with the conclusion reached by the learned primary judge.
30 The proposed grounds of appeal do not provide any arguable basis for a conclusion that an appeal should be allowed to go forward. That being so, whilst, as indicated, I do grant Mr Chopra an extension of time, for the reasons just given I will refuse to grant leave to appeal.
31 I should indicate that in the course of the hearing Mr Chopra sought an adjournment of the hearing for the purpose of obtaining legal advice. I refused that particular application upon considering the opposition by the Minister to the adjournment application. I refused it because of, in an absolute sense, the passing of more than two and a half years since the filing of the application. In a more particular sense, that the hearing would occur today was notified to each of the parties via the registry in late March; so some two months have elapsed. I have no evidence before me from Mr Chopra as to efforts which he had made, either over the two and a half years or, for that matter, the two months, to obtain legal advice.
32 There comes a time when a case just must be heard. To have adjourned the case would have seen an allocation of judicial resources on another hearing date to this case at the expense of other cases.
33 Mr Chopra made submissions to me which highlighted particular academic progress which he had made and an end to which that progress was directed, namely, enhancing skills, both academically and in command of oral and written English, to the end of progressing to bachelor's degree studies. Indeed, he has made some progress in that regard. Another reason for undertaking non-degree-level earlier study was that some credits were thereby obtained towards degree-level studies.
34 All of that provides an understandable basis upon which one might make a submission on the merits, but the time for that was before the Tribunal, and, indeed such a submission looks to have been made; it is just that it was not the only conclusion open on the material before the Tribunal.
35 The Tribunal's reasons provide a logical and rational basis for the absence of satisfaction recorded by the Tribunal. It is not the role of the judiciary to revisit, in this type of case, value judgments on the merits. It follows, therefore, that the application for leave to appeal must be dismissed.
I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Logan.
Associate:
Dated: 26 July 2023
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federal_court_of_australia:fca/single/1988/1988FCA0401
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application/pdf
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1988-07-28 00:00:00
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Morton, M & Anor v Black, D.R. [1988] FCA 401
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/1988/1988FCA0401.pdf
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2024-09-13T22:46:39.591513+10:00
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JUDGMENT No. AQ BS ene
CATCHWORDS
Trade Practices Act, s.52 ~ Sale of farm - Whether "in trade or
commerce" β Whether such a_ sale falls within the principle of
Bevanere v. Lubidineuse 7 F.C.R. 325 β- Representations made by
telephone.
Trade Practices Act 1974, ss.6(3), 52, 87
MORTON & ANOR -V-β BLACK
NSW G.345 of 1985
Burchett J.
Sydney
28 July 1988
IN THE FEDERAL COURT OF AUSTRALIA
)
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. G.345 of 1985
)
)
GENERAL DIVISION
BETWEEN:
MARY MORTON
First Applicant
ALEXANDER WIASAK
Second Applicant
DONALD ROSS BLACK
Respondent
REASONS FOR JUDGMENT
BURCHETT J.
On 22 November 1985 Mary Morton (to whom I shall refer
as Mrs. Morton) applied to this Court for interlocutory and
permanent orders restraining Donald Ross' Black (who was' called
from time to time by witnesses "Rocky" and to whom I shall refer
as Mr. Black) from offering or selling certain land near
Macksville by way of mortgagee's sale. She obtained some
anterlocutory relief, which was subsequently withdrawn, and then,
after the commencement of the final hearing in the latter half of
the next year, in part restored. On 17 February 1986 a statement
of claim was filed alleging, in substance, breaches by Mr. Black
of ss.52 and 53A(1)(b) of the Trade Practices Act 1974, and also
fraud at common law. I shall not set out the terms of this
statement of claim, which bears the marks of careless preparation
2.
and was the subject of a number of subsequent amendments.
However, it is fair to say that the amendments do not depart from
the basic case made by the original statement of claim, except in
so far as they join an additional applicant, correct errors of
date, and vary a particular allegation, to be referred to later,
in respect of a representation alleged to have been made
concerning a subdivision of part of the land in question.
Although Mrs. Morton had been legally represented, she
was not represented by any lawyer when the final hearing
commenced. In part by reason of her language problem (she is of
Russian extraction and communicates in English with some
difficulty), I permitted her to be represented by a friend who
was said to be a business consultant. Both he and Mrs. Morton
appeared quite unable to comprehend the issues involved, and much
time was wasted. After the case had been adjourned part heard
for a number of months, the hearing was resumed, Mrs. Morton and
her son Alexander Wiasak, who was then joined as an additional
applicant, being represented by Mr. Gullotta of counsel. I
should like to say that in a very difficult hearing, which proved
much lengthier than anyone had estimated, and therefore had to be
broken off and resumed several times, so that it was spread over
almost a year, both the applicants and the respondent were very
well served by their legal representatives, Mr. Gullotta and Mr.
Brereton, and the Court also 1s indebted to them.
The statement of claim, in its final form, relied on
breaches of the same sections of the Trade Practices Act, and
again relied also on common law fraud. It alleged that in
3.
December 1983 the applicants went to Macksville, and met' the
respondent; that the respondent owned land at Macksville; and
that after the visit to Macksville the respondent, during
February 1984, made a number of representations concerning his
farming property by telephone to Mr. Wiasak. These
representations, as set forth in the statement of claim, were the
following:
"(a) The property had a carrying capacity of
200 head of breed (sic) cattle.
(b) The rainforest on the property, if
cleared, would yield land suitable and
sufficient for grazing a further 50
head of cattle as well as establishment
of a commercial scale plant nursery.
(c) The property had upon it growing timber
having a sale value of between $50,000
and $60,000.
(d) Portion 5 of the property was suited to
the agistment of horses.
(e) Conduct on the property of cattle
grazing and breeding, timber felling
and nursery activities would produce
income sufficient to comfortably
support the applicants and the second
applicant's family without need for
external income.
(fΒ£) He would personally tutor and assist
the second applicant in the proper
conduct of the business of cattle
breeding and grazing on the property if
the applicants purchased it.
(g) There was considerable work available
in the area of the property for
contract workers with their own farm
machinery and he would provide
machinery to the second respondent
(sic) to enable him to obtain such work
if they purchased the property.
(h) If the applicants purchased the
property, he would remain on the
property until the applicants took
possession of it to ensure maintenance
of the quality of the property during
changeover.
(i) He would include with the property on
sale certain farm equipment being a
tractor slasher jib and carry-all all
1n good condition,
(9) If the applicant (sic) purchased the
property, he would complete an access
road into the rain forest (already part
built) to permit cattle grazing and
nursery activities there.
(k) He would include with the property on
sale 100 head of cattle in good
condition.
(1) Portion 5 of the property was or would
be subdivided at the respondent's
expense into three lots each capable of
sale for between $50,000 and $60,000."
As I have already indicated, the alleged representation
lettered (1) differs from what had been alleged in that respect
in the earliest statement of claim, the corresponding allegation
in which was a_ representation "that one portion of the property
was divided into three lots which could be sold for $60,000
each." That statement of the representation had been
subsequently amended, during the period when Mrs. Morton was not
legally represented, to read:
"That one portion of the property was divided
or would be subdivided at his expense into
three lots which could be sold for $50,000 or
$60,000 each, and were not traversed by any
road."
The statement of claim proceeded to allege that, after a
further visit to Macksville by the applicants, the respondent in
early April 1984 made, by telephone to the first applicant,
representations to the same effect as those previously made to
her son, and again by telephone repeated the representations to
5.
him. Thereafter, in late April 1984, it was alleged that the
applicants orally agreed with the respondent to purchase the
property, that they made certain payments, and that Mrs. Morton,
in trust for herself and Mr. Wiasak, executed certain documents
including a mortgage. (In fact, she contracted to purchase' the
property, and gave a mortgage back on completion in respect of a
balance of purchase moneys.} The statement of claim proceeds' to
allege that, by making the representations, the respondent
engaged, in trade and commerce in Australia, in conduct which was
at all material times misleading and deceptive, or likely to
mislead and deceive, in contravention of s.52 of the Trade
Practices Act, and further that he was in breach of s.53A. The
same representations were also pleaded as having been made
fraudulently.
Mr. Black's statement of defence admits the visit of the
applicants in December 1983, adding (and this is not disputed)
"that although he showed the applicants the property he did not
then offer it for sale to them." The statement of defence admits
that Mr. Black had a telephone conversation with Mr. Wiasak in or
about February 1984, but denies the representations alleged to
have been made in that conversation, and also in the other
telephone conversations alleged in the statement of claim. In
particular, and with reference to the telephone conversation with
Mr. Wiasak, the statement of defence deals with the lettered
alleged representations already set out by stating that Mr.
Black:
"(a) denies that he ever represented to the
applicants or either of them that the
property had a carrying capacity of two
(b)
(c)
(d)
(e)
(Β£)
6.
hundred head of breeding cattle or any
particular carrying capacity at all;
(1) admits that he informed the
applicants (but not on the
telephone) that the rainforest on
the property, if cleared, would
yield land suitable and sufficient
for grazing fifty head of cattle;
(2) denies that he ever represented to
the applicants or either of them
that the rainforest if cleared
would support the establishment of
a commercial scale plant nursery;
and
(3) admits that he unformed the
applicants (but not on the
telephone) that it was possible to
remove plants from the rainforest
for sale.
denies that he ever represented to the
applicants or either of them that' the
property had upon it growing timber
having a sale value of between $50,000
and $60,000 but admits that he informed
the applicants (but not on the
telephone) that there was a $200 royalty
for lamp posts and that there was plenty
of suitable timber on the property;
admits that he informed the applicant
(but not on the telephone) that he had
horses agisted on the property but
denies that in respect of such
aunformation there was any limitation to
portion 5;
denies that he ever represented to the
applicants or either of them that
conduct on _ the property of cattle
grazing and breeding, timber felling and
nursery activities would produce income
sufficient comfortably to support the
applicants and the second applicant's
family without need for external income,
but admits that he informed the
applicants (but not on the telephone) to
the effect that if the applicants and
their family worked hard they might get
a living out of the property;
denies that he ever represented to the
applicants or either of them that he
would personally tutor and assist the
second applicant in the proper conduct
(g)
(h)
(i)
(3)
(k)
(1)
7.
of the business of cattle breeding and
grazing on the property if the
applicants purchased it;
denies that he ever represented to the
applicants or either of them that there
was considerable work available in the
area of the property for contract
workers with their own farm machinery
and that he would provide machinery to
the second applicant to enable him to
obtain such work if the applicants
purchased the property.
admits that he informed the second
applicant (but not on the _ telephone)
that if the applicants purchased the
property he would remain on the property
and maintain the property in good
condition until they took possession;
admits that he informed the applicant
(but not on the telephone) that he would
include with the property on sale
certain farm equipment being a tractor,
slasher, jib and carry-all;
admits that he informed the applicants
{but not on the telephone) that he would
complete an access road into the
rainforest (already part built);
admits that he informed the applicants
(but not on the telephone) that he would
include with the property on sale one
hundred head of cattle in good
condition;
denies that he represented to the
applicants or either of them that
portion 5 of the property was or would
be sub-divided at the respondent's
expense into three lots each capable of
sale for between $50,000 and $60,000 but
admits that he informed the applicants
(but not on the telephone) that a
proposal for sub-division of portion 5
had been approved but that if it were to
proceed the applicants would have to pay
for the costs of survey and sub-division
and further admits that he informed the
applicants (but not on the telephone)
that nearby one hundred acre lots
without 1umprovements were selling for
$50,000."
8.
The statement of defence admits that on or about 30
April 1984 the applicants paid to the respondent's solicitor as a
deposit the sum of $31,500; that on or about 30 June 1984 they
paid a further sum of $100,000; and that on or about 17 December
1984 they paid a further sum of $60,000. It admits Mrs. Morton
executed a contract and mortgage, but denies that the applicants
or either of them relied upon the truth of the alleged
representations. It asserts, inter alia, that the property did
have a carrying capacity 1n excess of 200 head of cattle, and
that the rainforest on the property, if cleared, would yield land
suitable and sufficient for grazing in excess of 50 head of
cattle; that there was considerable work available in the area of
the property for a competent farm hand; that he remained on the
property until the applicants took possession and that the
property was then in good condition; that the equipment included
in the sale was in good condition and working order; that he
completed the access road into the rainforest; that included with
the property on the sale were 115 head of cattle in good
condition; and that he did not at any relevant time intend that
portion five be subdivided at his expense into three lots.
The statement of defence denies that the respondent was
relevantly engaged in trade and commerce in Australia, and in
final submissions on the respondent's behalf Mr. Brereton urged
that the sale of a property of this kind was not in the
circumstances something done in trade or commerce, Bevanere Pty
Ltd v. Lubidineuse (1985) 7 F.C.R. 325 being in his submission
distinguishable. I shall return to this interesting question of
law.
It was a somewhat tangled, and much disputed, tale which
led to these proceedings. It began in 1983, when Mr. Wiasak and
his wife Simonetta Wiasak were living in Geelong in the home
where Mr. Wiasak had grown up. Mrs. Morton was then living in
the Gold Coast area of Queensland. Both Mr. Wiasak and Mrs.
Morton had a desire, which I think was more than a little
escapist in nature, to find a haven somewhere deep in the
country. Mr. Wiasak had just been involved in a disastrous
business venture. It was suggested, in cross-examination on
behalf of the respondent, supported by evidence of attempts at a
later date to avoid knowledge getting about of his address, that
Mr. Wiasak wished to escape creditors, but he denied this, and
the facts are: that there is no evidence any creditor was
pressing him, that his only liability of which there is evidence
was upon a joint guarantee of a relatively small amount, and that
after the events which I shall describe he did in fact return to
Geelong to live and work, there being no suggestion that he was
faced with any difficulty in doing so. The probability is that
Mrs. Morton and Mr. Wiasak were simply, or at least mainly,
afflicted with that romantic yearning for the country life which
sometimes afflicts those who have never experienced it.
Just before Christmas 1983, Mr. Wiasak saw an
advertisement for a property in the Macksville area owned by a
Mr. Mangles. He telephoned Mr. Mangles, who was in Adelaide,
from his own office 1n Melbourne, and obtained directions with a
view to inspecting the property. He then went to Surfers
Paradise, picked up Mrs. Morton, and drove to the address of Mr.
10.
Mangles' property. There he met a Mr. Aldridge, who had taken a
letting of Mr. Mangles' house in his absence, and who had
previously agreed to buy part of Mr. Black's property, variously
referred to in the evidence as the rainforest and as Purgatory.
(Ultimately, Mr. Aldridge proved unwilling to proceed in respect
of that proposed purchase, with the result that a few months
later it was cancelled.) Mr. Wiasak and Mrs. Morton spoke to Mr.
Aldridge, who said the property would not carry the number of
cattle Mr. Mangles had claimed it could carry, and nowhere near
the number originally advertised, and that the land was
unsuitable for cattle. A discussion ensued about the
requirements of the applicants, after which they walked back to
their car which was parked near the front gate. As they were
about to get in, Mr. Black drove up ina landrover and greeted
them, asking whether they were looking for land. When they said
they were, but this place was not suitable because it would not
yield a sufficient income, he requested them to wait while he
spoke to Mr. Aldridge, and then told them he knew a couple of
properties for sale in the valley (the area formed a valley known
as Thumb Creek). He invited them to come back with him to his
place, which was only a couple of minutes drive up the road, and
upon their accepting, he turned his vehicle round and they
followed in theirs.
They arrived at a house some hundred yards off the road,
where Mr. Black introduced them to a Miss Clark, known as Billie,
with whom he was living, and their little girl, Opal. There was
a discussion in which the applicants told Mr. Black they were
looking for a property that would provide a sufficient income to
li.
support Mr. Wiasak's family and his mother, and that they had in
mind spending somewhere between $150,000 and $200,000. Mr. Black
said there were a couple of properties in the valley they might
look at. Over coffee and biscuits with prawns, Mr. Black told
them about himself and the role his horses had played in the film
"Man from Snowy River". I think that in this conversation and
ensuing conversations Mr. Black, as an older man of much
experience, a rough rider in rodeos and films in the United
States and Australia, a former commando, and a cattleman and
bushman, impressed his personality upon the much younger Mr.
Wiasak, who was still in his twenties, and upon Mrs. Morton, and
somewhat captivated them. Mr. Wiasak had himself for some time
attended Duntroon Military College, and may have been susceptible
to tales of conflict with man and beast. That afternoon coffee
was the beginning of a relationship which, at least for some
months, involved admiration and trust.
The applicants obtazned from Mr. Black the addresses of
a couple of properties in the valley, and he told them that if,
after they had seen those places, they came back and called on
him the next day, he might have further information about any
available land. They stayed the night at Macksville, visited the
properties Mr. Black had told them about, which were not
suitable, and called back at Mr. Black's property in the early
afternoon. Mr. Wiasak told Mr. Black that he needed to buy where
someone would be able to teach him how to run a farm. After
further discussion, Mr. Black told them that he had sold a lot of
land in the area, but had kept the best for himself. He asked
them if they would like to look around his property, and took
12.
them for a drive along the road, showing them where the
boundaries, paddocks, ridges, valleys and river flats were. The
house was between the road and a small river or creek which made
a horseshoe bend around a spur jutting out of the hillside that
rose above the road. The house was built on the spur. Along the
river there were river flats, and on the other side of the raver
the land rose fairly steeply to the top of a ridge on the hidden
far side of which Mr. Black told them he owned a big piece of
rainforest. At some stage, the applicants learned that Mr. Black
referred to this rainforest as Purgatory because there was a
creek running through it known as Purgatory Creek, an apt
appellation deriving from the jungle of lantana and stinging
nettles which would have to be traversed by an unwary visitor
venturing there. Beyond Purgatory, extended the Mistake National
Forest.
On their return from the drive to Mr. Black's house, Mr.
Black and Mr. Wiasak again discussed the land in the valley, Mr.
Wiasak saying that he liked Mr. Black's property, and Mr. Black
referring to the rising cost of land in the area. Mr. Wiasak
spoke of his limited resources, and the conversation ended as it
was getting late. There was a long way ahead of Mr. Wiasak,
after driving his mother back to the Gold Coast, to return to his
own home in Anakie Road, Geelong. Mr. Black asked for the
applicants' telephone numbers so that he could contact them 1f he
came across any property for sale, which they gave him, and he
also gave Mr. Waiasak a note of his own telephone number. The
applicants left.
13.
It is common ground that Mr. Black did not offer, on
either of those two days, to sell his property to the applicants,
nor did he suggest that 1t was for sale. The applicants' case is
that he did offer his property to them shortly afterwards, in
circumstances which will be recounted, and making the
representations that are the basis of the action. Mr. Black, on
the other hand, claims that it was the applicants who
subsequently came to him, eagerly desirous of buying his
property. Indeed, in an affidavit to which I shall refer, after
mentioning the day of their first meeting, he swore: "Over the
period of the next few weeks, they kept coming back to me saying
'We want to buy your property.'"
Concerning this conflict, there are some circumstances
which provide support to the applicants' version. Mr. Black
asserted it was by pure coincidence that he met the applicants at
Mr. Mangles' place while driving back to his own property from
town. But there is reason to think that, on the contrary, he
came there deliberately in order to make contact with persons
interested in purchasing land in the area. In crossβ-examination,
he himself gave some rather equivocal evidence suggesting that
he may have thought his estranged wife might be willing to resume
their relationship if he moved out of the area, that he had some
desire for a reconciliation with her, and that his' relationship
with Miss Clark was at the time breaking up. It did in fact
break up when she left him in August of the following year, and
apparently established a relationship with another man. Miss
Clark is very many years younger than Mr. Black. She was' called
in the applicants' case, and gave evidence that she lived with
14,
Mr. Black from the end of 1978, the child Opal being born in
December 1980. Before the applicants ever came to the property,
Mr. Black (she said) had told her that he wanted to sell the
house and the property, and they had discussed building a new
home in the area for themselves. Mr. Black, though he denied
saying these things, at one stage in cross-examination admitted
he "very likely may" have told her he "would build her a house".
Miss Clark was an extremely nervous witness, with little
understanding of business or affairs, who was probably not a
close observer of much of what occurred in her presence. But I
think she was an honest witness, and I did not detect any
indication that she was motivated by revenge in giving evidence,
some of which was unfavourable to Mr. Black. Not all of her
evidence was unfavourable to him.
Miss Clark was the sort of young woman for whom the
preparation of an appetising afternoon snack might be more
important than a business discussion. She remembered what she
had provided for the applicants, and the circumstances which led
to her doing so. It was the first occasion on which she met
them, and she said that before they arrived there was a telephone
eall which Mr. Black answered. After speaking on the telephone,
he told her "that there were some people coming up to have a look
at the land down further (i.e. further down the road) and he
would go down and meet them." Mr. Black, she said, "gave me
instructions after that telephone call to prepare afternoon tea."
It was some time after that that the applicants came to the
property and she prepared afternoon tea. While Mr. Black denies
is.
the evidence of the telephone call, he admits that he stopped his
vehicle when he saw the applicants right outside Mr. Mangles'
place, his explanation being he thought they might have lost
their way. As they had not, it 1s unlikely they gave any clear
indication that they had.
Mr. Brereton urged in argument that I should not accept
Miss Clark's evidence. He relied on the fact that Mr. Waiasak
said he had arranged to visit the property by a telephone call
from Melbourne to Adelaide, and had driven directly to it after
picking up his mother, without calling on an agent in Macksville.
However, this certainly tends to negate any suggestion that Mr.
Wiasak had procured Miss Clark to give false evidence on the
matter, since he is a man of some intelligence (albeit no
knowledge at all of the country). The evidence does not make it
clear who was the caller in the telephone call to Mr. Black, but
if I accept her evidence, someone who was in a position to know
(as she thought, a real estate agent) did inform him that persons
interested in buying land at Thumb Creek were calling at a
property which was only a couple of minutes drive from his own
place; whereupon he did evince an immediate interest, taking
action to ensure that he made contact with them and was in a
position to invite them to refreshments during which he could
establish some relationship with them. Although the precise link
which led to the telephone conversation has not been established
by the evidence, it is easy to infer that there may have been
some prior communication of the applicants' impending visit, or
alternatively that someone telephoned immediately upon their
arrival at Mr. Mangles' place. After all, it was very near Mr.
16.
Black's, and Mr. Aldridge was in business contact with Mr. Black
in connection with the proposed sale of Purgatory, on which he
had paid a deposit, during the very period in question. One
matter which tends to confirm that Miss Clark's evidence was not
fabricated is that in respect of a number of other issues, on
which she might have been expected to give evidence favourable to
the applicants if she had been prepared to conspire to assist
them, she had a very limited recall, or did not profess to have
been present during relevant discussions. I do accept Miss Clark
as a witness of truth. It follows that Mr. Black was 1n fact
keenly interested ina possible purchaser in the Thumb Creek
area, although at the time he did not offer his own property for
sale. It also follows that his evidence suggesting the meeting
with the applicants arose out of a pure coincidence was untrue.
Another significant pointer to the untruthfulness of Mr.
Black's account of the initial meeting of the parties is that,
although at the hearing he gave evidence about inviting Mrs.
Morton and Mr. Wiasak to refreshments at his place, and of saying
he knew "other places for sale", on 21 February 1985 he had sworn
in an affidavit an account which omitted all reference to his
invitation, and suggested their coming to his place was an
independent event, of their volition, later in the day. On that
version, there was involved a second coincidence, that it was his
property they happened to visit afterwards during the same day in
which the original chance meeting had occurred.
According to Mr. Wiasak, Mr. Black telephoned him
several times early in the new year 1984. The first couple of
17.
calls were in January, and in each of them Mr. Black said
something about the possibility of properties becoming available
in the near future, but without being specific. There was also
conversation about racehorses, both men being interested in
betting on horses.
Then, Mr. Wiasak said, in early February 1984 Mr. Black
telephoned him and asked whether he was "still interested in
coming up and living in the valley". Mr. Wiasak said: "Yes, we
are very interested." Mr. Black then referred to Billie's desire
to have a new house with a swimming pool, and said that he "had
land nearby on which he proposed to build a new house for her
with a swimming pool, and would we be interested in his place?"
Mr. Wiasak claimed that he replied indicating interest, but
asking to know the terms upon which a purchase could be effected.
He said he had a notepad at his desk in his Geelong home, and
that he started to take notes which, however, were subsequently
discarded. The fact that he had made, and read over at the time,
notes of what was represented in the conversation enabled him, he
asserted, to have a clear picture of what Mr. Black put to him.
Mr. Black told him he was dealing with businessmen from Sydney,
but would rather sell to Mr. Wiasak because he liked Mr. Wiasak
and felt Mr. Wiasak would do well on the land. "(H)e said he
makes his income from selling and breeding cattle and horses and
timbering. Then I... asked him how many head of cattle does his
property run. He said 'It runs at least 200 and quite often I
have more than that there.' He said that there was lots of
timber up in the place, and I asked him how much timber was
there. He said there was at least $50,000 or $60,000 worth of
18.
timber there." Mr. Black indicated that he had not worked out a
price, but he knew they had only $150,000 to $200,000 and had
"worked out a deal that might interest you". He referred to the
fact that he had made an application to subdivide one block (the
block on the opposite side of the road to the house, that is,
extending up the hillside), the suggestion being that some of
this land could be sold off to meet part of the purchase moneys.
At this point Mr. Wiasak said he raised the question:
"If we spend all our money buying (the) place,
how would we make a living out of it?"
Mr. Black referred to the cattle and equipment he was prepared to
include in the contract, among which was 100 head of cattle, and
said "you can breed out of the 100 head". He also said:
"There is at least $60,000 worth of timber up
there and you can use my bulldozer. I will
teach you how to use it, and you can get the
timber out while you are building the cattle
herd up to sufficient proportions ... to
derive an income from."
He added:
"If you ever get short of work there is plenty
of work up in the valley."
When Mr. Wiasak referred to his own lack of experience, Mr. Black
retorted:
"Look, I told you already I am building a
house nearby. I will give you all the
assistance you need. wee {I)n a couple of
years you would be quite capable of running
the place by yourself."
Mr. Wiasak said that Mr. Black added:
19.
"The only problem would be he promised his
wife Billie that he was going to take her for
an overseas trip, and that he would be away
for a couple of months, and that when he
returned there would be no problems about him
teaching me the pros and cons of what to do
and what not to do on properties."
Mr. Wiasak made a reference to the effect on the farm of losing
subdivided land sold off, to which Mr. Black replied:
"well, that block across the road is not much
good to you anyway. All it's good for is
agisting horses. You make your main money
out of cattle and timber. Listen, mate, what
you want to do is you want to get the timber
off the subdivided blocks first, and then
sell the blocks after you have got the timber
off. There is quite a number of pole trees
on that slope."
Mr. Black said there was a high royalty on pole trees which were
in short demand.
There was also, according to Mr. Wiasak, a reference in
the conversation to the possibility of Mr. Aldridge defaulting in
respect of his purchase of the rainforest area, and an indication
that this would be added at a reduced price if it became
available. Mr. Black, he said, referred to the desirability of
keeping the farm together, his confidence that Mr. Wiasak would
work hard on it, and the good company his three years old
daughter Opal would be for Mr. and Mrs. Wiasak's expected child.
He also said he was constructing access over the ridge into the
cainforest area, which had been neglected lately, "but if it was
slashed we could raise another 50 head of cattle there when the
stock had been built up. And he said that... it is an aideal
20.
place for building a nursery because it is always hot there and
moist and plenty of sunshine. He said 'plants grow like wildfire
there,' and he said quite often he takes truckloads of plants
down to Sydney, and had made a lot of money out of them."
Mr. Wiasak said he told Mr. Black he was interested, and
would relay the information to his mother. The call had lasted
at least half an hour.
Mr. Wiasak said he did telephone his mother that night.
They had a discussion, in which they decided to go and have
another look at the property. Mr. Wiasak flew to Surfers
Paradise, and then drove with his mother to Thumb Creek. He
thought this was in the second half of February, but having
regard to the fact that Mr. Black instructed a solicitor in the
matter on 16 February, I think it must have been somewhat
earlier. More serious errors of date than this occurred in the
evidence; Mr. Black, in his affidavit, brought the first meeting
of the parties in December 1983 forward to April 1984.
There is now no dispute that Mrs. Morton and Mr. Wiasak
did visit the property in February, but Mr. Black gives an
entirely opposed version of how they came to do so. Whereas Mr.
Wiasak says he telephoned back to Mr. Black after the long
conversation, the terms of which I have indicated, to say he and
his mother would be coming again to discuss the matter, Mr. Black
says the first he knew about that visit was "as far as I can
recall they just came there." He had "definitely not" discussed
his property with Mr. Wiasak on the telephone, or asked him
21.
whether he was interested in buying the property, or made any
reference to it, though he acknowledged that in a _ telephone
conversation "I did tell him that my sale of Purgatory fell
through, or I thought it had fallen through then." He did
concede that "Alex and I had a couple of phone calls", which he
first thought were in March, but then said were before the
February visit. Asked who initiated the calls, he said:
"I think I rang Alex once and I think he rang
me twice. I. cannot remember, but I think
that is what it was."
He could not say who made the first call. Apart from the
reference to Purgatory, the subject on which he was definite was
that there had been discussion of racing tips. So, on Mr.
Black's evidence, it was quite out of the blue when Mrs. Morton
visited him in February with Mr. Wiasak, and said (as he claims):
"We would like to buy your place, can we buy
your place?"
Mr. Black's version is that he responded by saying "Yes, I would
if I got the right price for 1t, and I was having a bit of
trouble, I would sell it, but I would have to sell it less
Purgatory because Purgatory was still going through at that
time."
It 1s, of course, a consideration which favours Mr.
Wiasak in this conflict that I have already concluded Mr. Black
deliberately set out to meet Mrs. Morton and Mr. Wiasak upon
learning they were interested 1n land in the valley, and that he
22.
had told Miss Clark he wanted to sell his land. There is other
evidence in the case which shows Mr. Black had played some part
in the arrangement of a number of other sales in the area, and I
infer that he had had some experience in negotiation. If, as I
think, he did in fact want to sell his property, I cannot believe
that he was shy about making the appropriate approach. I thank
it is lakely that he did proffer his own property to the
applicants, knowing that they were interested in land in the
area. He did not do so in December because of uncertainty
concerning the sale to Mr. Aldridge, and also because of the need
to take time to sort out a proposal which would make it possible
for him to get the price he wanted from prospective purchasers
who had indicated their resources were strictly limited. There
may have been other factors, but I am satisfied that the
possibility of achieving a sale to the applicants was in Mr.
Black's mind from the beginning. I shall consider the various
alleged representations later in these reasons. It is enough at
this stage to find that the respondent did urge upon Mr. Wiasak
the desirability of his property by telephone prior to _ the
February visit, and that the visit resulted from his doing so.
On the February visit, Mr. Black took the applicants in
his landrover to the top of a high hill, from which they could
overlook a large part of the property, but not Purgatory. Mr.
Black pointed out particularly that portion of the property
across the road, describing it as "full of pole trees". During
this visit, according to Mr. Wiasak, Mr. Black confirmed a number
of his statements made on the telephone. He said he was going to
build a new house nearby and would be able to teach Mr. Wiasak
everything he needed to know, adding:
23.
"You are as big and strong as one of my bulis
in the paddock down there, and you will have
no problem at all. You can help me, and I
will help you."
Mr. Wiasak referred to the promise to leave a hundred head of
cattle and asked:
"What do you term a head of cattle?"
Mr. Black replied:
"A head of cattle is a breeding cow that you
can breed off, and you can sell the young
calves. That is how you. make money out of
them."
Mr. Wiasak expressed concern about income in the early stages, to
which Mr. Black replied: "There is heaps of timber all over the
property," and added that they could make a lot of money out of
the timber. Mr. Wiasak asked:
"Have you done any timbering on the _ place
before?"
Mr. Black said:
"I have not done much. I have taken a bit
here and there, but most of the timber is
still up on the property."
Specifically with reference to pole trees, he said:
"They are all on portion 5, up at the top of
the hill ... . ... They are mainly in the
gullies up in portion 5."
This was a reference to the area above the road. Mr. Wiasak said
they were unable, on that occasion, to inspect the timber,
24.
because it had been raining, and Mr. Black said that his vehicle
would slip on the hillside.
There was further discussion about the financing of any
purchase, and the possibility of selling subdivided blocks from
portion 5 for that purpose. Reference was made to Billie's
father being interested in moving up to live close by. There was
also a discussion of two blocks, which could be sold, and one
which should be retained in order to preserve the privacy of the
house, a matter which seems to me to have the ring of probability
about it. Then mention was made of the directness of access to
the Purgatory area to be achieved by completion of the
part-constructed road into that area, which would be much better
than the roundabout access Mr. Black then had through the
property of a neighbour, a Mr. Finlay. I shall refer later to
the difficulties involved in that access.
According to Mr. Wiasak, he asked Mr. Black how much he
made out of cattle, receiving an interestingly indirect reply.
Mr. Black said:
"Well, I run over 200 head. You work it out
for yourself. If each one drops a calf each
year, and allowing for some that do not make
it through, if that is 200 you can sell each
one for at least 200 and you can make at
least $40,000 or $50,000 out of cattle once
you build your herd up."
In evidence, Mr. Black insisted that he made no representation as
to the carrying capacity of the property, or as to its ability to
provide an adequate income from the breeding of cattle. He
25.
conceded that he had not himself for some years achieved any
significant net profit from the property.
Mr. Black's account, as given in chief, made no
specific reference to taking the applicants to see a panoramic
view of the property, but he did refer to showing them parts of
the property; he said he explained the subdivision had been
"passed in principle only"; he said he had a wildlife licence to
sell staghorns and other plants (this related to the rainforest)
which he would endeavour to transfer to Mr. Wiasak; he said "we
definitely went along the road and looked at the boundaries and I
showed him the tops of the hills and... where both boundaries
ended"; and he said, either on that occasion or subsequently,
"Alex and I walked up some gullies on block 5 and I showed him
timber." Mr. Black denied there was any discussion about' the
value of the timber, but said he did show Mr. Wiasak some poles,
that something was said about a royalty on timber, and that "in
one discussion when they were there I showed him the prices of
what you got for the poles." He denied he said anything to the
effect that he would stay on the property, or near the property,
and help. He denied that he said anything about a nursery,
except "I might have told them I sold plants to a nursery."
It is clear that a measure of verbal agreement was
reached during the February visit. Mr. Black says two prices
were negotiated, one on the basis that the sale of Purgatory to
Mr. Aldridge would be going through, and the other on the basis
that the whole property would be involved. The fact 1s that
immediately afterwards Mr. Black instructed his solicitor, Mr.
26.
Finlayson, of Macksville, to forward two contracts, one on each
of these two bases, to Mr. O'Brien, a_ solicitor of the Sydney
suburb of Waverley for his consideration. That makes it clear
there must have been at least tentative agreement on the figures,
but it also demonstrates the vagueness of the arrangement at that
stage. Neither the property nor the name of the purchaser had
been identified, nor had there at that stage been any mention of
a mortgage back. One consequence of this vagueness, and of the
suggestion that the sale of subdivided blocks would assist in
paying off the balance of the purchase price of the property, was
that Mrs. Morton was under the impression there was no limit to
the number of blocks she could sell for that purpose, or indeed
to get in money for other purposes. The proposal was, however,
sufficiently concrete for Mr. Wiasak to proceed to take
preliminary steps to endeavour to sell his home in Geelong (it
was then in the joint names of himself and his wife though, at
his wife's request, it was later transferred to her), a_ sale
which was necessary if the money was to be raised to pay for the
purchase of the property at Thumb Creek. In cross-examination,
Mr. Wiasak was asked:
"After your February visit to the property you
certainly had not made up your mind to buy
the property then had you?"
He answered:
"I believe that we tentatively were going to
make arrangements and see if it was possible
for us to buy the property."
In answer to further questions, he said that there was a proposal
that the price would be $315,000 for the whole property, and a
proposal to buy all of the property except the rainforest at a
27.
price which he could not recall, but which could have been
$275,000.
It is clear that there was adelay for some time
following submission of the alternative contracts, and it is most
probable that both the uncertainty regarding Purgatory and
indecision on the part of Mrs. Morton and Mr. Wiasak contributed.
Mr. Finlayson, Mr. Black's solicitor, said he had a large number
of conversations with Mr. Black over the March, April, May
period, but that, as late as 11 April 1984, he still did not know
who would be the purchaser. Finally, he received the deposit of
$31,500 from Mr. Wiasak on 30 April, which he paid into his trust
account on 1 May 1984. The terms of the proposed contract had
nevertheless still not been settled at that stage, and a further
form of contract was submitted on 15 May 1984 to Mr. O'Brien. A
conditional tender of exchange was made by Mr. O'Brien on 12
June, unconditional exchange being finally effected under cover
of a letter sent by Mr. Pinlayson to Mr. O'Brien dated 26 June
1984,
Mr. Wiasak ain evidence put some flesh on these bare
legal bones of the transaction. He said that in March he
telephoned Mr. Black to say his mother was concerned about the
financing of the purchase, and they would probably not be able to
proceed. Mr. Black said he still did not know whether' the
rainforest was 1n fact available. He assured Mr. Wiasak he would
call back in a few days. Then, early in April, Mr. Black
telephoned to say the rainforest was now available, that a
nursery could be established in it, and that it could be' slashed
28.
in order to run an extra 50 head of cattle there. Mr. Black also
said:
"I will finish the road down into the
rainforest, and you can have easy access from
your house instead of having to go right
around the roads to get in from Finlay's
side."
There was also further discussion about the subdivision proposal,
and Mr. Wiasak promised to discuss the matter again with his
mother.
Mr. Wiasak did telephone his mother, he said, to find
that she had herself received a call from Mr. Black, in which he
had put the same matters to her. Mrs. Morton gave evidence of a
conversation, spiced with some attempt at gallantry on the part
of Mr. Black, in which the same representations were put to her,
together with some further representations and an assurance that
"a country man's word is not like the city, it is like a law".
In the version which she gave, Mr. Black insisted he would be
there for two years and would teach her son, who could easily
produce sufficient for two families from the property, from
cattle, a plant nursery, and timber felling.
Thereafter, in early April, the applicants again
travelled to the property, this time accompanied by a Mr.
McIntosh, whose opinion Mrs. Morton apparently valued. It is
convenient to note here that Mr. McIntosh was not called,
although the earliest version of the statement of claim included
an allegation that a number of relevant representations were made
29.
to him, as well as to Mrs. Morton and Mr. Wiasak. At one stage
during the protracted hearing Mr. McIntosh was overseas, but at
another stage he was outside the court. Mr. Brereton relied on
the failure of the applicants to call Mr. McIntosh, but Mr. Black
himself said he had insisted on the exclusion of Mr. McIntosh
from all conversations relating to the transaction, and on the
occasion of two particularly hotly disputed conversations Mr.
McIntosh was left outside sitting in the car. It is one of the
many strange features of this case that at a later conference, at
which Mr. Finlayson was prepared to make representations to the
applicants in the absence of their solicitor Mr. O'Brien (a
situation which did not seem to concern either solicitor), no one
seems to have seen anything inappropriate in Mr. Black insisting
upon Mr. McIntosh remaining outside in the car. The result was
that Mr. Black had the benefit of a professional representative
while Mrs. Morton and Mr. Wiasak, who certainly stood in need of
assistance in relation to a substantial business transaction,
were denied whatever assistance Mr. McIntosh might have been able
to offer. I do not know whether Mr. McIntosh's presence would in
fact have averted any of what followed, but the fact is that Mrs.
Morton had brought him all the way from Surfers Paradise in order
to get the benefit of his advice, the usefulness of which must
have been greatly diminished by his exclusion from all
discussions. I do not think, in the circumstances of this case,
I should attribute much weight to his absence also from the
witness box.
On the occasion of the April visit, a Mr. Woolley was
also present with Mr. Black and Miss Clark. On this occasion, it
30.
was possible for the first time for the applicants to see the
rainforest known as Purgatory. They travelled by landrover,
driven by either Mr. Black or Mr. Woolley, with Mr. McIntosh. In
order to get to the rainforest they drove back onto the public
road, down it for some distance, and then turned off along a
track which crossed the river, passed through Mr. Finlay's
property, and followed Purgatory Creek to the boundary of that
part of Mr. Black's property called Purgatory. In taking this
route, there were two gates through which it was necessary to
pass. Both gates, Mr. Wiasak said, were locked. According to
him the first gate, which gave access to the track from the main
road, was opened by Mr. Black by levering the lock off with a
tyre lever. He spoke to Mr. Black about this, and was told there
was trouble with a neighbour about access, "and they're always
putting logs across the road to stop me getting through my own
gates." The second gate, Mr. Wiasak said, was opened by Mr.
Woolley, who obtained a key from a hiding place in the scrub
nearby. This was the gate which actually led onto Mr. Black's
property, of which he alone might be expected to control the key.
According to Mr. Black and Mr. Woolley, the lock which was broken
was the lock on the second gate, the explanation being given that
Mr. Black's key had been taken or lost. Neither Mr. Black nor
Mr. Woolley could say who broke the lock, although each conceded
that 1t was one of them. On this subject, Ido not find
acceptable the evidence of Mr. Black (who at one stage did say
that he himself broke the lock, and then changed his evidence to
the version that it may have been Mr. Woolley) or the evidence of
Mr. Woolley. I find 1t curious that the man who broke the lock
cannot recall doing so, and if it was the gate the key of which
31.
was secreted in the bush, it is curious, too, that no evidence
was given either by Mr. Black or by Mr. Woolley of a fruitless
search for it. There is also, in my view, significance 1n the
fact that Mr. Wiasak's description of how the key was obtained to
open the final gate in Mr. Black's boundary fence of Purgatory
closely matches admissions obtained from Mr. Woolley in
cross-examination as to how this gate was normally opened. If,
on the only occasion Mr. Black and Mr. Woolley took Mr. Wiasak to
Purgatory, that gate (and not the previous gate) was opened by
breaking the lock, it is curious that Mr. Wiasak knew how it
should have been opened. He described it as if he had seen it:
"Mr. Woolley got out of the car, and Mr.
Woolley jumped over the fence and went about
five yards into the scrub and got a key from
a hiding place and opened the lock."
Of course, the true significance of the incident of the
gate was not so much that it was a particular gate, but that
there were difficulties with the roundabout route to Purgatory,
which tends to confirm Mr. Wiasak's version of Mr. Black's
statement that he was completing another means of access.
However, if I had accepted the story of a missing key, it would
have appeared that there may have been no difficulty, but just an
unfortunate accident.
According to Mr. Wiasak, as they drove into Purgatory,
Mr. Black pointed out a spot which he said was where "you should
put your nursery to get the most of the sunlight." He also
pointed out small rainforest plants and staghorns and said: "You
just put them in pots and they grow like crazy up there,"
32.
indicating a particular area. Mr. Black then suggested that he
and Mr. Wiasak walk back to the house, so that he could' show Mr.
Wiasak where he had started the access road. Mr. Woolley drove
off with Mrs. Morton and Mr. McIntosh, and Mr. Black and Mr.
Wiasak walked up quite a steep hill to a point where there was a
big stump, above which was a 40 or 50 yards stretch of newly made
roadway joining up with a forestry road at the top of the ridge
in Mr. Black's property. According to Mr. Wiasak, Mr. Black made
it clear that his intention was to continue the new roadway, past
the spot where the stump was, down into the Purgatory valley, to
provide access to it, which would involve dynamiting the stump
and then doing further work with a bulldozer. Mr. Wiasak said
Mr. Black claimed expertise as a bulldozer driver. The two of
them then walked up over the top of the ridge, and down from the
forestry road to the back of the house, using a quite long
section of older road construction, and crossing the river.
Upon their return to the house, Mr. Wiasak said, there
was a further discussion in which Mr. Black asserted that in one
weekend he and Billie could get $500 worth of shrubs out of the
rainforest, and that by slashing the slopes and flats another 50
head of cattle could be grazed there. He continued:
"Once I finish the road, you can run them
straight up the road, over the hill and down
into the yards."
He also said he would teach Mr. Wiasak to ride a horse, adding:
"I am just building a house nearby." He referred to two big logs
they had seen, and said: "I am sending them down to the _ local
33.
saw mill to get cut up to use in the framework of the house I am
building for Billie." (Mr. Black denied these statements, but in
his own evidence he said that, following a discussion with Billie
about a new house, he had three big logs carted to a mill and
"cut up into enough timber to build what we were going to build."
He said that was in about 1983.) After further discussion, in
which Mr. Black said there was "a hell of a lot of timber" on the
property including red cedar in one part of Purgatory, the
visitors left for Surfers Paradise.
A couple of days later, Mr. Wiasak's evidence was, he
telephoned Mr. Black to tell him they would like to buy the
property, but would have to sell assets, which would take some
time. He said to Mr. Black: "You have got a deal." At some
stage, Mr. Black asked for a 10% holding deposit "to know that
you are genuine." Mr. Wiasak, to whom Mr. Black had previously
proclaimed that "a country man's word is better than any
contract", retorted: "Well, you have my word; it is as good as
yours", and they laughed. Mr. Wiasak did pay appropriate moneys
to his solicitor, Mr. O'Brien, and personally delivered Mr.
O'Brien's trust account cheque for the deposit of $31,500 to Mr.
Finlayson, Mr. Black's solicitor, on 30 April 1984.
Some time in May, Mrs. Morton received from Mr. O'Brien
a draft contract, and was unhappy with it. As a result, Mrs.
Morton, Mr. Wiasak and Mr. McIntosh travelled to Macksville in
late May. By then, it had been agreed between Mrs. Morton and
her son that the purchase would be made in her name, though on
behalf of both of them, on the basis that she would leave her
34.
interest to him in her will. They went to Mr. Finlayson's place,
this being the occasion when Mr. McIntosh was excluded, upon Mr.
Black's objection. Mr. Finlayson thought the conference took
place on Saturday 29 April 1984, and not at the end of May as Mr.
Wiasak said. There are several reasons to accept Mr. Wiasak's
version, not the least being that 29 April 1984 was not in fact a
Saturday, but a Sunday. Mr. Finlayson relied on a note in his
file headed "Rocky Black 29/4/84", saying it would be consistent
with his recollection that that was the date of the conference
"if it was a Saturday". Mr. Wiasak, on the other hand, relied on
his memory that he went to Macksville and saw Mr. Finlayson after
the birth of his child, who was born on 24 May. I accept Mr.
Wiasak's evidence on this, and it follows that Mr. Finlayson's
notes are notes, as the heading actually implies, of what Mr.
Black told him, and not of what was agreed at a conference
involving Mr. Wiasak and Mrs. Morton. So Mr. Finlayson, who did
not profess to have a clear memory of what was said on various
relevant occasions, was attempting to refresh his recollection in
respect of the conference from a document relating to Mr. Black's
statements on a different occasion. However, two of the notes
are interesting. One refers to the need to adjust the draft
contract "to allow sale of part of property i.e. 60 acres." This
at least goes some way to confirm the applicants' evidence about
the importance of selling pursuant to the subdivision, 1n order
to raise necessary moneys. The other note, made at a time when
it could not have been known that the contract would not in fact
be completed until the end of the year (as late as 23 July 1984,
Mr. Finlayson wrote "our client has advised that the purchaser is
to take possession at the end of the month"), reads:
35.
"R.B. to - for plant and stock to end of
year. After 30/8/84, parties to bear costs
of repair to plant as to 50% each."
In the blank in this note appears the word "care" with a line
through it. The note at least suggests a contemplation of some
ongoing role for Mr. Black after completion, since on all the
evidence I am satisfied Mr. Black was looking for a much earlier
completion than the end of the year. In fact, as will be
recounted, Mr. Finlayson treated the contract as completed at the
end of June.
One thing that certainly was discussed in the conference
was the desire of Mrs. Morton to be able to sell two blocks
subdivided from the land, 1n order to meet the repayments under
the mortgage, which she claimed was in accordance with the oral
discussions with Mr. Black, whereas the draft contract permitted
only one. According to Mr. Wiasak, Mr. Finlayson simply
responded: "I am acting under Mr. Black's instructions."
According to Mr. Finlayson, "Mr. Black ... only would allow them
to sell one block." But Mr. Black's version was different. He
said that he did not say anything about that: "I let Mr.
Finlayson do most of the work. ... I know he would not let them
have two."
On 12 June 1984 Mr. O'Brien forwarded to Mr. Finlayson a
counterpart of the agreement for sale, signed by Mrs. Morton,
under cover of a letter which, omitting formal parts, reads as
follows:
36.
"We enclose herewith our client's executed
copy of the Agreement for Sale of Land. We
are instructed to exchange subject to a
favourable report from the Forestry
Commission granting our client the right to
log timber on the property.
Our client has been informed and rely on
(sic) purchasing this property on a warranty
given by Mr. Black that there would be no
objection by any authority to the cutting and
sale of timber on the property.
We would be pleased to exchange immediately
with that proviso."
This letter is consistent with the proposition that the
applicants were satisfied, without any doubt, of the truth of
what Mr. Black had told them about the value of the timber, and
for that very reason were concerned about the possibility that
the Forestry Commission might not permit them to realize that
value. This is indeed the substance of what Mr. O'Brien said,
when he gave evidence. He recalled that, early in the
transaction, either Mr. Wiasak or Mrs. Morton had said to him
"that the property had trees on it that could be logged and that
would provide a lot of money for the purchasers," as a result of
which he made a note "to check with the Forestry that you could,
in fact, remove it."
In this connection it may be mentioned that, much later,
when Mr. Wiasak abandoned the property after attempting for three
months to work it, according to Mr. O'Brien's evidence, Mr.
Wiasak made a number of complaints of alleged breaches by Mr.
Black, of two of which Mr. O'Brien then made a specific note,
which bears the date 30 March 1985. Interpreting abbreviations
in the light of Mr. O'Brien's evidence, the effect of this note
may be stated as follows:
37.
It was represented that there was $50,000 to
$60,000 worth of timber, but the timber was
not up to the standard represented and its
real value was $6,000 to $10,000.
Mr. O'Brien did obtain, by a letter dated 19 June 1984
from the Forestry Commission of New South Wales, an assurance
that the Commission had no interest in any timber on the
property, except timber growing on reserved roads. Mr. O'Brien
appears to have confirmed that the exchange could now be made
unconditional, and Mr. Finlayson completed the exchange by
forwarding the original contract for sale, executed by the
vendor, under cover of a letter dated 26 June 1984.
On 30 June 1984, a Saturday, Mr. Wiasak went to
Macksville, and personally paid the sum of $100,000 to Mr.
Pinlayson. Of this sum, $75,000 was paid by Mr. O'Brien's trust
account cheque, the source of which was the sale of a unit at
Surfers Paradise by Mrs. Morton, and $25,000 was in cash which
had earlier been withdrawn from Mrs. Wiasak's savings account.
There was dispute about the receipt which Mr. Finlayson gave Mr.
Wiasak for this sum. As it was a Saturday, Mr. Finlayson simply
wrote it out on a sheet of paper. It is possible easily to read,
in the document tendered, the words "the sum of $100,000.00 being
completion money," but the last three words have been crossed
out, and there 1s a somewhat equivocal mark in the margin which
might or might not represent an initial. At one stage, it was
suggested handwriting evidence might be called on behalf of the
respondent, but this was not done. According to Mr. Wiasak, he
drew Mr. Finlayson's attention to the fact that he was not' then
38.
completing, whereupon Mr. Finlayson crossed out the words which
are crossed out. He did not suggest that Mr. Finlayson
initialled the alteration. Mr. Finlayson in cross-examination
conceded that the crossing out may have been his work, but he
could not remember doing 1t, and he said the mark in the margin
did not appear to have been made by him. He also said that he
had specific instructions from Mr. Wiasak that the money was' to
be held for Mrs. Morton, and at one stage in his evidence he said
that the moneys "were held in my trust in the name of Mrs.
Morton." In fact, the trust account ledger showed the money as
paid in in Mr. Black's name, and Mr. Finlayson accounted for it
to Mr. Black within a few days. At the same time, he accounted
for the deposit of $31,500, although the contract specifically
provided for the obtaining of an authority from Mr. O'Brien to
account, which he had not obtained, and although clearly the
matter was not completed. The time for making requisitions had
not expired, andno requisitions had even been received, let
alone answered. In fact, no requisitions were ever received.
Particulars of title had been given only a couple of days before.
Mr. O'Brien was not advised that the deposit and the further
payment of $100,000 had been disbursed to Mr. Finlayson's client.
In evidence, Mr. Finlayson said he treated the contract as
settled as at 1 July because the contract provided for settlement
on that date, notwithstanding that exchange had been delayed
until 26 June. The impossibility of maintaining this point of
view is emphasized by the fact that the mortgage back was not
even submitted until 5 July, and the discharge of a mortgage,
which the vendor had previously given to a bank, and the deeds
held by the bank were only received on 9 July.
39.
These proceedings have had an unusual and _ tortuous
history, and a number of persons may have handled the receipt in
question. I have no doubt that the money was not in fact paid as
completion money, but on the basis that the solicitors for the
parties, whose responsibility it was to carry through the
contract to completion only after the appropriate steps had been
taken, would attend to those steps, and the money would be held
in Mr. Finlayson's trust account pending completion. Mr.
Finlayson's handling of the matter left a great deal to be
desired, as indeed did Mr. O'Brien's, and between them they
probably contributed greatly to this litigation by failing to
follow ordinary conveyancing procedures; but I do not feel able
to make an affirmative finding that Mr. Wiasak drew Mr.
Finlayson's attention to the terms of the receipt as originally
written out, though he may have done so. He had not yet
finalized sale of his home in Geelong, which I think he regarded
as a precondition to completion, nor was it finalized until
almost the end of the year.
In July 1984, Mr. Wiasak brought his wife and child to
Thumb Creek, by arrangement with Mr. Black, to visit the
property, and they stayed six days. Unfortunately, it was
bitterly cold, wet weather. They were unable to see much of the
property except from the road. But Mr. Black did point out some
trees to Mr. Wiasak, and Mrs. Wiasak gave evidence that Mr. Black
pointed out to her "the type of trees that could be logged, the
type of trees that were used for telephone poles, and informed me
that this was the timber that was abundant on the property. aoe
40.
He said there was red cedar to be found on the property and that
these were a very expensive tree and it was in our interests to
find these trees and log them." The part of the property he
pointed to, where there were trees that could be used for poles,
was across the road from the house, up on the hill.
Mrs. Wiasak also said that Mr. Black "did at one point
say that he was pleased that I would be good company for Billie
because he would be building a house up the road that would be
their home where they were living, and that we would not be far
away from each other."
Mrs. Wiasak also gave evidence of some subsequent
telephone conversations with Mr. Black, when he had telephoned to
speak to her husband who was not home, and had referred to the
"comfortable living" which the property could provide and to his
own remaining available to give assistance, and his building of a
house "up the road".
In cross-examination, Mrs. Wiasak was asked about the
payment of the deposit and what she thought the $100,000 was if
the first payment had been a deposit. She replied:
"Alex had told me that Mr. Black had requested
we take money up to show him the colour of
our money."
She understood from what her husband had told her that 1t was to
be held on trust.
41.
Mrs. Wiasak''s credit was attacked, particularly on the
basis of an entirely peripheral issue about a visit to Port
Macquarie, concerning which her evidence was vague until after
she had had an opportunity to refresh her memory. I am quite
unable to regard vagueness about an event of no great
significance in itself, which happens to have occurred at a_ time
of considerable stress for her when other events must have tended
to preoccupy her mind, as having any bearing on her credit. It
was suggested she was endeavouring to cover up for the fact that
her mother-in-law, Mrs. Morton, had not in reality been present
at the property during a period when she claimed to have been
there. But since, on all the evidence, I am satisfied that Mrs.
Morton was in fact there, this ground of attack is without sting.
Whatever else may have accounted for hesitation on the part of
Mrs. Wiasak on some questions, it was not the improper motivation
alleged. There was, as I observed her, nothing in her demeanour
to suggest she was other than a witness of truth.
The sale of the house in Geelong took some time, and by
early October it became clear that the applicants would be unable
to comply with the arrangement for payment of the next
instalment, which was $100,000 payable at the end of October.
They offered a variation of the contract, involving the payment
of some interest. Ultimately it was agreed, 1n November, that
the matter would be settled on the basis of a payment of $60,000
after completion of the sale of the house at Geelong, which was
expected on 10 December 1984, and that the mortgage back would be
varied to accord with the new arrangements. The existing
contract was cancelled, a fresh contract being entered into 1n a
42.
form submitted by Mr. Finlayson with a note dated 3 November
1984. It is interesting to observe that the note makes it clear
that, even as late as that date, there was uncertainty about
precisely what was intended to be the purchaser's right in
respect of the sale of subdivided blocks. It may be the varied
contracts were never formally exchanged, but the original signed
by Mr. Black was backdated to 4 October 1984 and stamped. It
provided for a price of $315,000, as originally agreed. That
price was to be paid by a deposit of $131,500 (the total of the
two amounts already paid), and the balance of $183,500 was to be
secured by first mortgage to provide for a further payment of
$60,000 on 14 November 1984, a payment of $83,500 on 15 August
1985, and the balance on 31 January 1986. No interest was to be
charged "provided the principal sum is repaid within the time
(sic) stipulated". The purchaser was to be entitled to sell one
block "which shall be deemed to have been consented to by the
vendor". The last provision had originally been typed "two
blocks" and was altered in ink, apparently at the time Mr. Black
executed it. The counterpart signed by Mrs. Morton, but
apparently never formally exchanged, was unaltered, and thus in
it the relevant clause read "two blocks".
An express special condition was included in the
contract as follows:
"5. The Purchaser acknowledges that he (sic)
does not rely in this contract upon any
warranty or representations made by the
Vendor or any other person on behalf of the
Vendor except such as are expressly provided
herein but the Purchaser has relied entirely
upon his (sic) own inspection of the property
hereby sold and accepts the property and
improvements included in this sale in their
43.
present state of repair and subject to any
defects whether latent or patent."
Although Mr. Brereton relied on this clause, I do not
think such a provision can effectively answer either a claim in
deceit or a claim under the Trade Practices Act: Bateman v.
Slatyer (1987) 71 A.L.R. 553 at 561-2.
On 17 December 1984 Mr. Wiasak paid the further payment
of $60,000 directly to Mr. Finlayson at Macksville, almost all of
it in cash, and was given the key to enable him to go into
occupation. No adjustment of rates figures were ever worked out,
and in fact Pastures Protection Board rates back to 1983 were
outstanding. The settlement (of a kind) which was thus effected
is further indication of the slipshod way in which the whole
conveyancing transaction was carried out. Alterations made by
Mr. Finlayson to the executed mortgage had at that stage not yet
been approved by the purchaser's solicitor. However, it seems
clear that a settlement was intended, and that the alterations to
the mortgage were ultimately approved. The settlement was
somewhat later than had been proposed, because Mr. Wiasak had
difficulties with his motor vehicle in the course of the journey
up from Geelong, arriving perhaps a week or two late. He had
telephoned before leaving to arrange for Mr. Black to vacate, so
that the property would be available for him and his family to go
into occupation. The evidence of Mr. Black and Mr. Finlayson
suggests some criticism of the alleged shortness of the notice to
vacate, but since settlement was overdue by about a month, even
under the varied conditions of the new contract, I do not' think
this criticism is justified.
Mr. and Mrs. Wiasak, with their little more than six
months old child, arrived at the house very late in the evening,
to find a situation which, as they described it, was harrowing.
44.
The full extent of it could not be seen until daylight, but the
area around the house was overgrown, there was rubbish, there was
spilt sugar in the house and rats had got into the place and left
droppings on the floor and the bed, there was a terrible' smell
which turned out to be from the contents of a freezer simply
thrown over the fence and left to decompose, and the house water
tank had been allowed to run dry. The cows had been left penned
in paddocks which were eaten bare, while other paddocks were
empty of stock and covered with long grass.
They remained at the farm for three or four days, during
which Mr. Wiasak got the water pump going and refilled the tanks,
started slashing the grass around the house, and tried to count
the cattle. He telephoned Mr. Finlayson to ask where Mr. Black
was. Mr. Finlayson said he did not know.
Just before Christmas, they went to Surfers Paradise,
returning with Mrs. Morton on the ist or 2nd of January. Apart
from the brief visit to Port Macquarie, they stayed until about
the end of March, by when they had come to the conclusion that it
would be impossible for them to live and maintain themselves on
this farm. Instead of the 100 head of breeding cattle which they
understood were to be left, many of the somewhat more than 100
cattle on the property were steers and calves. Mr. Wiasak
attempted fruitlessly to sell the timber which he understood was
available on the property and, so far as the subdivided blocks
were concerned, an estate agent advised him that costs would have
to be incurred in completing the subdivision which would render
the project uneconomic. He endeavoured to obtain work in the
45.
area, but was unable to do so. They ran out of money trying to
live without income on very meagre resources.
Upon leaving the property, Mr. Wiasak arranged for a
tenant to be put in the house, and he saw Mr. O'Brien, as I have
indicated, on 30 March 1985, when he instructed Mr. O'Brien that
the property had been misrepresented to him. A somewhat garbled
letter of complaint was written alleging false and misleading
representations, which referred to reliance on a_ representation
that timber on the land was suitable for sale. But otherwise
nothing was done for several months, until the threat of a
mortgagee's sale led to these proceedings. Mr. O'Brien said he
was waiting for a more detailed statement of Mr. Black's
representations. Doubtless, Mr. Wiasak was preoccupied with the
problem of finding work, and re-establishing his family in
Geelong.
It is now necessary to examine the principal matters
alleged to have been misrepresented, and I shall do so seriatim.
Carrying capacity of 200 head of breeding cattle, and potential
of rainforest, if cleared, to graze additional cattle
This representation is alleged to have been made both on
the telephone and in personal conversations. On some occasions
Mr. Black is alleged to have referred to "head of cattle", and on
other occasions to "breeding cattle". I have already noted that,
according to Mr. Wiasak, Mr. Black told him that "a head of
cattle is a breeding cow that you can breed off, and you sell the
young calves." As regards the 100 head to be left on the
property, Mr. Wiasak said he made it clear that these were needed
46.
to start building up the herd, that is to say, they were also to
be cows. Mr. O'Brien was asked 1n cross-examination whether the
word "breeders" was used in the conversations of which he gave
evidence, to which he replied in the affirmative, and said:
"That is what I understood all the way
through. That was the base, breeders."
In fact no more than 40 breeding cows were included in the 113
head of cattle that were left on the property, the others being
47 steers, 2 Brahman bulls and the balance young calves.
This is one of the allegations in respect of which the
applicants receive some support from Miss Clark. She said Mr.
Black talked to the applicants about "different ways of making a
living off the farm which he had done". She was asked:
"As near aS you can remember, what did he
actually say about it?"
Her answer included a reference to breeding cattle and
she continued:
"If you kept a certain amount of head of
breeding cattle you could have a calf each
year which was extra income."
A Mr. Allen, who bought some land four kilometres from
Mr. Black's farm in 1982 after seeing Mr. Black on the
recommendation of Mr. Finlayson, said that Mr. Black showed him
the land telling him he could run "between 50 and 60 head of
breeding cattle on it." This evidence was admitted on the issue
of whether Mr. Black's selling activities involved trade and
commerce, and I refused to admit evidence tendered to show, on a
47.
similar fact basis, that the representation of carrying capacity
made to Mr. Allen was false. I did not think the doctrine of
similar facts could be stretched so far. However, the expression
"breeding cattle" was, according to Mr. Allen, employed by Mr.
Black, and I think this does admissibly refute Mr. Black's denial
that he used the expression "breeders" or "breeding cattle". He
said: "I do not use it." In answer to his own counsel, as_ to
whether there was any particular reason why he did not use it, he
said he had always been taught that a cow is a head of cattle, a
steer is a head of cattle and a place would run a particular
number of head of cattle. But Mr. Allen asserted that Mr. Black
had used the expression "breeding cattle", which he said it was
the practice to use in breeding areas, though not in dairying
areas, and that the area in question was breeding country. Mr.
Allen impressed me as an honest witness, and I accept that Mr.
Black did use the expression he attributed to him. As a matter
of fact Mr. Black himself at one point in his evidence, after
saying "you always call it a head of cows - that 1s what nearly
everybody who has been in the cattle business calls it - a head
of stock, no matter what it is it is a head of stock," used the
expression "breeders" when answering a question as to how many
cows capable of having calves were included among his" stock.
Another witness, Mr. Parkins, who described himself as a
bushworker and grazier who had lived all his life 1n the Thumb
Creek/Macksville area and had for some time lived on one of the
properties adjacent to Mr. Black's property, also used the word
"breeders" when answering a question about cattle carrying
capacity of a property. The same expression was used by Mr.
Beaney, a local stock and station agent and real estate agent
with thirty years' experience.
48.
Mr. Beaney expressed the opinion that the property could
carry 50 breeders, which he explained meant plus their progeny,
up to a maximum of somewhere over 100 at times - but he added
"not for the whole year round though". He described the property
as land that "does not carry cattle year in and year out, very
well," and said that it had at one time in the past been a dairy
farm, and well kept, with improved pastures, but even then was
limited to about 80 cows plus their replacements, or somewhere in
the vicinity of 130 or 140 head of cattle all told. He inspected
the property, either late in 1984 or early in 1985, at Mr.
Wiasak's request, when he noticed "the country was very bare as
far as feed was concerned", and "rubbish had grown up in some of
the areas." He did not believe it would be viable as a_ cattle
breeding property, as he thought in the vicinity of 150 to 200
head of breeders would be required for viability.
Mr. Parkins's estimate was that 40 or 50 breeders was
the number that could be run on that property. If as much of the
area called Purgatory as the so1l conservation authorities would
permit were cleared, it might be possible to run an additional 6
to 10. He noticed that there had been regrowth all over the
property, which was not consistent with being just that summer's
growth. He also said there was very little improved pasture to
be found in the district, the expense being more than you could
get out of your cattle. Mr. Young, an agricultural worker whose
aunt had a property next door to Mr. Black and who had himself
run breeding cattle on a property, said that he would not like to
run any more than 70 breeders on Mr. Black's property. He
49.
pointed out that the numbers you can carry in the summer have to
be supported in the winter, and that kikuyu, a grass which grows
substantially on Mr. Black's property, is a summer grass which 1s
severely affected by frosts, the area being one which gets severe
frosts.
Mrs. Young, an experienced farmer in the area who was
called on behalf of Mr. Black, gave evidence that, leaving aside
the Purgatory area, approximately 80 cows and their calves and a
few extras could be run on the property.
Mr. Black himself said at one stage that the largest
number of cattle he had ever run on the property was between 120
and 130. He said he had also had between 10 and 20 horses at
that time. But other evidence showed that Mr. Black also
utilized other land to carry some of his cattle from time to
time. In particular, he had an arrangement with a Mr. Page, and
some of his cattle might have grazed every year on Mr. Page's
land. When he had his maximum number of cattle, not all of them
grazed on his own land. That was in the late 1970s. At the time
he left the property, he conceded "it would not run 200 head of
cattle." But if the weeds were kept down, and the lantana and
ferns, and necessary spraying and farming operations carried out,
"it would run closer to 200 head then." At another point in his
evidence, he said "if it was a real good season you would run a
lot more than you would any other time." Asked:
"What could you run at any other time?"
he replied:
50.
"A hundred head, a hundred and twenty head,
more if you were there all the time and moved
them from paddock to paddock and took them
over to Purgatory and brought them back."
Asked:
"And what could you run in what you describe
as a good season?"
he replied:
"In a good season you would run another 20 or
30 head more. It all depends how much money
you had to spend on the property and how much
time you had."
Mr. Black's defence in respect of this matter was' that
he had never said the property had a carrying capacity of 200
head of breeding cattle, and that he had not said anything to the
applicants about the carrying capacity of the property in
relation to any particular figure. Although the statement of
defence admits that he did say that the rainforest, if cleared,
would yield land suitable and sufficient for grazing 50 head of
cattle, in evidence he also at one stage explicitly denied saying
that. Pressed, he gave evidence that he would have said if the
whole of Purgatory was cleared you would be able to run extra
cattle, but added "I would not have said you would be able to run
them all the year round." Asked did he recall whether he said
how many extra cattle you would be able to run, he said "maybe 40
or so." Later, he did say that he told Mrs. Morton or Mr. Wiasak
that that was his op2nion. He endeavoured to support that
opinion by saying he was' referring to the entire area, not just
the flats along Purgatory Creek. But the evidence showed the
soil conservation authorities would not permit much of the area
to be cleared. Moreover, the carrying capacity of this land was
51.
almost completely dependent on the flats, which were of very
small extent.
Mr. Black supported his denial that he had stated a
carrying capacity for the property by giving evidence of a
particular conversation towards the end of May 1984, when he said
a Mr. Barry Garner was present. He said that in that
conversation Mrs. Morton "did ask what could you carry on the
place as far as cattle went." He added it may have been Mr.
Wiasak who asked. He said he had given an answer that it was "up
to the individual who runs the property," referring to the work
put in to the place, the superphosphate used, the slashing done
and other matters. He said they then asked Mr. Garner who "more
or less agreed with me." Mr. Wiasak was cross-examined about
this, and denied the alleged conversation.
Mr. Garner was called in the respondent's case. I
formed the impression that he was doing his best to assist the
respondent. He was a friend who at one stage was going to go
into business with Mr. Black, whom he had known for a long time.
But there were a number of curious features about his evidence,
He said there was another man there on the occasion in question
who stayed in the car - a statement which fitted the evidence
that Mr. McIntosh was outside in the car on that occasion in May.
But later in his evidence, he said that he did not speak to Mr.
Wiasak or Mrs. Morton on any occasion in April or May, and was
not present at any discussions that they had at that time. The
only times he saw Mrs. Morton and Mr. Wiasak were in early
September, and a further occasion after that. He could fix the
52.
specific month of September because of his own personal
circumstances, involving marital problems. He had gone to Mr.
Black's place to visit and, finding that Miss Clark had left Mr.
Black, he had stayed from September to November of 1984. There
were odd inconsistencies, on the subject of a carpet, and the use
of the slow-combustion stove, between his evidence and _ the
evidence of other witnesses. If he was at the property over' the
extended period he described, though certainly he said he was
away from time to time for short periods during those months, it
is strange that Mr. Black had to get Miss Clark's assistance in
October, though she had left him in August, when he was in
hospital for a couple of days and said he could not get out of
hospital to go back to the farm "without I had somebody there."
As a result, he invited Miss Clark to come for a few days and
offered her $5,000 to work to clean up the property in
preparation for the settlement. Why would he agree to pay
$5,000, which in fact he did not pay, for work a woman could do
in a few days, if he had staying with him an able-bodied close
friend of many years standing? Mr. Black and Mr. Garner went to
Queensland to look at businesses they contemplated buying
together, and it is difficult to believe Mr. Garner, having
accepted Mr. Black's hospitality over a lengthy period, would not
have been happy to assist at the time when Mr. Black had just
come out of hospital.
Whether or not Mr. Garner was staying with Mr. Black
over the period he says, I do not accept that he was involved in
the conversation he alleges with Mrs. Morton and Mr. Wiasak. No
other witness, including Mr. Black, alleges that any relevant
53.
conversation took place between Mr. Black and Mrs. Morton or Mr.
Wiasak during the period when Mr. Garner says he was staying with
Mr. Black.
Mr. O'Brien made the usual Pastures Protection Board
inguiry in connection with the transaction, and received a_ reply
dated 1 June 1984 which includes the statement:
"Assessed carrying capacity 100 Head of
Stock."
This certainly raises the question whether, if Mrs. Morton and
Mr. Wiasak had been told something different by Mr. Black, they
would not have queried the matter. However, they may have had
the same sort of attitude to such an official assessment as many
people have to Valuer-General's valuations. Mr. O'Brien's
evidence is that, on his instructions, he regarded the Pastures
Protection Board information as confirming the under-utilization
of the property and the scope for expansion. He thought he did
tell his clients about it, but could not recall showing it to
them. As at 1 June 1984, I do not think the applicants, even if
made fully aware of the Pastures Protection Board reply, would
have regarded it as cause to lose faith in what Mr. Black had
told them.
I think Mr. Black made the alleged representation about
the carrying capacity of the property. I think 1t is very
unlikely that he would have given them a precise figure, as
admitted on the pleadings, in respect of the relatively small
potential capacity of the area known as Purgatory, and not have
54.
given them any indication, as he claims, despite a request for
information, as to the carrying capacity of the existing
property. If he made the representation, it is clear on his own
evidence that it was incorrect. So too was the statement about
running 50 head of cattle in Purgatory. It is also clear that he
knew both statements were incorrect.
Timber
It is important to note that, while the statement of
defence denies a representation that there was on the property
timber of a sale value of $50,000 to $60,000, it admits that Mr.
Black informed the applicants, though not on the telephone, "that
there was a $200 royalty for lamp posts and that there was plenty
of suitable timber on the property." The evidence suggests that
even this representation would have been seriously misleading in
view of the paucity of the number of suitable trees.
Mr. Wiasak's evidence as to this representation is
supported by his wife, Simonetta Wiasak, who said that Mr. Black
told her that pole trees were "abundant on the property" and
there was also expensive cedar.
Mr. Black denied representing there was timber that
could be sold for $50,000 to $60,000, but he said he told the
applicants he had bought a_ bulldozer in order to cut poles, and
that he showed them paperwork concerning the royalties obtainable
from timber of particular types. He said he told Mr. Wiasak
"there was timber there and we went for a walk one afternoon. I
explained it to him in the gully." Asked what he explained, he
said:
ry
55.
"I told him the different types of timber,
showed him the different types of timber."
He denied that he said anything about timber on the telephone.
He did on one of the visits tell them something about the royalty
for timber.
But Mr. Black's witness, Mr. Woolley, said he recalled
hearing a discussion between Mr. Black and Mr. Wiasak, relating
to timber, prior to Mr. Wiasak moving to Thumb Creek. He could
not recall the date. He said:
"I can recall that in the conversation Mr.
Black said that there was thousands of
dollars worth of timber on the property."
Mr. Garner, for what his evidence is worth, recalled Mr. Black
saying to Mrs. Morton and Mr. Wiasak "that there was a lot of
timber on the property," though he related it to the ability to
"cut your own fence posts and rails for yards," notwithstanding
that the evidence 1s Mr. Black had renewed all the fencing and
its condition as well as that of the yards was very good.
The subject of timber was certainly very much in Mr.
Black's mind in 1984, for Mr. Finlayson recalled Mr. Black saying
to him "that he and some other person were thinking of starting a
sawmill."
Timber was also in Mr. Wiasak's mind when he moved onto
the property, for during the relatively short period he was there
y
56.
he made attempts to sell timber from it. He contacted the local
sawmiller, a Mr. Mitchell, and also Mr. Parkins and Mr. Young,
all of whom came to the property and none of whom was prepared to
buy timber from him. Mr. Mitchell "said it was not worth his
while coming up because there was nothing there," but he did in
fact come onto the property.
Mr. Parkins, who sells timber from his own property
which adjoins Mr. Black's on one corner, and employs Mr. Young in
connection with timber getting, gave evidence that at Mr.
Wiasak's request he attended to "have a look and see what the
timber was on the place." He looked specifically over the block
on the hillside across the road from the house which, according
to Mr. Wiasak's evidence, Mr. Black had particularly nominated.
The area he saw had been logged, so that what had been left
behind was "mainly the small stuff and the short stuff." He
thought there were five or six truckloads of timber there. As to
the rest of the property, he said that he had been over it
"looking for cattle", and "I could see that it had been logged
and there was not areal lot of timber left on it," that also
being mostly pallet timber, that is to say, the small and short
timber. He thought on the rest of the property there would be
something like three times as much as on the block across' the
road. On Mr. Parkins's figures, there might have been about
$4,000 worth of royalties if someone had been prepared to take
this timber and pay royalties on it, or alternatively 1f Mr.
Wiasak had got the timber out himself he might have got a_ gross
return of about $10,000, from which he would have had to pay for
the cost of labour and equipment to do it. So far as poles were
57.
concerned, Mr. Parkins said "I might have seen two or three." He
added:
"It is not real pole country; like at the time
I was cutting poles - a pole has got to be
straight and it has got not to have any
defects. --- (P)oles are pretty hard to get,
poles.
He confirmed that if there were poles they would be very
valuable, ranging from $35-00 to $550-00 each when cut and taken
to an appropriate dump.
I accept Mr. Parkins's evidence. It follows that there
was nowhere near $50,000 to $60,000 worth of timber on the
property. It also follows that the admitted representation
suggesting that there was plenty of suitable pole timber on the
property was quite misleading.
On the whole of the evidence, and bearing in mind the
importance which was clearly attached by the applicants to
ensuring the Forestry Commission would have no objection to
timber getting operations, I am satisfied that the alleged
representation was made. I think it was made as alleged by Mr.
Wiasak on the telephone, as well as at the property, and having
regard to the fact that Mr. Black had himself sold timber in the
past, and in view of his knowlege of the property, I am also
satisfied that Mr. Black knew this representation was untrue or
was at least reckless as to its truth.
58.
Comfortable Income and Tutoring and Assisting
I shall treat together the alleged representations that
conduct of the proposed activities on the farm would produce an
income sufficient to support the applicants comfortably and that
the respondent would personally tutor and assist the second
applicant in the proper conduct of the business of cattle
breeding and grazing. The statement of defence denies the latter
representation and also the former, but admits that, though not
on the telephone, the respondent said that if the applicants and
their family worked hard they might get a living out of the
property.
In evidence, Mr. Black emphasized his denial of any
representation that the applicants could obtain a comfortable
living from the property. He said:
"No, I told them it was terrible hard work up
there, to do it, to live, to keep the farm
going, all that, you were at it day and
night."
On this basis, Purgatory was well named. Mr. Wiasak would have
done better to have stayed in his home in Anakie Road. At the
same time, Mr. Black said he would have told them that it was a
good quiet life; he claimed they did not ask for any details of
how much could be made out of the farm.
Mr. Wiasak said that, right at the beginning of their
acquaintanceship in December 1983, he told Mr. Black he _ was
looking for something that would provide a good income sufficient
to support his family and mother. On his evidence, the whole
59.
tone of the discussions suggested the farm was a viable
operation, and substantial income figures were suggested to him
as to be expected from 200 head of breeders each dropping a calf
which could be sold for over $200. On his evidence, Mr. Black
added:
"you have to allow a little bit in case a few
of them do not make it through,"
a comment calculated to suggest that a fair and reasonable
estimate was being put forward taking proper account of losses.
In so far as Mr. Wiasak's evidence depends on the
proposition that Mr. Black was to remain in the area and provide
him with tuition, it gains some support from the evidence of Miss
Clark. She recalled, on one of the visits by the applicants, Mr.
Black making statements to the effect: "We were going to build a
house not too far away and Rocky would be there to give him a
hand and show Alex how to run the farm for a while. There were
different ways of making a living off the farm which he had done
and basically talked about the different ways of making the extra
income." She said plans for the future were discussed, Mr. Black
saying "we would have a new house built, still in the valley."
Mrs. Morton and Mr. Wiasak both gave evidence of statements by
Mr. Black that he was going to build anew house nearby, and
would be able to teach Mr. Wiasak everything he needed to know.
Mr. Wiasak said Mr. Black told him that "Billie's father is very
interested in moving up and living close by," a statement which
would tend to reinforce the idea that Mr. Black and Miss Clark
would continue to live in the area. In the telephone
60.
conversation in March, Mr. Wiasak said Mr. Black made the
statement: "I will teach you everything you need to know. You
can make a good income from it."
Mrs. Simonetta Wiasak's evidence confirmed both the
representation that the property would provide a comfortable
living and that Mr. Black would remain, building a house up the
road, and give assistance.
Interestingly, although Mr. Black's evidence makes it
clear that it was always his intention to leave Miss Clark, if
she had not left him first, the applicants' evidence is that he
said at one stage:
"I promised I would take Billie on a trip
overseas, and that would take some time, and
by the time I get my own house organized you
can move in and my house can be built."
It was urged on behalf of Mr. Black that this detracted from the
reality of the representation that he would be staying in the
area, being consequently available to assist Mr. Wiasak. On the
contrary, it seems to me that a temporary break, such as this
evidence suggests, would not seriously disrupt the alleged
arrangements, and it is difficult to understand why Mr. Wiasak
should have introduced the question of a trip overseas by Mr.
Black and Miss Clark, unless Mr. Black had in fact said it.
According to Mr. Wiasak, the overseas trip was also mentioned in
the telephone conversation 1n February, when the representations
about income and remaining to provide tuition were also made, and
on that occasion Mr. Black said they would be away for a couple
61.
of months. This is not a very long period in the operation of a
farm.
There is some confirmation in the evidence of Mr.
Finlayson, who said he thought "there was an arrangement whereby
Mr. Black was going to stay there for some' short period." He
supposed it was "to show him the farm," but he did not know. Mr.
O'Brien, too, said that it was his understanding, from early in
the piece, that Mr. Black was to remain in the area and
personally tutor Mr. Wiasak in relation to the farm. He
explained the way in which he had permitted himself to be
bypassed in the conveyancing procedures by saying that the
parties had become friends, with his clients trusting Mr. Black
implicitly. Because of the special relationship, he permitted
them to work out their own arrangements.
My conclusion is that Mr. Black did make each of these
alleged representations. I find it impossible to reconcile my
impression of Mr. Black with the proposition that he presented,
while attempting to sell his property, the Spartan and uninviting
picture he claims to have painted of carrying it on as a farm. I
find he did represent it would provide an income sufficient to
support the applicants comfortably. I also accept Mr. Wiasak's
evidence that Mr. Black represented himself as intending to
remain in the area for some time, where he would be available to
teach and assist Mr. Wiasak, and that he represented himself as
intending to do so.
62.
In fact, it is plain from admissions made by Mr. Black
himself in crossβexamination that he had not made a living out of
the farm, which he said was why he had gone out to work and done
other things such as horse training and stunt work. Asked: "Was
your farm covering your living expenses?" he answered "Hardly."
His evidence made it clear that in the past two years before he
sold the farm the cost of running it was more than the receipts
from it. The property was not capable of yielding a comfortable
living for Mr. Wiasak, his family, and his mother.
So far as concerns tutoring and assisting Mr. Wiasak in
this unproductive enterprise, it is quite apparent that Mr. Black
did not intend to remain in the area. In his own phrase, he
intended to "do a bolt". As far back as shortly before he met
Mrs. Morton and Mr. Wiasak, he admitted in cross-examination, he
was considering leaving the area to break up his' relationship
with Miss Clark and re-establish his previous family. On his own
evidence, I conclude that from an early stage in the negotiation
of the sale of the farm he intended to leave Miss Clark and Thumb
Creek. He had no intention of building a new home there. During
a period of about three months up until about two months before
he left, he was looking at properties in Queensland, a
preoccupation which provides some support for the applicants'
evidence of the neglected state of the farm when they took it
over. This was amatter which only really came out in the
crossβexamination of Mr. Garner and Mr. Finlayson.
Immediately upon the conclusion of the sale, Mr. Black
left the district without telling Mrs. Morton and Mr. Wiasak, for
63.
whom he had professed such liking, where he could be found. It
is true that he had promised to pay Miss Clark $5,000 to assist
in the support of their child and as a reward for the work she
did when he came out of hospital, and that he was avoiding her.
However, Mr. Finlayson gave evidence in cross-examination that,
about April or May 1985, he received explicit instructions not to
tell Mrs. Morton where she could get hold of Mr. Black. As I
have remarked earlier in this judgment, Mr. Finlayson's
recollection of dates is not always accurate. The fact is that
Mr. Wiasak was seeking to get in touch with Mr. Black from the
beginning of his occupation of the farm, but neither Mr.
Finlayson nor anyone else was able, or at any rate willing, to
tell him where Mr. Black was. I think Mr. Black intended to
avoid Mr. Wiasak and Mrs. Morton because he was quite conscious
that his conduct was in breach of representations he had made to
them. On all the evidence, I have also come to the conclusion
that he did not intend to do what he said at the time he made the
representations about tutoring and assisting Mr. Wiasak. He
certainly knew the farm would not provide the applicants with a
comfortable living.
Access Road to Purgatory
Both on the pleadings and in evidence, Mr. Black
admitted that he informed the applicants he would complete an
access road into the rainforest area, though on his version he
did not say it on the telephone. The defence is that he kept his
word. A great deal of time was taken up at the hearing in a
detailed examination of the problems of access to Purgatory by
the roundabout route already described, or by other similar
64,
routes. There were difficulties caused by the divergence of a
made track from the line of a reserved road, and there were
arguments with neighbours. As a result, Mr. Black took steps to
obtain rights of way, and had surveys made and a certain amount
of work done to provide for the passage of vehicles. It is this
work which he claims to have completed in performance of his
undertaking to Mr. Wiasak.
Whether, by December 1984, any access route had been
completed, over the whole of which rights of passage existed, was
a matter much in dispute at the hearing. In the view that I
take, it is unnecessary to resolve this dispute. I accept, on
the basis of Mr. Wiasak's evidence, that the statement about
completion of an access road referred to the newly constructed
section of roadway or track, finishing at a big stump on the edge
of a declivity, on the far side of the ridge which separated the
farmhouse from Purgatory. As I have said, the true relevance of
the difficulties of access to Purgatory by the road or roads in
or near Mr. Finlay's place is that these difficulties underline
the need for direct access wholly within the bounds of the
property. Mr. Black conceded that he and Mr. Wiasak had walked
back from Purgatory along the route Mr. Wiasak described (in
evidence to which I have earlier referred). He also conceded
that in 1983 he had cleared a track, along which they walked, in
the vicinity of what he described as "a stump and a half".
However, he denied that the stump blocked the track, and denied
entirely the conversation about the access road which Mr. Waiasak
alleged took place while they were walking up from Purgatory past
the stump. There was no contradiction of Mr. Wiasak's evidence
that nothing was done to complete this method of access.
65.
I have concluded that this also is a representation
which Mr. Black did make. It was a representation as to his
intention to do something, and I have concluded, on all the
evidence and as a matter of inference, that he did not intend to
do it. However, despite the disproportionate amount of time
taken at the hearing dealing with this aspect of the case, I have
difficulty in regarding the particular representation as a
significant one. There was no evidence that completion of the
proposed route in the vicinity of the stump would have been
impracticable for Mr. Wiasak, or as to what it would have cost,
or as to anything he would in fact have done in the Purgatory
area (had Mr. Black been as good as his word) which in the event
he could not do, or as to any diminution in the value of the
property resulting from this particular route to Purgatory not
having been completed.
Subdivision
There were two proposed subdivisions of Mr. Black's
property, the former to enable Purgatory to be excised, and the
second to enable two or three blocks to be sold out of that part
of the property which was across the road from the house. The
former was of course relevant to the sale to Mr. Aldridge which
did not go to completion. It was the second in relation to which
the applicants claimed Mr. Black had made a representation that
it would be effected at the respondent's expense so as to produce
three lots capable of sale for between $50,000 and $60,000.
66.
The statement of defence denies the making of the
representation pleaded, but admits that the respondent informed
the applicants, though not on the telephone, that a proposal for
subdivision had been approved and that nearby 100 acre lots
without improvements were selling for $50,000. The respondent
says he made it clear that if the proposed subdivision were to
proceed the applicants would have to pay the cost of it.
The history of the transaction reveals that over a
lengthy period Mrs. Morton was concerned about the question of
subdivision. Undoubtedly, the prospect of selling one or two
blocks for a price in the vicinity of $50,000 each was very
important in the applicants' calculations as to whether they
would be able to find the money to pay off the mortgage. In Mr.
O'Brien's letter of 8 May 1984 to Mr. Finlayson, specific
reference is made to this matter. Mr. O'Brien writes:
"Our purchaser has been advised by your client
that the property is the subject of some
subdivision with the local council. Would
you be kind enough to advise if the property
has in fact been submitted to council and if
in fact the property has had a development
application for the subdivision."
There is also a note in Mr. O'Brien's file which reads:
"Pind out from council 1f possible to
subdivide into 100 acre".
But nothing seems to have been done to clarify the precise
position concerning the subdivision. Mr. Finlayson replied to
Mr. O'Brien's letter of 8 May in terms which contained no warning
67.
of the fact that the approval was already quite an old one, on
which no action had been taken, and that very substantial
contributions as well as road construction costs were required to
be met if the subdivision was to proceed. What he advised Mr.
O'Brien on 15 May 1984 was:
"We confirm that the property has been the
subject of a proposed plan of sub-division
which proposed plan was in fact approved hy
the Nambucca Shire Council but unfortunately
we do not have copies of the plan, but they
can be obtained by the surveyor Mr. K.R.
Amos, Wallace Street, Macksville."
There is no suggestion Mr. Amos was in fact asked to obtain
copies of the plan at any time before contracts were exchanged.
On the basis of the fact that Mr. Amos, the surveyor,
had reactivated his file and written a letter, dated 31st October
1984, to the Northern Rivers County Council for advice as to its
requirements for supply of electricity to lots in the proposed
subdivision, which Mr. Amos referred to as "proposed subdivision
of portions four/five parish of Herborn for R. Black", it was
suggested that Mr. Wiasak or Mrs. Morton must have been in touch
with Mr. Amos in October. Mr. Amos had no other record
pertaining to any such contact and his recollection as to whether
or not it occurred was extremely vague. I do not think it would
be safe to conclude that any visit to him by Mr. Wiasak or Mrs.
Morton occurred. Mr. Wiasak's evidence, which I accept, was that
he first spoke to Mr. Amos after he went into occupation.
68.
A more significant piece of documentary evidence is Mr.
O'Brien's note of the instructions he received from Mr. Wiasak on
30 March 1985, to which I referred earlier in these reasons in
respect of the representation made concerning timber on _ the
property. That note indicates that Mr. Wiasak's complaint to Mr.
O'Brien, concerning the subdivision question, was that it had
been represented that blocks could be sold for $50,000 to
$60,000, but they were really only saleable for $30,000 to
$35,000. Obviously enough, if the blocks had in fact been worth
as much as was represented, substantial expenses could have been
involved in their subdivision without the economics of the
project being seriously affected. The profit would have been
large enough to meet the cost comfortably. But once it was
realized that the return was likely to be little more than half
that which had been anticipated, the question arose whether the
cost of subdivision and the loss of value to the farm itself as a
totality would make the game not worth the candle. Mr. Beaney's
advice to Mr. Wiasak was that "the cost factor in the subdivision
would be more than possibly was warranted". He thought
subdivision in the Nambucca Shire was "very costly".
But if the applicants' true complaint related to the
price which could be obtained for the blocks, as Mr. O'Brien's
note suggests, that 1s not a matter for which Mr. Black can be
held responsible. Mr. Beaney's evidence makes it clear that
about the end of 1984 there was a sharp and substantial drop in
land values in the Thumb Creek area, so that a_ representation,
made six months earlier, as to the price which could be obtained
for a block of land would not be shown to have been' incorrect
simply because that price could no longer be obtained.
69.
The applicants' case at the hearing was that Mr. Black
had gone further, and had represented that he would complete the
subdivision at his own expense. Their evidence as to this,
however, was somewhat equivocal. Mr. Wiasak at one point in his
evidence quoted Mr. Black as saying: "You could subdivide and
once portion five is subdivided you could sell off a couple of
blocks to pay your mortgage." Elsewhere in his evidence, he
referred to Mr. Black making statements about going ahead with
the subdivision and completing it. But he also said: "It was
not clear in my mind as to whether the roadwork had to be (done)
straight away or had been arranged to be done later."
It is common ground that Mr. Black did mention the
subdivision question at an early stage. He says himself that he
told the applicants at the February meeting that he "had put in
for a subdivision over the front and that the house block then
would be attached to four" (i.e. portion four). He went on to
say that he showed them the plans and told them he had got it
"passed in principle only". According to this version, there was
no reference either to the fact that it would be very costly to
complete the subdivision, or to any suggestion that Mr. Black was
giving an assurance he would in fact complete it at his own
expense. At the same time, there was perhaps some ambiguity in
the statement "the house block then would be attached to
(portion) four", which might have been taken to suggest the
proposal was going to be implemented. Mr. Finlayson said that
"on more than one occasion" Mr. Black said to him "I have had a
plan of subdivision approved by the Shire," and Mr. Finlayson
70.
added "full stop". Mr. Finlayson himself in a letter he wrote on
3 November 1984 forwarding a copy of the final form of the
contract and a memorandum of transfer executed by the vendor to
Mr. O'Brien wrote:
"Both documents are executed in escrow pending
resolution by the parties as to whether' the
purchaser shall have the right to sell and
retain the proceeds of sale of certain
subdivided blocks ... ."
Mr. O'Brien said:
"There was some talk about the land being
subdivided ... ."
A disquieting aspect of the evidence is a note dated 13
February 1985 in Mr. Finlayson's file, which arises out of an
attempt by Mr. Black to assign the mortgage. Apparently, a
question had been raised by the proposed assignee concerning the
right to sell a subdivided block, conferred on the mortgagor by a
special condition, which of course might well have been thought
to reduce to some extent the value of the security. The note
indicates that Mr. Black had telephoned to say that Mr. Wiasak
could not excise one block because "council has approved a plan
for the subdivision of four blocks out of the 180 acre parcel.
... Rocky says there is an amount of about $22,000 payable to
council re contributions, as well as survey fees and _ road
construction costs." This suggests that Mr. Black was very well
aware that the right to sell a subdivided block was an illusory
one, since the cost of subdivision would be prohibitive.
It 1s difficult to believe that Mrs. Morton and Mr.
Wiasak were not given to understand that subdivision was a
71.
practical reality. Otherwise, there would have been no point in
Mr. Black telling them about the approval he had obtained from
the council. In fact they appear to have gained that impression,
since it was a matter they thought of sufficient importance to
tell Mr. O'Brien about it in terms which elicited from him the
reaction that it needed to be made the subject of enquiry.
Nevertheless, not without some misgiving, I am unable to conclude
positively that Mr. Black represented he would complete the
subdivision at his own expense. I think he probably suppressed
the costliness of the proposal, and put it in the most favourable
light, but that is not the way the applicants' case has been
presented.
The fact that I have not been prepared to accept all of
the applicants' evidence on some points, including this point,
has led me to examine their evidence on other questions with
care. However, it will be apparent that it has not led me to
reject that evidence in respect of a number of critical matters,
or, indeed, in respect of the substance of their account of the
development of the transaction.
Availability of work in the area
Mr. Wiasak's evidence was that in the telephone
conversation in early February 1984 Mr. Black, after referring to
timber getting as something to be done while the cattle herd was
being built up to a sufficient size, added: "If you ever get
short of work, there 1s plenty of work up in the valley." He
mentioned road making and slashing, and said that he would teach
Mr. Wiasak how to do the work and lend him equipment he would
need.
72.
The applicants also relied on the evidence of Mrs.
Simonetta Wiasak who described a telephone conversation,
following her visit to the property, in which Mr. Black said
"that he had told Alex that there was other work available around
the district, that would bring extra income to us, and that he
would introduce Alex to people in the district and he would help
him as much as he could to obtain extra work."
Mr. Black disputed this evidence. But in
crossβ-examination, after denying that Mr. Wiasak or Mrs. Morton
asked as to how much the farm would produce by way of income, or
how much the expenses of running it were, he said: "I think Alex
did ask me, could he get work in the area?" Mr. Black claimed
his reply was: "I more or less said if he could work, if he
wanted work and he was willing to work, there would be work. ...
I never said what work or what you had to do or anything." I
think it is unlikely that such an uninformative reply was given,
and I accept the evidence of Mr. and Mrs. Wiasak on this matter.
In fact, the evidence shows there was in 1984, as Mr.
Parkins said, "very little" work available in the area. What
work there was, generally required skills which Mr. Wiasak could
not be expected to have. Mr. Allen, who had been raised on a
dairy farm, and owned land at Thumb Creek between 1982 and 1985,
said he did contract work in the area, but the work he was able
to obtain "just sort of covered the cost of running the
machinery". He said: "There was very little work around," and
gave as a reason for leaving the district at the end of 1985 that
73.
"there was no work in the district that I could see." Mr. Young,
an agricultural worker who had lived all his life in the
Macksville area, said there was some work, though there were
problems about getting paid, operating tractors in gullies and on
ridges, which was dangerous work requiring experience in the
handling of tractors in that kind of country.
I am satisfied that the representation about the
availability of work was quite misleading, and that Mr. Black,
who had lived in the area about which he made the representation
for a considerable period, was well aware of the facts.
Nursery in Purgatory
The applicants alleged that Mr. Black represented that
part of the rainforest area was suitable for the establishment of
a nursery. There is no doubt that Mr. Black told them he had
procured native plants, stag horns, etc., from that area, which
he had sold to a nursery. He denies that he suggested the
applicants would be able to establish a nursery in the Purgatory
area. However, it seems to me not an unlikely thing to suggest,
and if it had been suggested, I can see no evidence that the
suggestion would have been false. The applicants do not claim
that the representation extended to any particular size of
nursery operation, and at most, the suggestion appears to have
been that a nursery could be established as an adjunct to. the
collection of plants growing naturally in the rainforest, which
the evidence discloses Mr. Black did, ona very small. scale,
exploit commercially from time to time. He had last done so in
1980, and the most he had received for the plants he had
collected was about $50.
74.
Agistment of horses on portion five
An allegation is pleaded that portion five was suited to
the agistment of horses, but this allegation was not seriously
pressed at the hearing. The area in question 1s the very area
which was proposed to be subdivided and sold off. It follows
that whether or not it was suitable for the agistment of horses
was of little materiality. In fact, the evidence shows horses
had been agisted there, though it was not particularly suitable
for use in that way. When, some years earlier, Mr. Black had
contracted to provide agistment for a breeder of quarter horses
during a drought affecting the breeder's own property at Scone,
the river flats had been utilized almost exclusively for the
purpose.
Mrs. Morton made it clear that at the time the agistment
of horses on portion five was mentioned, she was not interested
in that. Mr. Wiasak's evidence was equally dismissive of the
question; he quoted Mr. Black as saying concerning portion five:
"Well, that block across the road is not much good to you anyway.
All it's good for is agisting horses. ... You make your main
money out of cattle and timber."
That the respondent would maintain the property until the
applicants took possession and that certain farm equipment would
be in good condition
There was certain farm equipment included in the sale,
and there was evidence of various difficulties which Mr. Wiasak
encountered in attempting to operate the equipment. However, he
75.
was a young man, still in his twenties, who had grown up in the
town of Geelong and was totally inexperienced in the conduct of a
farm. I do not think any inference can fairly be drawn that the
equipment was not, when he took it over, in proper running order.
On the other hand, I am satisfied that when the
applicants took over the farm it was in a state of very
considerable neglect. The respondent denied this, and witnesses
were called on both sides who gave completely different accounts
of the condition of the farm at that time. I do not think it is
necessary to say more than that I accept in substance the
evidence of the applicants and their witnesses on this matter.
It may be that the state of the farm is to be explained by
reference to the respondent's absences in Queensland, or his
illness in October, or frustration on his part at the continued
delays in the progress of the transaction, or a combination of
some or all of these factors. I think Mrs. Morton probably
exaggerated some details bearing on the extent of the neglect,
but I accept the evidence of Mr. and Mrs. Wiasak concerning it,
and I think it was in fact quite considerable. This matter does
not warrant further discussion, having regard to the view I have
taken concerning much more important representations, and the
fact that the property was in any event incapable of sustaining a
viable farming operation.
I have next to consider the effect of my findings' that
certain of the representations made by Mr. Black were, to his
knowledge, false. They were made for the purpose of inducing
Mrs. Morton and Mr. Wiasak to enter into the transaction, and I
76.
conclude that they did in fact do so. I am assisted in reaching
that conclusion by the principles which are discussed by Wilson
J. in Gould ov. vVaggelas (1985) 157 C.L.R. 215 at 237-9.
Accordingly I think the applicants are entitled to succeed upon
their common law claim for deceit. The normal measure of damages
on that basis would be the difference between the real value of
the property at the time of the purchase and what the applicants
paid for it: Gould's case at 220, per Gibbs C.J.
It will be recalled that contracts were originally
exchanged in June 1984. Oral agreement had been concluded
somewhat earlier, but at any rate upon exchange there was a
binding contract, notwithstanding that subsequently variations
were agreed upon and a fresh form of written contract
substituted. Evidence was given by Mr. Beaney, who impressed me
as well qualified by great experience as an auctioneer, stock and
station agent and real estate agent to give such evidence, and
who said he had frequently been asked to give his opinion
concerning values of properties and to provide valuations for the
National Australia Bank and the ANZ Bank, that he inspected the
property at the request of Mr. Wiasak on a date which he could
not recall precisely but which I think was probably early in
1985. He thought the property was then worth $150,000, but
having regard to the deterioration in property values in the area
to which I have already referred, which he thought had taken
place over the five or six months prior to his inspection of the
property in question, he expressed the opinion that the property
"may have been worth possibly $200,000 or something like that"
five or six months earlier. The respondent did not call any
77.
evidence to rebut Mr. Beaney's evidence concerning the true value
of the property. In Mr. Finlayson's file, which was tendered in
evidence, there is a copy of a letter dated 18 February 1985 to
Mercantile Credits Limited, written on behalf of Mr. Black, which
asserts that the value of the property was indicated by a valuer
of Macksville as "around $200,000". This certainly confirms that
the value was much less than the price at which the property was
sold. I accept the evidence of Mr. Beaney and conclude that, at
the time of the purchase, the true value of the property was
$200,000 plus the value of the cattle and equipment which were
included in the transaction. Almost all the cattle were in fact
sold by Mr. Beaney on behalf of Mr. Wiasak for a little over
$20,000. On all the evidence, and taking into account the value
of the equipment and of the few additional cattle, I conclude
that the true value of what was purchased at the time of purchase
was $240,000. By reason of the misrepresentations the applicants
were induced to purchase that property in the name of Mrs. Morton
for $315,000, and to enter into a mortgage to secure the sum of
$123,500 in order to complete the purchase. I think they have
sustained damages in the sum of $75,000 together with the amount
of any interest paid or payable pursuant to the terms of the
mortgage in respect of that sum of $75,000.
But the applicants also seek relief under s.87 of the
Trade Practices Act, and if they are entitled to relief under
that Act it seems to me it would be appropriate to exercise the
power conferred by 6.87 so as to declare void the contract and
the mortgage to the extent that they require payment of the sum
of $75,000 and any interest thereon, and to do so ab initio. It
78.
would then of course be inappropriate to award damages on the
basis stated above and, in all the circumstances of this case,
including the applicants' affirmation of the purchase and at the
same time failure to take reasonable steps, such as by attempting
to resell the property promptly at the appropriate price, to
mitigate their loss, I do not think any further order of
compensation should be made.
It as therefore necessary to consider whether' the
applicants are also entitled to succeed under the Trade Practices
Act. The respondent not being a corporation, that Act is
submitted by the applicants to be attracted, by virtue of its
extended operation pursuant to s.6(3), in respect of his engaging
in conduct to the extent to which the conduct involves the use of
telephonic services: see Smolonogov v. O'Brien (1982) 67 F.L.R.
311; O'Brien v. Smolonogov (1983) 53 A.L.R. 107 at 108. The
misrepresentations which I have' found established were all made
by telephone, though there were repetitions in face to face
interviews. Those repetitions are of course available under the
common law count, and are of evidentiary value in respect of the
question whether the statements by telephone were in fact made.
In such a case, subsequent statements may also bear on whether or
not a misrepresentation has been qualified or corrected, and
whether it has continued to have an operative influence. I do
not think it can be right to say, however, certainly in the
circumstances of this case, that the repetition of a
misrepresentation deprives the original misrepresentation of its
effect and substitutes that of the later one. Both may continue
to operate, one being simply reinforced by the other.
79.
In Smolonogov v. O'Brien (supra), a similar situation
arose. A transaction of purchase was initiated by a telephone
conversation, in which misleading statements were made, but no
decision to buy was made until the purchaser had seen the vendor
personally at his home, when there was a repetition of what had
been said on the telephone. Ellicott J. at 325 said:
"The question which arises is whether in these
circumstances the telephone conversation can
be said to have induced or caused the
applicants to enter into the contract. In my
opinion, on the facts of this case, the
telephone conversation was part of a course
of conduct embarked on by the respondents to
dispose of their land at Jindabyne. That
conduct included placing the advertisement in
the Sunday Telegraph inviting people to ring,
holding the consequent telephone conversation
and personal conversation at the respondent's
home and attending the respondent's
solicitor's office at the same time as_ the
applicants the next morning to have the
contract prepared and signed and the deposit
paid.
In such circumstances it may not be possible
to say of any particular aspect of the
conduct that it alone induced the contract.
Because the telephone conversation was, in
the events which happened, an integral part
of what took place, I think it is proper to
conclude that the contract was induced by the
respondents' false or misleading statements
during the telephone conversation, albeit in
conjunction with the advertisement and the
conversations at the respondent's home."
Ellicott J. regarded the effect of the telephone conversation as
in that case persisting through the succeeding events, and I take
the same view in the present case. Although the judgment of
Ellicott J. was overruled on appeal, that was ona different
issue.
80.
But the decision on appeal in O'Brien v. Smolonogov
(supra) was the foundation of a submission, which Mr. Brereton
made, that the misleading conduct I have found established was
not engaged in by the respondent "in trade or commerce" within
the meaning of ss.52 and 53A of the Trade Practices Act. In that
case, the Full Court applied certain American decisions in which
the view has been taken that a private sale of property by an
individual is not conduct in trade or commerce unless it is done
in the course of a business activity, or otherwise arises in what
has been described as a business context.
However, in applying the American decisions, the joint
judgment of the Full Court noted (at 113):
"The land itself was not used for any business
activity: it was not used for farming or
grazing."
The judgment then continued:
"It follows, in our opinion, that the only
possible feature of the case which could
conceivably be relied upon to suggest that
the impuqned conduct occurred in trade or
commerce was the resort by the appellants to
a newspaper as a medium of public
advertisement of the land and the use made by
the parties of the telephone for the purpose
of conducting negotiations. It is true, as
the learned judge observed, that the use of
such facilities is common practice in the
conduct of trade or commerce. ... But, in
our view, the mere use, by a person not
acting in the course of carrying on a
business, of facilities commonly employed in
commercial transactions, cannot transform a
dealing which lacks any business' character
into something done in trade or commerce. ...
The conduct complained of was not something
done by the appellants in the course of
carrying on a business and it lacked trading
or commercial character aS a transaction. It
thus fell outside the scope of s.53A."
81.
In Bevanere Pty Ltd v. Lubidineuse (1985) 7 F.C.R. 324,
a case arose which was on the other side of the line. There,
misleading statements were made by the vendor of a beauty clinic
business. On the appeal, the submission was pressed that the
conduct had not occurred in trade or commerce, but during the
sale of a capital asset. The Full Court rejected this submission
in a joint judgment, holding that the sale of the clinic was
"part and parcel of the totality of the appellant's activities in
trade or commerce." At 331 the joint judgment distinguishes the
judgment of the Court which decided O'Brien's case, observing:
"The court was careful to point out that' the
land which was sold in that case was not used
for any business activity. Nothing was. said
in O'Brien's case that lends support to the
proposition that the sale of a capital item
used for business purposes will not
constitute conduct in trade or commerce
unless it forms part of a business of buying
or selling such capital assets."
The joint judgment refers to the wide meaning given to the terms
"trade" and "commerce" in Re Ku-ring-gai Co-operative Building
Society (No 12) Ltd (1978) 22 A.L.R. 621, and points out at 332:
"(I)t by no means followed from the
appellant's sale of the beauty clinic in the
Strand Arcade that it would not engage in
other commercial activities elsewhere. It is
not uncommon for a corporation to acquire and
dispose of businesses during the course of
1ts corporate life and we see no sound reason
for excluding an obviously commercial
transaction from a corporation's conduct in
trade or commerce merely because the
transaction is the sale of the corporation's
principal, or sole, business undertaking."
82.
It may be commented that, similarly, a farmer, other
than a hobby farmer or a peasant farmer, commonly carries on
business activities which he transfers from farm to farm over the
course of the pursuit of his farming. In the present case, Mr.
Black dealt commercially in horses upon a farm near Wyong from
which he moved to the property in question at Thumb Creek, and,
after the sale the subject of these proceedings, he removed
farming equipment, which was not included in the sale, to another
property near Tamworth where he has continued to deal
commercially in horses. It is true that during the long interval
at Thumb Creek he engaged in other activities, such as cattle
breeding and some non-farming activities, but his evidence makes
it clear that at all times he also bred some horses, even if only
in small numbers, for sale as part of his farming business. In
any event, the continuity of farming activities does not depend
on the breeding of a particular kind of animal; commercial
operations were pursued systematically, if not on a large scale,
on a succession of farms in the course of the conduct of which
the subject property was acquired and later disposed of.
There can, of course, be no doubt that the products of a
farm may be the subject of trade and commerce (see O'Sullivan v.
Noarlunga Meat Limited (1954) 92 C.L.R. 565 at 596, per Fullagar
J.), and I do not think a narrow construction should be adopted
which excludes from trade and commerce the dealings with those
very commodities by the farmers who produce them. Having
produced them, they deal with them in the same manner,
relevantly, as do other persons who deal with them in trade and
commerce thereafter. It is true that production and
83.
manufacturing may be distinguished from commerce, as is pointed
out in the joint judgment of Dixon C.J., McTiernan, Webb and
Kitto JJ. in Grannall ov. Marrickville Margarine Proprietary
Limited (1955) 93 C.L.R. 55 at 77-8 where, however, a citation is
made from a judgment of Rutledge J. of the Supreme Court of the
United States which emphasizes the "economic continuity" between
the former and the latter. But no one suggests that a
manufacturer may not be subject, in relation to a sale of his
manufactured goods, to the provisions of s.52 of the Trade
Practices Act, simply because he is a manufacturer, and I see no
reason why a primary producer is not ina precisely similar
position with regard to a sale of the goods he produces. If that
is so, the reasoning of the Full Court in Bevanere's case seems
to me to demand that a sale of the capital asset, by virtue of
the ownership of which the primary producer has been carrying on
his business, may also be a transaction in trade and commerce.
In the decision of the Full Court in the Ku-ring-gai
case (supra) and in the recent decision of French J. in Orison
Pty Ltd v. Strategic Minerals Corporation NL (1987) 77 A.L.R. 141
at 157-8 a very wide ambit has been given to the expression "in
trade or commerce". See also Patrick v. Steel Mains Pty Ltd
(1987) 77 A.L.R. 133 at 136.
In the Ku-ring-gai case at 624-5 Bowen C.J. said:
"The terms 'trade' and 'commerce' are ordinary
terms which describe all the mutual
communings, the negotiations verbal and by
correspondence, the bargain, the transport
and the delivery which comprise commercial
arrangements ... . The word 'trade' is used
with its accepted English meaning: traffic
84.
by way of sale commercial
dealing ... ."
of exchange or
At 648-9 Deane J. said:
"If the scope of the phrase 'trade Or
commerce' in s 47 of the Act were restricted
to ordinary trading and commercial activities
in open markets, there would plainly be a
great deal to be said for the applicants'
submission that their lending to their
members is not in such trade or commerce.
The phrase cannot, however, in my view
properly be regarded as so restricted.
The terms 'trade' and
terms of art. They
'commerce' are not
are expressions of fact
and terms of common' knowledge. While the
particular instances that may fall within
them will depend upon the varying phases of
development of trade, commerce and commercial
communication, the terms are clearly of the
widest import: see, generally, W_& A McArthur
Ltd v. State of Queensland (1920) 28 CLR' 530
at 546ff; Bank of New South Wales ve
Commonwealth (1948) 76 CLR JI at 284ff and
361fΒ£. They are not restricted to dealings
or communications
described as being
sense that they
between strangers
objective of profit-making.
include commercial
finance between a
which are
ordinary
while being
marked by a degree
compatible with a
profit-making.
conclusion that,
which
are within
or business
company and its
not within the
commercial
commercial in
can properly be
at arms length in the
open markets. or
or have a dominant
They are apt to
dealings in
members
mainstream of
activities and which,
character, are
of altruism which is not
dominant objective of
I have already expressed the
notwithstanding the
particular nature of the applicants and the
particular
their lending
character
of their activities,
to their members are commercial
or business dealings in finance.
In my view,
that lending 1s, for the purposes of s 47 of
the Act, in trade or commerce."
In the Ku-ring-gai case the majority considered that the
provision, not for a profit but as a social service, of loans
to
members restricted to persons within a low income range, pursuant
to legislative provisions and
utilizing funds made available
by
hn
85.
governmental intervention, was nevertheless an operation which
could be said to be carried on in trade or commerce. It seems to
me that it would not be consistent with this wide meaning of the
phrase to exclude the operations of farmers.
For these reasons, I hold that the applicants have also
made out their case under s.52 of the Trade Practices Act. Upon
appropriate short minutes being brought in, I shall make an order
in the terms I have already indicated.
I certify that this and the
preceding eighty-four (84)
pages are a true copy of the
Reasons for Judgment herein of
his Honour Mr. Justice
Burchett.
Awe dude Associate
Dated: 28 July 1988.
Counsel for the Applicants: Mr. S.P. Gullotta
Solicitors for the Applicants: John Bettens & Co.
Counsel for the Respondent: Mr. P.L.G. Brereton
Solicitors for the Respondent: Duncan Barron & Co.
Dates of hearing: 9,10,11 July 1986
7, 27 August 1986
10,11,12,13,14 November
2,3,4,5,6,9,10,11 March
27,28,29,30 April 1987
1 May 1987
9,12,16 June 1987
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Gibson v Malaysian Airline System Berhad (Class Membership) [2019] FCA 1399
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2019/2019fca1399
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2024-09-13T22:46:39.889517+10:00
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FEDERAL COURT OF AUSTRALIA
Gibson v Malaysian Airline System Berhad (Class Membership) [2019] FCA 1399
File number: NSD 1067 of 2016
Judge: PERRAM J
Date of judgment: 28 August 2019
Date of publication of reasons: 29 August 2019
Catchwords: PRACTICE AND PROCEDURE β representative proceeding β where persons claim to be class members β where class definition previously amended β where settlement of proceeding approved
AVIATION β consideration of jurisdiction under Art 33 of Montreal Convention
Legislation: Civil Aviation (Carriers' Liability) Act 1959 (Cth) Sch 1A Art 33
Federal Court of Australia Act 1976 (Cth) s 33Z
Cases cited: Gibson v Malaysian Airline System Berhad [2016] FCA 1476
Gibson v Malaysian Airline System Berhad (Settlement Approval) [2019] FCA 1007
Gulf Air Company GSC v Fattouh [2008] NSWCA 225
Date of hearing: 28 August 2019
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
Category: Catchwords
Number of paragraphs: 19
Counsel for the Applicant: Mr J Rowe
Solicitor for the Applicant: LHD Lawyers
Counsel for the Respondent: Ms C O Gleeson with Ms S Gaussen
Solicitor for the Respondent: Clyde & Co
Counsel for Jerzy Dyczynski and Angela Rudhart-Dyczynski Dr Dyczynski and Mrs Rudhart-Dyczynski appeared in person
ORDERS
NSD 1067 of 2016
BETWEEN: CASSANDRA JANE GIBSON
Applicant
AND: MALAYSIAN AIRLINE SYSTEM BERHAD (ARBN 996 903)
Respondent
IN THE INTERLOCUTORY APPLICATION:
BETWEEN: JERZY DYCZYNSKI
First Applicant
ANGELA RUDHART-DYCZYNSKI
Second Applicant
and: CASSANDRA JANE GIBSON
First Respondent
MALAYSIAN AIRLINE SYSTEM BERHAD (ARBN 996 903)
Second Respondent
JUDGE: PERRAM J
DATE OF ORDER: 28 AUGUST 2019
THE COURT DECLARES THAT:
1. Dr Jerzy Dyczynski and Mrs Rudhart-Dyczynski are not class members within the meaning of paragraph 7 of the amended statement of claim.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
PERRAM J:
1 On 26 June 2019, I approved the settlement of this class action pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) ('the Act'). The class action concerned the tragedy which befell the passengers and crew on board Malaysian Airlines flight MH17 which was shot down over the Ukraine on 17 July 2014. Amongst the passengers on that flight was Ms Fatima Dyczynski, a promising space systems engineer who was returning from Amsterdam where she studied, to visit her parents in Perth for a couple of weeks. They were a very close family, and the loss of their daughter has caused Dr Dyczynski and Mrs Rudhart-Dyczynski untold distress and incalculable, irreversible pain.
2 The terms of the settlement remain confidential but were alluded to in the settlement approval judgment I gave on 26 June 2019: see Gibson v Malaysian Airline System Berhad (Settlement Approval) [2019] FCA 1007. At the time of the settlement hearing I was told there were only 12 class members. The class members were all relatives of deceased passengers. Dr Dyczynski and Mrs Rudhart-Dyczynski were not amongst those 12 class members. Without any disrespect, I will refer to Dr Dyczynski and Mrs Rudhart-Dyczynski as the Dyczynskis. The Dyczynskis found out about the settlement which had occurred only through the media. They were very distressed to hear that the class action had been settled and had been keen to understand why they were not part of that settlement and why they were not kept informed. During this morning's hearing in Sydney, at which they represented themselves, they impressed upon me their desire to see justice done for their daughter and to have all those who are responsible held to account. I accept this. I note for completeness that the Dyczynskis travelled at considerable inconvenience from Perth for this morning's hearing.
3 The immediate issue which arises is whether, as the Dyczynskis contend, they are members of the class and hence entitled to share in the settlement, or whether, as both the lead applicant and the respondent contend, they are not. This is a legal question whose resolution is unswayed by the very considerable sympathy anyone who looks at this matter must bear towards the Dyczynskis.
4 The jurisdiction of this Court to hear claims for compensation in the case of deceased or injured passengers arising from the carriage on a scheduled international passenger flight is governed by the provisions of the Convention for the Unification of Certain Rules for International Carriage by Air, done at Montreal on 28 May 1999 ('Montreal Convention'), which in this country is given effect to by the terms of the Civil Aviation (Carriers' Liability) Act 1959 (Cth) (see s 9B and Sch 1A). Article 33 of the Montreal Convention deals with the jurisdiction of courts. It provides:
Article 33βJurisdiction
1. An action for damages must be brought, at the option of the plaintiff, in the territory of one of the States Parties, either before the court of the domicile of the carrier or of its principal place of business, or where it has a place of business through which the contract has been made or before the court at the place of destination.
2. In respect of damage resulting from the death or injury of a passenger, an action may be brought before one of the courts mentioned in paragraph 1 of this Article, or in the territory of a State Party in which at the time of the accident the passenger has his or her principal and permanent residence and to or from which the carrier operates services for the carriage of passengers by air, either on its own aircraft, or on another carrier's aircraft pursuant to a commercial agreement, and in which that carrier conducts its business of carriage of passengers by air from premises leased or owned by the carrier itself or by another carrier with which it has a commercial agreement.
3. For the purposes of paragraph 2,
(a) "commercial agreement" means an agreement, other than an agency agreement, made between carriers and relating to the provision of their joint services for carriage of passengers by air;
(b) "principal and permanent residence" means the one fixed and permanent abode of the passenger at the time of the accident. The nationality of the passenger shall not be the determining factor in this regard.
4. Questions of procedure shall be governed by the law of the court seised of the case.
5 Article 33 therefore allows a claim in the case of a deceased passenger to be brought in five potential locations. These are (a) the state where the carrier is domiciled; (b) the state where the carrier has its principal place of business; (c) the state where the carrier has a place of business through which the contract of carriage was made; (d) the state which is the place of destination; and (e) the state where the passenger had his or her principal and permanent residence at the time of the accident and to or from which the carrier operated services on its own or using another's carrier as an aircraft by commercial agreement, and from which the carrier conducts its business of carriage of passengers from premises leased or owned by the carrier or another carrier.
6 These complex jurisdictional requirements have had a significant impact on the class definition in this proceeding. When the proceeding was initially filed, the class was defined in paragraph 7 of the statement of claim in the following terms:
7. The group members are:
a) residents of Australia who are the legal representatives of a passenger who was killed on MH17; or
b) not being resident in Australia, who are the legal representatives of a passenger who was killed on MH17 and express the desire to take the benefit of the action (Civil Aviation (Carrier's Liability) Act 1959 (Cth), Section 9D(6)(b)).
7 The Dyczynskis were certainly members of this class at this point, for they undoubtedly fell within paragraph 7(a). However, the airline took the well-founded objection that the class definition which had been pleaded in the original statement of claim did not comply with the requirements of Art 33, and that it included within it persons with respect to whom the court could not have jurisdiction. It filed an application to strike out that part the class definition. In Gibson v Malaysian Airline System Berhad [2016] FCA 1476, I upheld this objection and struck out the class definition in paragraph 7.
8 Subsequently, on 26 July 2017, an amended statement of claim was filed by the lead applicant, which now pleaded a new class definition which was compliant with Art 33. This new form of paragraph 7 was in the following terms:
7. The group members are personal representatives of passengers:
i. Whose destination on the contract of carriage was Australia;
ii. Whose contract of carriage was made in Australia where the Respondent has a place of business through which the contract was made; or
iii. Where Australia was the passenger's principal and permanent place of residence at the time of the accident and to or from which the Respondent operated services on its own or using another carrier's aircraft by commercial agreement and from which the Respondent conducts its business or carriage of passengers from premises leased or owned by the Respondent (or other carrier).
9 The question which arises is whether the Dyczynskis fall within paragraph 7 of this definition. It will be apparent that because the amended form of paragraph 7 was a direct response to a challenge by the airline that the original class definition did not comply with Art 33 of the Montreal Convention, it is appropriate to construe paragraph 7 by reference to Art 33. There is a separate reason to construe it this way: it would be pointless to have a class definition which included persons within it with respect to whom the Court had no jurisdiction. So the immediate question is whether the Dyczynskis fall within paragraphs 7(i) or (ii), it not being suggested that they fell within 7(iii), since Australia was not Fatima's principal and permanent place of residence within the meaning of the Montreal Convention.
10 I do not think that the Dyczynskis fall within paragraph 7(i). Fatima was booked on a return ticket from Amsterdam to Perth. The New South Wales Court of Appeal's decision in Gulf Air Company GSC v Fattouh [2008] NSWCA 225 establishes that the destination of a return ticket for the purposes of Art 33 is the place to which the passenger returns. In this case, that would be Amsterdam. Consequently, Art 33 gives this Court no jurisdiction to hear a claim based on the destination cited in the ticket and correlatively, the Dyczynskis cannot therefore satisfy paragraph 7(i) of the class definition. This does not have the result, I should say, that the Dyczynskis have no claim. It just means that their claim should be before the Dutch courts, not the Australian courts. I also note, for completeness, the Dyczynskis' submission that a return ticket is, in substance, the same as two one-way tickets, but I do not accept that this is so with respect to Art 33.
11 I also do not think that the Dyczynskis fall within paragraph 7(ii) of the class definition. The evidence before me shows that it was Dr Dyczynski who purchased the ticket online in his daughter's name. Dr Dyczynski was in Australia when he did this, but the evidence shows that the ticket was issued either by the airline's office in Amsterdam or by its head office in Kuala Lumpur. This is apparent from the face of the ticket, which shows that the issuing agency was an entity called 'M A S E COMMERCE AMSTERDAM NL', which is nominated as the issuing entity when the ticket is purchased online. That entity is located in the Netherlands.
12 The ticket also contains the code 'RLOC MH', which shows that the reservation was made in Malaysia. I am satisfied, therefore, that the place of business of the airline 'through which the contract was made' was not in Australia. Consistently, the ticket price was denominated in euros. I do not need to determine whether the airline's place of business through which the contract was made was the Netherlands or Malaysia, but I accept that it was clearly not in Australia. It is not necessary in that circumstance to determine where, as a matter of Australian law, the contract of carriage is made, because that is not the question posed by Art 33.
13 Dr Dyczynski submitted that he made the contract from Australia through the airline's website, and I accept there is no doubt that he purchased a ticket in that fashion. However, I do not accept that the purchase by Dr Dyczynski of the ticket created a contract between him and the airline. He purchased the ticket for his daughter and with her authority, so the ticket was in her name and she was the passenger. It was Fatima who had the contractual rights against the airline. Dr Dyczynski paid the price of the ticket, no doubt, but that is not the same thing as forming a contract.
14 In any event, even if the contract had been made with Dr Dyczynski, this would not alter the outcome, because it would remain the case that the contract was made through the airline's relevant place of business, which was either in the Netherlands or Malaysia, but certainly not in Australia.
15 Consequently, it must follow that the Dyczynskis are not class members and are, unfortunately, not entitled to share in the settlement. They had once been class members, but the amendment of the statement of claim on 26 July 2017 removed them as class members.
16 During the hearing before me this morning, the Dyczynskis submitted that they had not been informed that they had ceased to be class members until the settlement had occurred. It is not necessary for present purposes for me to form a view about that. I have heard the Dyczynskis' side of that complaint and understand their anger about that if it be correct. The persons running the class action have not been given an opportunity to put their side of that story. Since I do not need to decide this issue, it is inappropriate in that circumstance for me to proffer any further views on the matter.
17 Accordingly, what I propose to do is to make a declaration that the Dyczynskis are not class members under paragraph 7 of the amended statement of claim. I will make this declaration in the principal proceeding in the form of ancillary declaratory relief under s 33Z(1)(g) of the Act, it being necessary, in my opinion, to clarify the class to effectuate the settlement which has already been approved. I will make no order as to costs.
18 I extend to the Dyczynskis my sympathy at their plight, but I regret I am unable to help them. I thank counsel in particular for their assistance. There remains the other matters which the Dyczynskis wish me to do. These include making orders for the holding of inquiries into the negligence of the airline, and for widespread and detailed examination of what has happened in this case in relation to this flight. None of this can be done outside a properly constituted case, and the present application this morning is not a properly constituted case. This is a class action which has settled. If the Dyczynskis wish to pursue the airline further, they will need to file a case. As I did at the hearing, I will strongly recommend that before doing so they obtain legal advice.
19 I therefore make this order:
1. The Court declares that Dr Dyczynski and Mrs Dyczynski are not class members within the meaning of paragraph 7 of the amended statement of claim.
I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.
Associate:
Dated: 29 August 2019
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Zomaya v Minister for Immigration & Multicultural Affairs [2000] FCA 222
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2000/2000fca0222
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2024-09-13T22:46:40.474637+10:00
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FEDERAL COURT OF AUSTRALIA
Zomaya v Minister for Immigration & Multicultural Affairs [2000] FCA 222
MIGRATION β protection visa β application for review of a decision of the Refugee Review Tribunal ("the Tribunal") β no grounds of review advanced by applicant
Migration Act 1958 (Cth), ss 36(2) & 476
KHNANO ZOMAYA v MINISTER FOR IMMIGRATION & MULTICULTURAL AFFAIRS
N 5 OF 2000
EMMETT J
28 FEBRUARY 2000
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY N 5 OF 2000
BETWEEN: KHNANO ZOMAYA
Applicant
AND: MINISTER FOR IMMIGRATION AND MULTICULTURAL AFFAIRS
Respondent
JUDGE: EMMETT J
DATE OF ORDER: 28 FEBRUARY 2000
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The application be dismissed.
2. The applicant pay the respondent's costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY N 5 OF 2000
BETWEEN: KHNANO ZOMAYA
Applicant
AND: MINISTER FOR IMMIGRATION AND MULTICULTURAL AFFAIRS
Respondent
JUDGE: EMMETT J
DATE: 28 FEBRUARY 2000
PLACE: SYDNEY
REASONS FOR JUDGMENT
1 The applicant is a citizen of Iraq who arrived in Australia on 8 June 1999. On 15 June 1999 he lodged an application for protection visa with the Department of Immigration and Multicultural Affairs. On 19 July 1999 a delegate of the Minister refused to grant a protection visa and on 19 July 1999 the applicant sought review of that decision by the Refugee Review Tribunal ("the Tribunal"). On 4 January 2000 the Tribunal affirmed the decision not to grant a protection visa.
2 The Tribunal was not satisfied that the applicant was a person to whom Australia has protection obligations under the Refugees Convention. In the opinion of the Tribunal the applicant did not satisfy the criterion set out in section 36(2) of the Migration Act 1958 (Cth) ("the Act"). The applicant now seeks an order of review of that decision by this Court, by application lodged on 5 January 2000. The application discloses no grounds. The applicant has simply written:
"Details will be sent at a later date."
3 The applicant appeared in person before me today. When invited to indicate the grounds upon which he asked the Court to interfere with the Tribunal's decision, the applicant was unable to do anything more than to say that the decision of the Tribunal was wrong. It is clear that the applicant had no comprehension of the limitations on the power of this Court to interfere with the decision of the Tribunal.
4 I have read the reasons of the Tribunal. They do not on their face disclose any ground within section 476 of the Act. It is, however, desirable that I summarise briefly the findings made by the Tribunal.
5 The applicant is a married Assyrian Christian from Iraq aged in his late forties. His wife and children are in Jordan. He travelled from Jordan to Australia using a genuine Iraqi passport and a false Australian visa. The passport and false visa document were confiscated by the authorities during the journey. Upon arrival at Sydney Airport the applicant was placed in immigration detention.
6 Upon being interviewed by Department officials at the airport, the applicant told them he was born in Dohuk, Iraq. He left Iraq in May 1995 and went to Amman in Jordan where he lived until leaving for Australia in June 1999. The applicant was represented by an adviser at the hearing before the Tribunal and the applicant's adviser made written submissions in support of his claim. The thrust of the submissions was that the Assyrian Christian minority is at risk of persecution by Muslims in Kurdish controlled Northern Iraq.
7 Country information available to the Tribunal from independent sources consistently describes an appalling litany of human rights abuses by the regime of Saddam Hussein in Iraq. However, the Tribunal was not satisfied that the applicant faces a real chance of harm in Northern Iraq. The city of Dohuk is in the area of Northern Iraq which has been under Kurdish control since April 1991. At that time the United States and its allies declared a no fly zone over Iraqi territory north of the 36th parallel. The Kurdish safe haven is protected by US, British and Turkish war planes stationed at the NATO base in Southern Turkey.
8 The applicant claims to fear harm from both the Iraqi government authorities and from the Kurdish authorities in control of Northern Iraq. He claims his problems with the Iraqi authorities began in 1979 when he refused to spy for the police and that they continued through the 80s. He claims that he was arrested and tortured in 1988 and again in 1990 because he would not join the Baath Party and because he had worked for foreign companies over the years.
9 The applicant claimed that he fled to Northern Iraq to escape the Iraqi authorities. He claims the Kurds twice arrested him and accused him of being a spy. However, relatives and friends who are members of these Kurdish groups were able to obtain his release and he remained in Dohuk for another 18 months, living with relatives and friends. He claims he cannot return to Northern Iraq because the Kurdish authorities will accuse him of being a spy. It was submitted on his behalf that he is at risk of harm in Northern Iraq because of his Christian religion and Assyrian nationality.
10 The Tribunal had serious doubts about the applicant's credibility and his claims in respect of the Iraqi government authorities. The applicant passed through Iraqi government check points when he returned to Kirkuk in 1994 using identification in his own name. He obtained a passport in his own name and travelled the several hundred kilometres by car to the Jordanian border, which he crossed using that passport. Because of the evidence about restrictions on movement in Iraq and the existence of security check points, the Tribunal was not satisfied that the applicant is wanted by, or of adverse interest to, the Iraqi authorities. The Tribunal accepted that the applicant may have experienced some harassment for refusing to joint the Baath Party but was satisfied that he had exaggerated those matters and that he was not subjected to the arrests and torture that he claims. The Tribunal considered that the applicant fabricated the claims of being wanted by the Iraqi authorities.
11 The Tribunal found that the applicant was born and raised in Dohuk City in Northern Iraq, an area controlled by Kurdish groups opposed to the Iraqi government and protected by the United Nations no flight zone. The Tribunal found that the applicant has seven of his nine siblings in Dohuk and they are all married. The applicant also has cousins and other relatives living in Dohuk. He and his family lived in Dohuk for four years until shortly before leaving Iraq. Some of the applicant's relatives and friends are members of the Kurdish groups controlling Northern Iraq and on his own evidence those relatives and friends were able to obtain his release from custody on two occasions when he was accused of giving information to the Assyrian parties and the Baath Party. The applicant continued to live in Dohuk for 18 months after the second incident.
12 The Tribunal considered that even if it were to accept the applicant's claims of being at risk from Iraqi authorities, it was not satisfied that he is wanted by or of adverse interest to the Kurdish authorities controlling Northern Iraq. The Tribunal was satisfied that he could return to live in Dohuk City in Northern Iraq where his family and friends remain who are members of the controlling Kurdish groups.
13 The Tribunal accepted that the applicant was arrested by the Kurds, as he claimed, but was not satisfied that he would be of adverse interest to the Kurdish authorities in Northern Iraq as a suspected spy or for any other reason. The Tribunal was satisfied, in view of the first hand reports from Christian and Assyrian leaders in Northern Iraq that Assyrian Christians are not at risk of harm from or of being persecuted by Muslims in Northern Iraq.
14 The Tribunal's conclusion was that the applicant is not wanted by, or of adverse interest to, the Kurdish authorities and that he faces no real chance of harm in Northern Iraq for any Convention reason. It is for those reasons that the Tribunal confirmed the decision of the Minister's delegate not to grant a protection visa.
15 I am unable to discern in the reasons any ground of review within section 476 of the Act. Accordingly, I consider that the application should be dismissed. I will order that the applicant pay the respondent's costs of the application.
I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.
Associate:
Dated: 8 March 2000
The applicant appeared in person
Counsel for the Applicant:
Counsel for the Respondent: Mr R Beech-Jones
Solicitor for the Respondent: Australian Government Solicitor
Date of Hearing: 28 February 2000
Date of Judgment: 28 February 2000
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Kowalski v Trustee of Mitsubishi Motors Australia Limited Staff Superannuation Pty Ltd [2003] FCA 14
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2003/2003fca0014
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2024-09-13T22:46:41.368525+10:00
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FEDERAL COURT OF AUSTRALIA
Kowalski v Trustee of Mitsubishi Motors Australia Limited Staff Superannuation Pty Ltd [2003] FCA 14
KAZIMIR KOWALSKI V TRUSTEE: MITSUBISHI MOTORS AUSTRALIA LIMITED STAFF SUPERANNUATION PTY LTD ACN 064 829 616 AND MITSUBISHI MOTORS AUSTRALIA LTD ACN 007 870 395
No S 234 OF 2002
SPENDER J
BRISBANE
15 JANUARY 2003
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY S 234 OF 2002
BETWEEN: KAZIMIR KOWALSKI
APPLICANT
AND: TRUSTEE: MITSUBISHI MOTORS AUSTRALIA LIMITED STAFF SUPERANNUATION PTY LTD ACN 064 829 616
FIRST RESPONDENT
MITSUBISHI MOTORS AUSTRALIA LTD ACN 007 870 395
SECOND RESPONDENT
JUDGE: SPENDER J
DATE OF ORDER: 15 JANUARY 2003
WHERE MADE: BRISBANE
THE COURT DIRECTS THAT:
1. The Registrar not accept the notice of motion dated 14 January 2003 or the supporting affidavit, or further process the motion.
2. The original notice of motion and supporting affidavit be returned to Mr Kowalski.
3. A copy of these documents be retained in the Registry.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY S 234 OF 2002
BETWEEN: KAZIMIR KOWALSKI
APPLICANT
AND: TRUSTEE: MITSUBISHI MOTORS AUSTRALIA LIMITED STAFF SUPERANNUATION PTY LTD ACN 064 829 616
FIRST RESPONDENT
MITSUBISHI MOTORS AUSTRALIA LTD ACN 007 870 395
SECOND RESPONDENT
JUDGE: SPENDER J
DATE: 15 JANUARY 2003
PLACE: BRISBANE
REASONS FOR DIRECTION
1 An appeal has been lodged by Kazimir Kowalski against the judgment of Mansfield J of 17 September 2002. The parties to the appeal are Mr Kowalski and the Trustee of the Mitsubishi Motors Australia Limited Staff Superannuation Pty Ltd (ACN 064 829 616) ("the Trustee") and Mitsubishi Motors Australia Ltd (ACN 007 870 395) ("Mitsubishi").
2 At first instance, the claim against the Trustee was dismissed, the primary judge being of the view that the Court had no jurisdiction to hear the claims against the Trustee, because the Trustee was not an employer under the Workplace Relations Act 1996 (Cth). In relation to the claim against Mitsubishi, that claim was dismissed on the basis of estoppel arising out of a final judgment given by the Australian Industrial Relations Commission ("the AIRC"), and also on the basis that Mr Kowalski had no prospect of success against Mitsubishi.
3 Mr Kowalski presented a notice of motion on 14 January 2003, which seeks, among others:
"1. An order that the first and the second respondent make discovery of the documents referred to in the affidavit of Kazimir Kowalski sworn on 14 January 2003.
2. An order that the first and second respondents pay to the appellant his costs and disbursements of and incidental to this notice of motion on an indemnity basis."
4 The affidavit of Mr Kowalski in support of that motion refers to a letter dated 8 January 2003 which he sent to the first and second respondents. That letter requested discovery of a copy of various documents. The affidavit asserts that the first and second respondents have failed to make discovery of the requested documents, with the consequence that:
"β¦ I seek an order that the first and the second respondent make discovery of the documents mentioned herein before my appeal to the Full Federal Court has been heard on 12 February 2002."
5 In my opinion, it cannot be suggested that the documents sought fall into any category of fresh evidence and further, the documents sought to be discovered by the letter of 8 January 2003 do not constitute part of the evidence that was before the primary judge. No basis appears from the material filed by Mr Kowalski either to support the reception of those documents on the basis of fresh evidence or on any other basis.
6 The notice of motion marked "RECEIVED/FILED 14 January 2003" by the South Australian District Registry is truly an abuse of process. Pursuant to O 46 r 7A, I direct the Registrar not to accept the notice of motion or supporting affidavit or further process the motion. I direct that the original of those documents be returned to Mr Kowalski, a copy of which should be kept in the Registry.
7 I note that Mr Kowalski might seek to agitate the issues raised by his motion and supporting affidavit when the appeal is heard at 10.15 am Wednesday 12 February 2003. Mr Kowalski should be supplied with a copy of these reasons.
I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Direction herein of the Honourable Justice Spender.
Associate:
Dated: 17 January 2003
Date of Hearing: 15 January 2003 (on the papers)
Date of Judgment: 15 January 2003
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2015-10-29 00:00:00
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Spence v Rigging Rentals WA Pty Ltd [2015] FCA 1158
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2015/2015fca1158
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2024-09-13T22:46:42.909427+10:00
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FEDERAL COURT OF AUSTRALIA
Spence v Rigging Rentals WA Pty Ltd [2015] FCA 1158
Citation: Spence v Rigging Rentals WA Pty Ltd [2015] FCA 1158
Parties: ERIC MYLES JOHN SPENCE v RIGGING RENTALS WA PTY LTD (ACN 105 556 563), CLIFFORD MCGILLIVRAY and CRAIG SWEETAPPLE
File number: WAD 301 of 2014
Judge: GILMOUR J
Date of judgment: 29 October 2015
Catchwords: CORPORATIONS - oppressive conduct under s 232 of the Corporations Act 2001 (Cth) - proposed sale of the first defendant β condition in email sent to the plaintiff concerning the issue of additional shares to the second and third defendants and the proposed sale - claims against the plaintiff for misconduct in relation to the affairs of the first defendant - whether the condition amounts to oppressive conduct - second and third defendants achieving a personal benefit although claims against the plaintiff are claims of the first defendant.
CORPORATIONS - cross-claim for breach of directors' duties under s 182 of the Corporations Act 2001 (Cth) and breach of fiduciary duties - disputed expenses charged to the cross-claimant's account - alleged excessive remuneration payments to the bookkeeper - receipt of director's fees from companies that allegedly placed the cross-respondent in a position of conflict - expenses and lost profits.
EVIDENCE - admissibility of email under the Evidence Act 1995 (Cth) - whether s 131 of the Evidence Act applies - classification of the dispute that is the subject of the email communication.
Legislation: Corporations Act 2001 (Cth) ss 182(1), 232, 233, 234, 1317H
Evidence Act 1995 (Cth) s 131
Long Service Leave Act 1958 (WA) s 8(3)
Cases cited: Hillam v Ample Source International Ltd (No 2) (2012) 202 FCR 336
Joint v Stephens [2008] VSCA 210
Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692
In re London School of Electronics Ltd [1986] Ch 211
Re Norvabron Pty Ltd (No 2) (1986) 11 ACLR 279
Wayde v New South Wales Rugby League Limited (1985) 180 CLR 459
Date of hearing: 15-17 June 2015, 2 July 2015
Place: Perth
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 238
Counsel for the Plaintiff/Cross-respondent: Mr C M Slater
Solicitor for the Plaintiff/Cross-respondent: Morgan Alteruthemeyer
Counsel for the Defendants/Cross-claimant: Mr L A Warnick
Solicitor for the Defendants/Cross-claimant: Trinix Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION WAD 301 of 2014
BETWEEN: ERIC MYLES JOHN SPENCE
Plaintiff/Cross-Respondent
AND: RIGGING RENTALS WA PTY LTD (ACN 105 556 563)
First Defendant/Cross-Claimant
CLIFFORD MCGILLIVRAY
Second Defendant
CRAIG SWEETAPPLE
Third Defendant
JUDGE: GILMOUR J
DATE OF ORDER: 29 October 2015
WHERE MADE: PERTH
THE COURT ORDERS THAT:
1. The second and third defendants, within 28 days of judgment, each pay the plaintiff $300,000 in consideration of the delivery of written share transfer documents, to each of them, of five shares in the first defendant.
2. There be liberty to the parties to apply, on 48 hours' notice, on any issue concerning Order 1.
3. The first defendant pay to the plaintiff the sum of $36,740.
4. The plaintiff pay to the first defendant the sum of $11,927.18.
5. The parties confer on the questions of costs of the claim and the cross-claim with a view to providing the Court with a minute of consent orders as to these costs by 4:00pm (WST) on Friday, 13 November 2015.
6. There be liberty to the parties to apply as to the orders to be made on the questions of costs on 48 hours' notice, in the event that these, in whole or in part, cannot be agreed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION WAD 301 of 2014
BETWEEN: ERIC MYLES JOHN SPENCE
Plaintiff/Cross-Respondent
AND: RIGGING RENTALS WA PTY LTD (ACN 105 556 563)
First Defendant/Cross-Claimant
CLIFFORD MCGILLIVRAY
Second Defendant
CRAIG SWEETAPPLE
Third Defendant
JUDGE: GILMOUR J
DATE: 29 October 2015
PLACE: PERTH
REASONS FOR JUDGMENT
1 This proceeding concerns the unfortunate breakdown of the relationship between Mr Spence, the plaintiff, on the one hand and Messrs McGillivray and Sweetapple, the second and third defendants, on the other, in relation to their company β the first defendant β Rigging Rentals WA Pty Ltd (the Company). The shares in the Company are held equally between Mr Spence and the personal respondents, to whom, together, I will refer as "the majority". Mr Spence alleges oppression at the instance of the majority. He seeks relief under s 233 of the Corporations Act 2001 (Cth) (the Act).
2 He alleges that on or about 1 August 2014 the majority demanded that he consent to the allotment of additional shares to them with the effect of reducing his shareholding to 25% and increasing theirs to 37Β½% each. Acceptance of this demand was said to be the price of the majority agreeing to the continuation of negotiations, in effect, for sale of the Company whether by a sale of all the shares or alternatively the business of the company, which was then in contemplation.
3 The alleged demand is contained in an email written on behalf of the majority by Mr Sweetapple sent to Mr Spence dated 1 August 2014 (1 August email). Mr Spence further alleges that it may be inferred from the email, that the majority would, absent his consent to the share allotment, cause or procure his exclusion from the management of the business of the Company.
4 The Company has cross-claimed for compensation pursuant to s 1317H of the Act for alleged breaches by Mr Spence of s 182(1) of the Act or, alternatively, equitable compensation for alleged breach of his fiduciary duties.
5 Within two months of commencing this action Mr Spence's employment was terminated and his day-to-day involvement in the affairs of the Company ended. Since then he has not received income or dividends from the Company. The opportunity for the sale of the Company which existed in or about July and August 2014 is no longer available.
6 Mr Spence submits that the additional share allotment demands of the majority constitute oppressive conduct, as does his exclusion from management. Mr Spence seeks relief in the form of an order for the purchase of his shares by the majority.
7 The expert evidence was agreed by the parties to be to the effect that $1,800,000 represented the market value of the Company and $600,000 represented a market value of one-third of the shares owned by Mr Spence as at 30 November 2014.
The background facts
8 The following background facts, most of which are not controversial, are substantially taken from the parties' respective closing submissions in combination. Whilst largely uncontroversial their relevance and effect is often in dispute. For example, there is no dispute as to the expenses of the Company incurred by Mr Spence. The issue rather is whether they were reasonably incurred in the course of the business of the Company (or perhaps β were incurred in breach of his duty to the Company). Where the facts are in dispute I have resolved that dispute.
9 Further, at the outset of the trial, Mr Spence took objection to various paragraphs in the written statements adduced on behalf of the defendants. It is not necessary to deal with each of those objections due to the conclusions I have reached. Where it is necessary, though, I will set out my rulings in these reasons.
Establishment of the Company
10 From about 1990 until 2002, Messrs Spence, McGillivray and Sweetapple were all employed by Sling-Rig Pty Ltd (Sling-Rig), a manufacturer and supplier of lifting, rigging and materials handling equipment. In about late 2001 Sling-Rig went into receivership. Shortly after this, Mr McGillivray resigned to set up his own lifting equipment company - Lifting by Design Pty Ltd (Lifting by Design). At about the same time Messrs Spence and Sweetapple were recruited to join Bullivants Pty Ltd (Bullivants), a national lifting equipment firm. Mr Spence managed the Perth branch of Bullivants and Mr Sweetapple managed the Bunbury branch.
11 In early 2003, Mr Sweetapple perceived an opportunity to establish a business of hiring out lifting, rigging and materials handling equipment. He discussed this opportunity with his then colleagues Messrs McGillivray and Spence. All three agreed that there was an opportunity in this field and that they should form a company to exploit the opportunity together. The business plan for the proposed new venture was to begin by hiring equipment to Lifting by Design for on-hire to its customers, and then to grow from that business base.
12 The Company was incorporated on 16 July 2003, initially under the name "LBD Hire Pty Ltd" (LBD Hire) reflecting the proposed close relationship with Mr McGillivray's company Lifting by Design. Each of the three participants in the venture took up ten shares. Messrs Spence and Sweetapple, who at this stage were still employed by Bullivants, took up their shares through trusts. Mr McGillivray took his shares in his own name and became the sole director.
13 Mr McGillivray also carried out the management of the Company, in conjunction with the management of Lifting by Design, for the first two years (from mid-2003 to mid-2005).
14 The original plan was that when the Company's business became established, Mr Sweetapple would resign from his employment and take over management. However, in early 2005 when the Company reached the stage where it could justify having a full-time manager, the three shareholders agreed that Mr Spence, instead of Mr Sweetapple, would resign from his employment and take over management of the Company. Mr Spence took up this position on 11 July 2005.
15 The shares in the Company held in trust for Mr Spence and Mr Sweetapple were transferred into their own names on 17 January 2007. Since that time each of the three parties has held ten shares in his own name.
16 Mr Sweetapple was appointed a director of the Company on 27 September 2006. Mr Spence was appointed as a director on 8 March 2007 and as company secretary on 8 May 2008. The defendants in their defence and cross-claim acknowledge that Mr Spence was Chief Executive Officer and also Managing Director of the Company.
17 In or about June 2007, Mr Spence commenced working for four days in a week for the Company.
18 Two other companies were also formed, with Messrs McGillivray, Sweetapple as Spence as shareholders and directors. One of these was LBD Supply Pty Ltd, trading as Hoisting Equipment Specialists WA (HESWA). Messrs McGillivray, Sweetapple and Spence each took up 25% shareholdings in HESWA with the other 25% being taken up by Mr Bradley Gardiner who was also a former employee of Sling-Rig and Bullivants. HESWA was incorporated in April 2005 and both Messrs Sweetapple and Gardiner were later employed by HESWA.
19 The other company was Total Lifting and Rigging Pty Ltd (TLR), which was incorporated on 11 August 2006. Its shares were divided equally between the four shareholders of HESWA and a fifth person, Mr Francis Parish. TLR is based in Karratha.
20 Lifting by Design, LBD Hire and HESWA shared an office and warehouse at 203A Star Street, Welshpool (Star Street office). From 2005 to 2010 Messrs McGillivray, Sweetapple, Spence and Gardiner all worked in that office. In October 2010, after growth in the companies at those premises, HESWA moved to different offices.
21 There was, I find, a general discussion about what expenses could be incurred in the name of the Company. Any agreement reached was never recorded in writing.
Deterioration of relationship
22 The relationship between the three shareholders of LBD Hire initially progressed satisfactorily. However, from about 2006 onwards the relationship deteriorated and a degree of animosity developed between Mr Spence and his fellow directors - particularly towards Mr McGillivray.
23 In May 2008 Messrs McGillivray, Sweetapple, Spence and Gardiner were considering the formation of a new company, Lifting Online Pty Ltd (LOL), with each taking a one-quarter shareholding. In the weeks leading up to the incorporation of LOL, Mr Spence approached Mr Sweetapple in the Star Street office and proposed that Mr McGillivray should be excluded from participation in the proposed new company. Mr Sweetapple declined this proposal and LOL was formed with four shareholders as originally planned.
National brand proposal β Rigging Rentals Victoria
24 In late 2009 and early 2010 Mr Spence was approached by industry contacts in Victoria, Mr Richard Johnson and Mr Nathan Van Berkel, who had established a company in Melbourne under the name "Rigging Rentals Pty Ltd" (RRVIC). Mr Van Berkel made a proposal to the Company in an email dated 21 December 2009. The proposal invited "Eric and stakeholders from LBD Hire" to participate, and stated the three broad objectives quoted below:
(1) Establishment of a lifting equipment hire company in the Eastern States and South Australia;
(2) Partnering with LBD Hire to create a national brand in this sector;
(3) Packaging and disposal of part or all of the business in the long term.
25 Mr Spence informed his fellow director/shareholders of this opportunity. However, he also approached Mr Sweetapple and asked him if he was prepared to take a bigger share of this opportunity and cut Mr McGillivray out. Mr Sweetapple declined.
26 The shareholders of the Company took a 25% interest in RRVIC between them, with each holding 8.33% (five shares) personally or through a personal investment vehicle. Notification of the share issue was given to the Australian Securities and Investments Commission (ASIC) on 23 July 2010.
27 As part of the commitment to participate in the proposal to create a national brand, the Company registered the business name "Rigging Rentals WA" on 12 April 2010 and immediately began trading under that name.
28 Mr Spence became a director of RRVIC but the majority did not.
29 Subsequently, in about mid-2011, the shareholders of the Company agreed that it should change its name to "Rigging Rentals WA Pty Ltd" (RRWA). This represented a further step towards the national brand proposed by Mr Van Berkel in his email of 21 December 2009. The name change was notified to ASIC on 9 December 2011.
Mrs Amber Mildon
30 In June 2010, the Company required the services of a bookkeeper. Mr Spence engaged Mrs Amber Mildon to fill that role. Mrs Mildon commenced employment on 25 June 2010. In addition to her work as bookkeeper Mrs Mildon's bookkeeping services were contracted to TLR and TLR paid the Company a fee for those services.
31 Over the months that followed Mr Spence developed a close personal relationship with Mrs Mildon. She became his friend and confidante. On 29 September 2010, approximately three months after Mrs Mildon joined the Company, Mr Spence sent her an email containing a gratuitous and offensive reference to Mr McGillivray.
32 As I mentioned earlier, in October 2010, HESWA moved out of the Star Street office to larger premises in Canning Vale and from that time, Messrs Gardiner and Sweetapple were no longer in close daily contact with Mr Spence or Mrs Mildon.
33 In late 2010 Mrs Mildon relocated with her family to Busselton. Mr Spence continued to employ her as bookkeeper for the Company, working remotely from her home in Busselton. She worked on the electronic financial records using the internet and communicating with the employees of the Company by telephone, email and mail. She recorded the hours that she spent on her work as it varied from week to week and was remunerated on an hourly rate.
34 From time to time the bookkeeper performed bookkeeping work for companies associated with Mr Spence and the other directors and the cost of her work was charged by the Company to the other companies and paid by those entities to the Company. Mr Spence explained the scope of her work in his evidence as more than mere bookkeeping.
35 The defendants point to a number of matters which occurred after Mrs Mildon's move to Busselton which they submit evidence her close and personal friendship with Mr Spence:
(a) When Mrs Mildon visited Perth on 29 April 2011, Mr Spence took her to lunch at Incontro Restaurant, charging the cost of $193 to the Company;
(b) Mrs Mildon confided in Mr Spence through the company email system about intimate personal matters in an email exchange on 31 May 2011;
(c) In June 2011 Mr Spence took Mrs Mildon with him on a business trip to Melbourne and Sydney. They flew business class on the return journey from Sydney to Perth;
(d) On 23 August 2011 Mrs Mildon sent Mr Spence, through the company email system, photographs of several scantily-clad obese women;
(e) When Mrs Mildon visited Perth on 5 September 2011, Mr Spence took her to lunch at Friends Restaurant, charging the cost of $209.50 to the Company;
(f) On 11 November 2011 Mr Mildon sent Mr Spence, through the company email system, another photograph - this time of a scantily-clad blonde woman lying on a bed;
(g) In late November 2011 Mr Spence took Mrs Mildon with him on another business trip, this time to Brisbane. Again they flew business class for part of the journey.
36 Mr Spence justified taking Mrs Mildon with him on business trips by saying that she could provide him with instant access to accounting information and, importantly, broke the ice with anyone he met at business meetings. He elaborated on this in cross-examination by saying that as Mrs Mildon "basically ran the admin, it sort of helped to create that relationship between [the Company's] admin and their administrative functions".
Establishment of Rigging Rentals Queensland
37 On 4 April 2011, Mr Spence, together with Mr Dean Nelson and Mr Johnson, who were directors of RRVIC, held a meeting in Perth to discuss a number of matters including expansion into Queensland and New South Wales. The majority were not informed of this meeting nor of the plans for expansion into Queensland and New South Wales, as discussed at the meeting.
38 A new company, Rigging Rentals (Qld) Pty Ltd (RRQLD), was registered on 1 March 2012. Mr Spence was a foundation director and a company under his control, Alderann Pty Ltd (Alderann), took up 20 of the 120 shares issued β a one-sixth shareholding.
39 The majority were not informed of the incorporation of RRQLD at the time. No shares in RRQLD were offered to any of the defendants.
Meeting of 2 March 2012
40 In the period prior to March 2012, Mr McGillivray became suspicious about the level of expenses, including travel expenses, being charged to the Company by Mr Spence. Mr McGillivray looked briefly at the accounting records of the Company on the MYOB accounting system, and found some expenses that he considered "alarming".
41 Mr McGillivray discussed his concerns with Mr Sweetapple.
42 The majority then called a meeting with Mr Spence. This meeting was held at the Star Street office on 2 March 2012 (2 March meeting). All three were in attendance.
43 At the meeting the majority questioned Mr Spence about his expenses, and also about his relationship with Mrs Mildon. There was never a schedule or specific itemisation of the amount required according to the evidence of Mr McGillivray.
44 As to what happened at this meeting and what the outcomes of the meeting were, there is a conflict of evidence. For example, Mr Spence does not accept that he was never to fly business class. I make no finding one way or the other about this conflict and in particular concerning air travel although I would find it surprising if someone in Mr Spence's position was required to fly economy on domestic business trips. Nonetheless, Mr Spence agreed to make a global payment to the Company in respect of some expenses. The amount of the payment was left to be agreed at a future time.
45 It was also agreed that Mr Spence would set up a discretionary account to which he would debit expenses which were not properly chargeable to the Company. This would be a loan account and he would be liable to clear the account by offsetting amounts due from the Company to him, or by making payments to the Company.
46 Mr Spence did create that account and did make repayments from time to time and that there remains an amount of $3,427.18 that remains outstanding on that account.
47 In or about October 2012, the Company had outgrown the available space at the Star Street office and moved to its own premises in Bibra Lake, WA. At that time Mr Spence and two employees of the Company moved to the new premises. From that time the other directors did not visit the Bibra Lake premises very often, if at all.
48 The amount of compensation to be paid by Mr Spence remained unresolved for some time. It was still unresolved as at 24 December 2012, when Mr McGillivray sent Mr Spence an email following up the matter, although the claim was not itemised.
49 On 24 December 2012, Mr Spence responded by an email. Mr Spence proposed that the Company could withhold from him $10,000 from a proposed dividend of $30,000, that is, the withheld amount would constitute the proposed repayment. According to his evidence it was just a "ballpark number". The majority did not accept that proposal. The discussion was in rounded amounts. It was resolved that the Company would withhold from Mr Spence $17,500 from the next dividend. That amount was withheld. The final agreement in part is reflected by an email dated 19 July 2013.
50 Mr Spence's position following the 2 March meeting was clearly stated in emails he sent to Mrs Mildon. He would not change his behaviour. Shortly after this meeting, Mr Spence wrote to Mrs Mildon stating he was determined to cut the ties with the majority and was working to make that happen sooner rather than later.
Conflict over shareholding in RRQLD
51 In late July 2012 Mr Sweetapple became suspicious that RRVIC might be planning to open a branch in Queensland. He telephoned Mr Spence to ask him what was going on. Mr Spence told him that RRQLD had been established, that he had taken shares in the company personally, and that the majority had been excluded.
52 Mr Sweetapple asked Mr Spence how he could do that, when he was employed to represent the shareholders in the Company. Mr Spence responded that he had taken the shares because Mr Sweetapple and Mr McGillivray had threatened his livelihood at the 2 March meeting. In cross-examination Mr Spence conceded that he made this statement. When it was pointed out to him that the RRQLD shares had been issued on 1 March 2012 (the day before the meeting), he said that he made the statement to "validate" his decision to exclude Mr Sweetapple and Mr McGillivray. The only substantive reason he was able to give for excluding them was that "[t]here was already animosity going way back before this".
53 Mr Sweetapple told Mr McGillivray the news he had been given by Mr Spence, on or about 29 July 2012. This situation was described in an email sent by Mr Spence to Mrs Mildon on 30 July 2012:
I've started world war 3 with Craig and Cliff which has been interesting if not a little stressful but admittedly of my own doing this time as I left them out of the QLD deal.
Mr Spence and Mrs Mildon β 2012
54 After the 2 March meeting with the majority, Mr Spence sent an email to Mrs Mildon with an account of the meeting. Mrs Mildon responded in terms that were sympathetic to Mr Spence and critical of the majority. However, she did suggest that Mr Spence might be better off "starting anew" with a different bookkeeper:
Now that I have everything running smoothly it will be a lot easier for someone to takeover. Perhaps hire a regular Norma type who can get the job done and not cause any speculations and issues β¦
55 Mr Spence did not take up this suggestion in his response, but said:
Amber, it's really nice knowing I have someone I can trust and talk too [sic]. I'll make sure I get this sorted to suit us.
56 Mr Spence's disclosure to Mrs Mildon of the questions raised at the 2 March meeting about the relationship between them led to Mrs Mildon confronting Mr Sweetapple. Again Mrs Mildon suggested that it might be better for her to look for another job. It was in response to this suggestion that Mr Spence said:
I definitely want to cut the ties and am working to make that happen sooner rather than later. So please hang in just a little longer and let's see what I can do.
57 Mrs Mildon did continue to work for the Company. On 16 April 2012 she sent Mr Spence an electronic birthday greeting containing a photo of a nude model. On 8 June 2012 she sent him another email attaching photographs of a young woman in suggestive poses.
58 The outbreak of conflict over the RRQLD shares led to another exchange of emails between Mr Spence and Mrs Mildon, commencing with the email of 30 July 2012 referring to "world war 3". Mrs Mildon commiserated with Mr Spence but also encouraged him in his decision to exclude the majority from participation in RRQLD. She said:
I am very sorry to hear you have another war on your hands but very glad they don't get to share in the QLD deal and make more money doing nothing but whining their scaly arses off on every decision you make.
59 Later in the same email exchange Mrs Mildon offered further advice to Mr Spence, culminating in the following words:
Just remember there [sic] opinion means nothing to you and you don't need there [sic] approval. Business is business.
60 Mrs Mildon visited Perth on 14 September 2012 and Mr Spence took her to the El Ocio restaurant. He charged an amount of $121 to the Company.
61 In late November and early December 2012 Mr Spence took Mrs Mildon with him to an oil and gas conference in Singapore. Both were booked to travel business class and the cost of the business class flights was booked to Mr Spence's discretionary loan account. Subsequently Mrs Mildon cancelled her business class flight and travelled economy class. Her economy class fare was not debited to the discretionary loan account but was charged to the Company.
62 Shortly after his return from the Singapore trip Mr Spence sent Mrs Mildon an electronic Christmas greeting containing pornographic material.
Attempts to sell the company
63 In the period since early 2013 Mr Spence and the majority were looking for a possible purchaser of the Company or its business.
64 In an email of 10 January 2013 to Mrs Mildon, Mr Spence reported that he had had a meeting the previous day with a potential buyer of the Company who was "very keen to do a deal".
65 In early April 2013, Mr Spence received an indicative offer for the shares in the Company from EC Hambro Rabben & Partners Ltd (Hambro), acting on behalf of a UK company called Fendercare Ltd (part of the James Fisher and Sons group).
66 Mr Spence met with representatives of the potential buyer in London during a trip to Europe in April 2013.
67 Mr Spence informed the majority of the Hambro offer. After discussion with them he instructed Gooding Partners, the Company's accountants, to write back to Hambro declining the offer and asking for a higher offer.
68 Hambro submitted a "Preliminary Indicative Offer" on behalf of Fendercare on 19 June 2013. The consideration referred to was a payment of A$3.5 million on settlement, with further payments approximately one and two years after completion if certain earnings targets were met. The letter contained a number of conditions.
69 With the agreement of the majority, Mr Spence instructed Gooding Partners to send back a response proposing a higher payment on settlement (A$4 million) and a pro rata structure for the subsequent payments based on meeting earnings targets.
70 On 2 July 2013 Hambro advised by email that the James Fisher group did not wish to proceed with the purchase of the Company. Four risk factors were referred to in the email, as justification for the decision not to proceed. These were said to be factors which Mr Spence himself had identified when he met with Hambro in London. One of these factors was the corporate structure of the Rigging Rentals group of companies and licence of the trade name.
71 In parallel with the discussions with Hambro, Mr Spence had been seeking to interest another potential buyer in making an offer to acquire the Company. He had been introduced to Mr Harry Gandhi, CEO of Unique Maritime Group (Unique Group), based in the United Arab Emirates. Unique Group was related to Seaflex Limited (Seaflex), a major supplier of the Company. Mr Graeme Brading of Seaflex had made the introduction and acted as a "go-between" in Mr Spence's communications with Mr Gandhi. For this service Mr Spence agreed to make a payment to Mr Brading.
72 Mr Gandhi had already "registered an interest" in a possible purchase of the Company prior to Mr Spence's meeting with Hambro in London. Mr Spence spoke of this as his "plan B" if the negotiations with Hambro were not successful.
73 In the email informing the majority that the James Fisher group were not proceeding, Mr Spence told them he had commenced "plan B". By a subsequent email of 19 July 2013 Mr Spence informed them that he had spoken with Mr Gandhi and was obtaining a "non-disclosure form" from him.
74 In early September 2013 Mr Spence met with Mr Gandhi in Singapore. Mr Gandhi told him that the Unique Group was raising capital and would not be in a position to consider the purchase for five or six months. Mr Spence reported this by email on 10 September 2013 to the majority.
Mr Spence and Mrs Mildon β 2013
75 In April 2013 Mr Spence took a trip to Dubai, Germany, England, Dublin, Paris and Amsterdam. Mrs Mildon joined him for the latter part of this trip (Dublin, Amsterdam and Paris). Mr Spence admitted that Mrs Mildon was not required for any business purpose on that trip; he took Mrs Mildon on what was effectively a holiday, as a "chance to repay".
76 Mrs Mildon's airfare was charged to the Company but debited to Mr Spence's discretionary loan account and subsequently paid for by Mr Spence. However, none of the cost of Mrs Mildon's accommodation or other travel costs appear to have been debited to the discretionary loan account.
77 In September 2013, Mr Spence took Mrs Mildon on a trip to Singapore. The purpose of the trip was to meet with Mr Harry Gandhi of Unique Group to discuss the possible sale of the Company. Mr Gandhi had met Mrs Mildon previously and "more or less suggested [that] it would be nice to meet her again". The costs of this trip, except for Mrs Mildon's airfare, were charged to the Company, although an amount put towards accommodation was subsequently recharged to Mr Spence's discretionary account.
Establishment of RRNSW and conflict over shareholding
78 On 12 August 2013 a company by the name of "Rigging Rentals (NSW) Pty Ltd" (RRNSW) was established, as the Sydney branch of the Rigging Rentals brand network. Mr Spence again took a one-sixth shareholding (through Alderann) and became a director from the time of registration, as he had in RRQLD.
79 Mr Spence did not inform the majority of the establishment of RRNSW, either before or after that company was registered. Mr Sweetapple learned of the establishment of RRNSW when he received an email from Mr Johnson, the manager of RRVIC. announcing the appointment of a Sydney branch manager. This email was dated 6 January 2014, some five months after the incorporation of RRNSW.
80 Mr Sweetapple emailed Mr Spence on 8 January 2014 to ask what the shareholding situation of RRNSW was. Mr Spence replied "Same as QLD". An exchange of terse emails followed, culminating in an email from Mr McGillivray to Mr Spence including a request to Mr Spence to improve communication with his fellow directors.
Mr Spence and Mrs Mildon β first half of 2014
81 Between 5 and 8 March 2014 Mr Spence took Mrs Mildon with him on a trip to Melbourne and Sydney. He said the trip was for a meeting of the Global Lifting Group and a meeting of the Eastern States Rigging Rentals companies. Mr Spence explained that Mrs Mildon acted as an icebreaker and helped with relationships.
82 Approximately one month later, Mr Spence took Mrs Mildon with him to a Global Lifting Group meeting in Melbourne on 9 and 10 April 2014. This meeting was also attended by Mr Sweetapple. Mr Sweetapple observed that Mr Spence arrived in the afternoon of 9 April and missed most of that day's meeting, but he and Mrs Mildon attended together at the Global Lifting Group dinner that was held on the night of 9 April.
83 On Friday, 11 April 2014, Mr Spence and Mrs Mildon attended a meeting of the Eastern States Rigging Rentals entities. They then flew to Brisbane together and stayed the night in Brisbane. On Saturday, 12 April they went to Noosa together. On the nights of 12 April and 13 April they stayed at the Little Cove Court in Noosa. They returned to Perth together on 14 April.
84 The cost of Mrs Mildon's travel on this Melbourne/Brisbane/Noosa trip was charged to Mr Spence's discretionary loan account. Mrs Mildon did reimburse the Company for part of the accommodation cost.
Dealings between Mr Spence or the Company and RRQLD and RRNSW - 2011 to 2014
85 It has already been noted that Mr Spence participated in a meeting of directors of RRVIC on 4 April 2011, at which expansion into Queensland and New South Wales was discussed. It has also been noted that Mr Spence became a director of each of those companies and took up a one-sixth shareholding in each of them, again through his company Alderann.
86 On occasions in the period between April 2011 and early 2014, Mr Spence had some involvement in RRQLD and RRNSW. He attended directors' meetings, including a meeting on Magnetic Island, Queensland on 15 July 2013, a meeting at the Radisson Hotel, Sydney on 21 November 2013 and the previously mentioned meeting in Melbourne on 11 April 2014 (also attended by Mrs Mildon). He inspected, or participated in inspections of, warehouse premises in Brisbane on 18 May and 26 July 2012.
87 In addition, at the direction of Mr Spence, the Company sent some equipment either on consignment or "hire for on-hire" arrangements to the Eastern States companies to be used in their rental business. In December 2014, Company equipment valued at $412,530 was held by RRQLD and Company equipment valued at $89,478 was held by RRNSW.
88 Mr Spence explained the business purpose of sending equipment to locations closer to customers. He said that it helped achieve "greater spread", that is, greater utilisation of the fleet of equipment in order to meet the demands of specific jobs in the other locations.
89 None of the dealings between Mr Spence and RRNSW or RRQLD were reported by Mr Spence to his fellow directors, except to the extent that his interests in those companies were disclosed during discussions which took place when the majority found out about them. In particular, the majority were not aware at the time of the amount of equipment sent to the Eastern States companies on consignment.
90 The nature of the arrangements for provision of equipment by the Company to RRQLD and RRNSW, and the effect of those arrangements on the Company, were the subject of conflicting evidence. Mr Spence asserted that the arrangements were beneficial to the Company in that they generated revenue. The majority, on the other hand, held different views. They considered them as detrimental to the Company because the equipment was unavailable for hire in WA, the rates received from the Eastern States companies were low, the equipment was sent on consignment which meant that it was not always on hire to a customer, and the Eastern States companies were slow in paying.
91 Mr Spence accepted that the consignment arrangements with RRQLD and RRNSW were very beneficial for the start-up of those companies, although the Company had no equity interest in the companies. The majority expressed the opinion that by assisting the start-up of these companies without any equity interest in them or any long-term arrangement assuring a favourable revenue outcome, the Company had gained nothing but had created a potential competitor. Mr Spence disputes this conclusion.
Meeting of 19 June 2014
92 By early June 2014, no further expression of interest had been received from Unique Group.
93 In or about early June 2014, the majority discussed the future of the Company. It was their opinion that Mr Spence's expense claims were still excessive and that he was still taking Mrs Mildon on business trips unnecessarily.
94 The majority called a meeting of the directors and shareholders of the Company for 19 June 2014 (19 June meeting). This meeting was held at Ramon's CafΓ©, Canning Vale and all three directors attended.
95 Again, there is some conflict of evidence over what happened at the meeting and the accuracy of the minutes prepared by Mr McGillivray. However, it appears to be accepted by all parties that the matters discussed at the meeting included:
(a) efforts to progress the sale of the Company, given that no offer had been received from Unique Group;
(b) the need for a better relationship between shareholders and a requirement for Mr Spence to keep the majority informed of all Company dealings of note;
(c) a proposal by the majority that a shareholders' agreement should be put in place to set out boundaries as to how the business of the Company could operate; and
(d) the assertion by the majority that the wages paid to Mrs Mildon were excessive by reference to comparable roles in associated companies. They requested Mr Spence to comment and propose a resolution.
Events between meeting of 19 June 2014 and meeting of 30 July 2014
96 Mr McGillivray sent the minutes of the 19 June meeting, as prepared by him, to Mr Spence by email on 23 June 2014. He pointed out that there were a few points for action by Mr Spence. He added two "personal comments" about the sale of the Company and the relationship between shareholders.
97 On 16 July 2014 Mr McGillivray sent a follow-up email to Mr Spence asking for his response to the action items in the minutes of the 19 June meeting.
98 Mr Spence sent an email to Mr Gandhi of Unique Group on 16 July 2014. He asked Mr Gandhi to confirm "as a matter of priority" the interest of Unique Group in the purchase of the Company concluding with: "My circumstances are such that I need to have this matter clarified as soon as possible".
99 On the same day Mr Gandhi replied saying:
We are in a position to consider our options
Please can you issue your latest end of june accounts, structure, reports etc and what u are looking for.
We are planning to be in Singapore in august so we can organize a meet in perth.
(Errors in original.)
100 Mr Spence instructed Gooding Partners to prepare updated information on the Company. He informed the majority of the response from Mr Gandhi by an email dated 20 July 2014.
101 Mr McGillivray responded asking for the correspondence received from Unique Group, and asking that all future correspondence about sale of the Company (including correspondence with Gooding Partners) be copied to him and to Mr Sweetapple.
102 At some time between 20 and 25 July 2014, Mr McGillivray spoke to Mr Sweetapple about the proposed sale of the Company. It remained their opinion that there was ongoing unjustified expenditure of Company funds by Mr Spence. They agreed between themselves that this concern would have to be resolved before they would agree to sell their shares in the Company. Mr Sweetapple's evidence is that this followed a further review of the books and records of the Company.
103 On 25 July 2014 Mr McGillivray sent an email to Mr Spence and Mr Crawford of Gooding Partners, with a copy to Mr Sweetapple and Mr Bourke. This email was sent in response to copy emails received by Mr McGillivray from Mr Spence and Mr Crawford, concerning the information memorandum to be provided to Unique Group. Mr McGillivray's email said:
Craig and I wish to place an immediate hold on proceedings until further notice.
Please do not forward any information to the prospective buyer or representative of.
104 After receiving Mr McGillivray's email, Mr Spence telephoned Mr Sweetapple to ask for an explanation. Mr Sweetapple gave an explanation referring to Mr Spence's failure to respond to requests for information, and the view of the majority that Mr Spence had engaged in "large-scale misappropriation of company funds".
105 On the night of 25 July 2014, Mr Spence sent an email to the majority. In this email he provided brief responses to the matters requiring his comments or attention from the meeting on 19 June. He then raised a different subject, as follows:
Mediation Meeting
Your attendance is requested at a mediation meeting to be chaired by Glenn Bourke of Goodings at Goodings offices.
. . .
The purpose of this meeting is to reach a resolution regarding the proposed offer of sale of RRWA to Unique Group. I feel that our business relationship is such that it requires the presence of Goodings to ensure that each of us is represented in a fair and open manner.
Your attendance at this meeting is imperative in order to move forward and have a speedy resolution to the potential sale. Non-attendance would indicate your lack of commitment to a 'better shareholder relationship'.
Minutes of this meeting will be taken independently and you will receive a copy as soon as can be arranged after the meeting.
I reiterate my support of the working relationship as previously stated.
(Emphasis added.)
106 On receiving the request for this meeting, Mr Sweetapple discussed it with Mr McGillivray. They agreed that they would consent to the meeting, provided it was accepted as a meeting of directors and shareholders at which resolutions could be passed. Mr McGillivray so informed Mr Spence by an email dated 28 July 2014. They made this stipulation because they wished to make use of the meeting to pass resolutions concerning governance of the Company in the event that a sale did not proceed.
Meeting of 30 July 2014
107 The meeting went ahead on 30 July 2014 (30 July meeting). All three director/shareholders attended. The meeting was held at the office of Gooding Partners with Mr Bourke and Ms Tamara Erdash of that firm also in attendance.
108 Ms Erdash took detailed handwritten notes during the meeting. Mr Bourke took brief handwritten notes.
109 The discussion was detailed, but in addition to the question of the sale of the Company to Unique Group the following occurred:
(a) The majority raised three issues which they believed had "cost [them] significantly". They said that if they sold their shares, they would get no recompense for the value loss caused by these issues. The three issues were:
β’ remuneration of Mrs Mildon;
β’ expenses incurred by Mr Spence; and
β’ the shares Mr Spence had acquired in RRQLD and RRNSW.
(b) Mr Spence asked what the majority wanted financially. An audit of expenses or ledger review was discussed. Mr Sweetapple proposed that he and Mr McGillivray "may be able to save some grief by coming up with a figure that we can negotiate [with] Eric".
(c) Mr Spence said he wanted a deal "now". The majority responded that they could not get a dollar figure on the table now. Mr McGillivray said they would put down their conditions in writing by Friday, 1 August 2014 to progress with the sale.
(d) There was further discussion about the future employment of Mrs Mildon, but it was eventually agreed that this issue would be put to one side and her position would be considered if the sale did not proceed.
(e) At the meeting the other directors proposed amendments to his authority. Mr Spence accepted all of these proposed amendments without argument.
(f) The majority proposed a series of eight motions concerning the future conduct of the Company's business. Mr Spence agreed to all of these motions and Mr McGillivray thanked him for doing so.
(g) During proposals about the shares held in RRQLD and RRNSW, Mr Spence offered no resistance to the debate as to whether those shares ought to be offered to the Unique Group as part of the sale or otherwise.
(h) Mr Bourke summed up the position at the end of the meeting. The two current issues were expenditures by Mr Spence, and both RRQLD and RRNSW. The majority were to look at these two issues and revert to Mr Spence.
110 Pursuant to a request made of him at the 30 July meeting, Mr Bourke sent an email on 1 August 2014 to the meeting participants setting out the outcomes of the meeting, as he saw them.
111 I do not accept that his summary of what occurred is entirely accurate. In particular, he characterised the "losses" as the losses of the majority. This is not what was discussed at the meeting. I prefer the comprehensive notes made by Ms Erdash. It may be seen that at the end of the meeting it was agreed that the majority would look at the issues of alleged unreasonable expenditures incurred by Mr Spence in the name of the Company and the issue of equity in the RRNSW and RRQLD. These issues clearly concerned claims against Mr Spence at the instance of the Company.
112 Mr Spence submits that Mr Bourke, who was an adviser at the meeting of directors, could not unilaterally insist that the directors reconvene for any purpose whatsoever as he purports to do this in his email. I accept this submission. This was not discussed at the meeting and there is nothing in the notes of the meeting to suggest a further meeting would be called if the proposal was not accepted or that the other directors were willing to "negotiate" any of their "conditions" for proceeding with the proposed sale to Unique Group.
113 The handwritten notes record that Mr Spence wanted to progress the provision of information for a sale and he is recorded as saying "[L]et me concentrate on [the] sale". At the end the notes also disclose that following their review of the above issues, the majority would "revert" to Mr Spence and then he would "revert on queries [and] be reasonable". There was no suggestion of a dilution of Mr Spence's shareholding in the Company or that the claims for reimbursement of accounts unreasonably incurred by Mr Spence were other than claims of the Company.
Relevant events after 30 July 2014
114 It is evident from an email exchange on 31 July 2014 and paragraph 1 of Mr Bourke's email of 1 August 2014 that at the 30 July meeting, it was agreed that information on the Company could be sent to Unique Group while the majority were preparing their offer to Mr Spence. An information memorandum was in fact prepared with the assistance of Gooding Partners, and sent to Unique Group on 31 July 2014.
115 On 31 July 2014, Mr Spence and Mr Bourke sought the agreement of the other directors as to the sale price for the Company and the other directors agreed the sale price would be $3.95 million.
116 As agreed at the 30 July meeting, Mr Sweetapple did send an email to Mr Spence, which is dated 1 August 2014: the 1 August email. The majority objected to the tender of this email under s 131 of the Evidence Act 1995 (Cth) (Evidence Act). I will resolve this objection later in these reasons.
117 The 1 August email set out the majority's "conditions to proceed with the sale" to the Unique Group. The 1 August email required as a "condition" to progressing the sale that the following occur:
1) The shares currently held by Eric [Spence] in RR Qld and RR NSW be transferred to RRWA."
2) RRWA issues an additional 10 shares taking the total number of shares in the company to 40. These additional shares be issued to Cliff [McGillivray] and Craig [Sweetapple] (5 shares each).
118 There was also a warning to Mr Spence for his comments made to the Unique Group:
[W]e strongly suggest you exercise better judgment in future. Alternatively, we have no issue in withdrawing our support for the sale and running the business as a going concern.
119 Mr McGillivray agreed in evidence that a return to running the business as a going concern was completely contrary to Mr Spence's proposals at the 30 July meeting.
120 The 1 August email concluded with the words:
We look forward to your prompt confirmation to the above so that the sale proceedings can continue.
121 The effect of these conditions was that on any sale of the company, the sale proceeds would be divided as follows: 37.5% to each of Mr McGillivray and Mr Sweetapple, and 25% to Mr Spence. The amount of value sacrificed by Mr Spence under this proposal, compared with the one-third share he would receive under an equal division of sale proceeds, would depend on the sale price. In effect Mr Spence would sacrifice 8.33% (33.33% minus 25%) of the sale price, and the value sacrificed by him would be shared equally between Mr McGillivray and Mr Sweetapple. At a sale price of $3.95 million, for example, the majority would share equally the amount of approximately $330,000 more than Mr Spence would receive.
122 On 4 August 2014 Mr Spence received an email from Mr Rupesh Mehta of Unique Group, requesting the Company's financial statements for the financial year ended 30 June 2014. Mr Spence instructed Messrs Bourke and Crawford of Gooding Partners to provide the information by an email dated 5 August 2014 copied to the majority.
123 By 5 August 2014 Mr Spence had not responded in substance to the 1 August email and on that day Mr McGillivray sent an email to Messrs Bourke and Crawford copied to Mr Spence that said:
As we have had no response or acknowledgement to date from [Mr Spence] as to our conditions of sale sent on Friday 01/08/2014, Craig and I again wish to place an immediate hold on proceedings until further notice.
124 Mr McGillivray agreed in evidence that in this email he was exercising the warning in the 1 August 2014 email. Mr Sweetapple agreed that sale negotiations were stopped because Mr Spence had not responded.
125 On 5 August 2014 Mr Spence provided a response to some draft notes on the 30 July meeting and requested access to the handwritten notes taken at the meeting. That request was followed up by his solicitor via a letter addressed to Mr Bourke, dated 8 August 2014. While notes of the 30 July meeting were circulated for settling on 18 August 2014, Mr Bourke was instructed not to make the handwritten notes of his associate available to Mr Spence's solicitors.
126 Mr Spence sent an email to Mr Sweetapple (with copies to Mr McGillivray and Mr Bourke) on 5 August 2014, saying "I'm considering your proposal and will revert". However, by 18 August he had not provided any substantive response. On 18 August, Mr McGillivray sent a follow-up email to Mr Spence, asking for a response by 19 August and saying:
Please either confirm your acceptance to allow the sale process to continue or advise otherwise.
127 On 22 August 2014 Mr Bourke sent to the directors the financial statements for the Company unsigned. Mr Spence took the view that they could not be sent to the Unique Group unsigned and without the consent of the other directors to progress the sale.
128 On 30 September 2014, Mr Spence commenced this action.
129 Mr Spence took a payment from the Company of approximately $15,000, on 28 October 2014. This payment was entered in the books of the Company as a payment of long service leave. The amount of approximately $15,000 represented the net amount of the payment after deduction of tax, and the total cost of the payment to the Company was $25,651.45. This amount forms part of the Company's cross-claim.
130 On 28 November 2014 the majority terminated the employment of Mr Spence.
131 Since that date Mr Spence was required and did return to the Company a computer and mobile phone as well as credit cards and keys. Mr Spence has not received any income in the period since then.
132 The Company has continued to trade. The performance of the company is recorded in the records of the Company.
133 While a profit is disclosed by those records no dividend since 1 July 2014 has been declared as a return to the shareholders.
OPPRESSION
134 Section 232 of the Act relevantly provides:
Grounds for Court order
The Court may make an order under section 233 if:
(a) the conduct of a company's affairs; or
(b) an actual or proposed act or omission by or on behalf of a company; or
(c) a resolution, or a proposed resolution, of members or a class of members of a company;
is either:
(d) . . .
(e) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.
For the purposes of this Part, a person to whom a share in the company has been transmitted by will or by operation of law is taken to be a member of the company.
135 Section 233(1) of the Act relevantly provides:
Orders the Court can make
(1) The Court can make any order under this section that it considers appropriate in relation to the company, including an order:
. . .
(d) for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law;
(e) for the purchase of shares with an appropriate reduction of the company's share capital;
. . .
(i) restraining a person from engaging in specified conduct or from doing a specified act;
(j) requiring a person to do a specified act.
136 There is no issue that under the provisions of s 234 Mr Spence had standing to bring this application.
137 A single instance of oppression is sufficient to constitute a basis for relief: Re Norvabron Pty Ltd (No 2) (1986) 11 ACLR 279 at 289.
138 The key to the expressions in s 232(e) β "oppressive", "unfairly prejudicial", and "unfairly discriminatory" β is a test of commercial unfairness: Wayde v New South Wales Rugby League Limited (1985) 180 CLR 459 at 472; Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 at 704; Hillam v Ample Source International Ltd (No 2) (2012) 202 FCR 336 at [4]. The test is an objective one, as if the conduct were viewed through the eyes of a commercial bystander: Morgan at 704.
139 The conduct must be assessed in its commercial context. Where, as here, the context includes allegations of misconduct by the plaintiff, his conduct may also be relevant as Nourse J noted in In re London School of Electronics Ltd [1986] Ch 211. His Honour also observed that "there is no independent or overriding requirement that it should be just and equitable to grant relief or that the petitioner should come to the court with clean hands": at 222.
140 This statement of principle in London School of Electronics was approved by Young J in Morgan at 706, and by the Victorian Court of Appeal in Joint v Stephens [2008] VSCA 210 at [136].
141 Furthermore the Court must assess the conduct in the context of the particular relationship which is in issue: Hillam at [4], citing Joint at [136].
142 Here, the oppression pleaded is confined to conduct taking place "[o]n [or] about 1 August 2014", consisting of:
(a) conduct of the affairs of the Company by the majority;
(b) an action or proposed action on behalf of the Company by the majority; or
(c) a resolution or proposed resolution by the majority as members (not directors) of the Company.
143 The conduct of affairs, action, proposed action, resolution or proposed resolution complained of is specified in paras 4(a) and 4(b) of the Statement of Claim. Two actions of the majority are pleaded:
(a) stating in the 1 August email that it was or would be a condition for their consent to a sale of the shares in the Company, or consent to the resolution to undertake the sale of the business of the Company that the Company issue a further five shares to each of Mr McGillivray and Mr Sweetapple; and
(b) making an inference in the same email that they would together cause or procure the exclusion of exclude Mr Spence from management of the Company.
Alleged oppressive action 1: statement in 1 August email
144 As to the first of these the majority make the following three submissions:
(a) The email is a communication between persons in dispute, in connection with an attempt to negotiate a settlement of the dispute. It cannot be adduced in evidence because of s 131 of the Evidence Act. Therefore there is no admissible evidence of the alleged oppression.
(b) Even if the email can be adduced in evidence, the statements in the email are not oppressive, unfairly prejudicial or unfairly discriminatory when considered in the context of all relevant facts, including the antecedent conduct of the plaintiff. That is, in all the circumstances the statements are not commercially unfair.
(c) Even if the email can be adduced in evidence and the statements in it can be classified as commercially unfair, they did not cause oppression, prejudice or detriment to the plaintiff in any of the ways pleaded.
Admissibility of 1 August email
145 Mr Spence contends that the email falls within one or more of the exceptions to s 131 of the Evidence Act as provided in s 131(2)(f), (i) or (k). None of these has operative effect.
146 Nonetheless it is, in my view, admissible. Section 131, relevantly, excludes evidence being adduced which is a communication that is made between persons in dispute in connection with an attempt to negotiate a settlement of the dispute.
147 The 1 August email is not such a communication. The dispute was between the Company and Mr Spence. The claims for unreasonable expenses, or overpaid salary and otherwise were claims which only the Company could advance. The majority had no claims personally. So much was acknowledged by them. It is no answer to say as they do that the "ultimate damage was to the economic interests of the individual shareholders".
148 The 1 August email was made on their personal behalf concerning their shares in the Company. The consideration demanded by them would have been for their personal benefit, not that of the Company.
149 I will accordingly admit the 1 August email in evidence.
Commercial fairness and oppression
150 It is convenient to deal with the last two of the majority's submissions together.
151 The majority submit that the context in which their conduct, its commercial fairness or otherwise, in sending the 1 August email falls to be considered embraces the entirety of what, in effect, they say is the misconduct of Mr Spence in relation to the affairs of the Company since at least the time when he became its Managing Director. Much of this misconduct is the subject of the cross-claim by the Company.
152 These contentions assert that Mr Spence breached the relationship of trust and confidence between him and them in the running of the Company. They point to what they regarded as his disloyal communications about them to Mrs Mildon; his acquisition of interests in the RRNSW and RRQLD companies, the sending of Company equipment on consignment to those companies, his taking of fees from those companies through his company Alderann, the alleged overpayment of Mrs Mildon and the alleged unreasonable expenses incurred and paid for by the Company.
153 Even if everything alleged by the majority against Mr Spence were made out and as I will explain later, I do not find that it has, it would still not have been a warrant for their conduct in sending the 1 August email. It was conduct which I find to have been commercially unfair and oppressive to Mr Spence.
154 It is the condition numbered 2 in the 1 August email, relating to the issue of additional shares, which is challenged as oppressive. The majority submit that, in substance, they said they would agree to the sale of their shares in the Company if Mr Spence agreed to the issue of five additional shares to each of them. The effect of this would be to alter the distribution of the proceeds of sale; Mr Spence would sacrifice 8.33% of the sale proceeds and this amount would be divided equally between Mr McGillivray and Mr Sweetapple. This is not a complete description. It is vital to appreciate that this offer or demand was a condition of the majority agreeing to the continuation of negotiations for the sale of the Company. So much is made clear by the introductory words of the 1 August email. This may have been effected by a sale of the shares held by the three shareholders or by a transfer of the Company's assets.
155 As the majority correctly observe the amount sacrificed by Mr Spence to their benefit would depend on the sale price. As I mentioned earlier, at the sale price of $3.95 million proposed to Unique Group, the value transfer would be approximately $330,000 ($165,000 each to Mr McGillivray and Mr Sweetapple). That was the value attributed by the directors to the Company at that time. I do not think it relevant, in this context, to have regard to the figure of $1.8 million, which was the value attributed to the Company, by agreement between the parties during the course of the trial. This was not the figure in contemplation as at 1 August 2014.
156 The majority submit that their complaint made at the 30 July meeting was that value had been taken out of the Company by the actions of Mr Spence, in relation to three matters: remuneration paid to Mrs Mildon, expenses charged to the Company by Mr Spence, and the setting up of RRQLD and RRNSW. They then submit that if the Company was sold and the proceeds were split equally, the value taken by Mr Spence would be a windfall gain to him and the majority would receive no compensation.
157 Mr McGillivray's evidence is that in the two days he and Mr Sweetapple had to calculate the amount of value taken out by Mr Spence, they came up with an approximate figure of $171,250. The logic they then used, as paraphrased by the counsel at trial, was: "You have taken out about $170,000 for your self-indulgent purposes with no benefit to the company - we should each be entitled to take an additional $170,000 out of the sale proceeds to even things up".
158 The majority then submit that the amount of $171,250 referred to by Mr McGillivray is less than the relevant amounts now claimed by the Company in the cross-claim. The liquidated demands in the cross-claim, as pleaded, are approximately $87,000 for unjustified expenses and approximately $126,000 for overpayment to Mrs Mildon.
159 As the majority submit, Mr Sweetapple's email provided two specific justifications for condition 2. The first was that unjustified expenditure reduced earnings before interest and tax (EBIT) and as a purchaser was likely to determine a purchase price based on a multiple of EBIT, the additional expenses incurred in any year had a multiplied downward effect on purchase price. For example, the total of unjustified expenses and overpayment to Mrs Mildon, as originally pleaded in the cross-claim for the 2012-13 year, is approximately $90,000. Applying a relatively conservative multiple of 2.5 to the earnings of that year to arrive at a notional sale price, the price would increase by $225,000 if those expenses were written back.
160 The second justification provided for condition 2 in the 1 August email was, on the majority's submission, that Mr Spence's devotion to his own interests above those of the Company had cost the Company the opportunity to acquire a substantial equity position in RRQLD and RRNSW (equivalent, for example, to the 25% originally offered in RRVIC). Had the Company held a 25% equity position in each of RRQLD and RRNSW, it would not only have had potentially valuable shareholdings among its assets, but would also have had a strong influence on the national Rigging Rentals network and a stronger ability to protect its brand, trade name, website and other pooled assets, thereby mitigating a significant business risk. They refer to the fact that Mr Spence took a one-sixth equity interest in both of these companies, in the name of his own company, and submit that he deprived the Company of a larger opportunity and, by locking it into the national brand strategy, he exposed it to a business risk.
161 The majority submit that they had the following reasons to expect that Mr Spence would come back and negotiate with them to improve the terms offered. First, they had specifically stated at the 30 July meeting that they would come up with a figure that they could negotiate with Mr Spence. Secondly, Mr Spence was an experienced negotiator who understood the tactic of "[pushing] the limits" in an offer, with the expectation that the other side would come back and negotiate. Thirdly, Mr Spence had previously negotiated with them over the compensation for pre-2 March 2012 expenses.
162 The majority assert that there was a further commercial reason for their conduct namely, that they did not wish to have to pursue Mr Spence for compensation once he had received cash from the sale.
163 I do not accept these submissions. The 1 August email did not leave open the door for negotiations expressly or impliedly. Acceptance of the conditions was the price of their agreement to proceed towards a sale of the Company.
164 As I explained above the claims against Mr Spence were claims by the Company. Even if the claims were established by agreement or otherwise, at say, $170,000 which was what Mr McGillivray thought this was the amount owed to the Company (not to the majority), Mr Spence would have had a one-third interest in that amount were it to have been paid to the Company. At its highest then, assuming that sum were due to the Company, the majority's indirect interest in it was to the extent of two-thirds, namely $113,000 approximately. At a prospective sale price of $3.95 million, Mr Spence was being told he would have to sacrifice approximately $330,000, being three times the amount of the majority's indirect interest as calculated by Mr McGillivray.
165 However, the claim by the Company against Mr Spence had not then been itemised. It had not articulated its claim with any specificity. Time was of the essence in progressing sale negotiations. It was a take it or leave it offer by the majority. They improperly, in my view, employed the potential sale of the Company to obtain an advantage from Mr Spence for their personal benefit which far outweighed even their own assessments of its worth.
166 What would have been reasonable was for the majority to allow the sale negotiations to proceed and to propose, for example, that part of the proceeds, should a sale have been effected, be held in a joint trust account pending the particularisation of the Company's claim and its resolution by agreement, court action or some form of alternative dispute resolution. The amount posited by Mr McGillivray of $170,000 could have been so retained.
167 I have no hesitation in concluding that the majority acted in a way which was commercially unfair. It denied Mr Spence any opportunity to defend the Company's claims however they might, in due course, be particularised. Their conduct quite deliberately sought to use the threat of halting negotiations for the sale of the Company to pressure Mr Spence, in effect, to waive his right to defend any claims by the Company. It was conduct which was in a very real sense, oppressive to him. He was denied the opportunity to realise the value of his shareholding in the Company in the event that negotiations for its sale were successful.
168 I find that the oppressive action of the majority which I have identified was unfairly prejudicial to and unfairly discriminatory against Mr Spence. The proposed act or resolution for the reduction of his share capital and the corresponding increase in that of the majority would have had that effect. It was unfair and discriminatory in that the proposed reduction lacked demonstrated justification at the instance of the majority. That is certainly so given that the claims made against Mr Spence were claims of the Company. Even if those claims are taken, indirectly, to be referrable to the majority they nonetheless were no more than claims. Moreover, the share reduction called for, in its monetary effect, could have varied widely depending on the sale price.
Alleged oppressive action 2: inference arising from 1 August email
169 The second alleged head of oppression is that the 1 August email contained an inference that the majority would together cause or procure the exclusion of Mr Spence from management of the Company.
170 I reject this claim. There is nothing in the text of the email to support the alleged inference.
RELIEF FOR OPPRESSION
171 The working relationship between the directors is completely fractured. Mr Spence's employment has been terminated.
172 The appropriate relief is for the majority to acquire the shareholding of Mr Spence. The injunction sought in the application is no longer pressed.
173 The evidence is that the Company continued to trade. The available results indicate that it has made a profit in the period to 30 May 2015.
174 It has been agreed between the parties that the value of the Company as at 30 November 2014 is $1.8 million and that Mr Spence's shares are worth $600,000.
175 Mr Spence submits that whilst that is the starting point, the directors as at 30 July 2014 were preparing an offer to the Unique Group of $3.95 million which put Mr Spence's share in the region of $1.26 million. He submits that as a consequence of being unable to complete the sale because of the oppressive conduct, if the experts' evidence is the only guide, the majority will be purchasing Mr Spence's share at half of that value because the effect of the oppressive conduct was to terminate in substance the interest of a "real purchaser" and Mr Spence's share is now substantially less in value.
176 I reject this submission. The value has been agreed. Mr Spence cannot now be heard to say that this agreed value is to be treated merely as a guide.
Income lost on termination of his employment since the oppressive conduct
177 Mr Spence has not received income since the termination of his employment. His employment was terminated on 28 November 2014. At that time he was paid an annual salary of $167,000. To the date of termination he was paid $70,000.
178 He claims that, as a consequence, to 30 June 2015 he has not been paid $97,000 and that but for the oppressive conduct he would have been employed and received income to that amount.
179 I do not think that would have been the case. As I said the necessary relationship of mutual trust had been fractured by the time his employment as Managing Director was terminated. He was, in any event, planning to leave the employ of the Company which is why he caused the Company to pay him a proportion of his long service leave entitlement. It has not been demonstrated that this termination was unlawful. I make no finding in that regard.
Dividends declared and not paid and not declared since the oppressive conduct
180 Mr Spence has received his distribution of the dividends declared on the financial results to the end of June 2014.
181 He also seeks an order for the payment of a dividend on the performance of the Company in the period since the oppressive conduct. The table put to Mr McGillivray set out the estimated dividend on the periods from 1 July 2014 to 30 November 2014 and from 1 July 2014 to 30 May 2015.
182 This table is based on profit and loss statements of the Company that are in evidence. The Company submits that the figures are unreliable and gives three examples to support this submission. First, the figures do not include depreciation expense or provision for payroll tax; second, wages and superannuation would be considerably less because Mr Spence is no longer employed and legal expenses would be incurred as a result of this action; third, plant and equipment amounts have increased from the financial year ending June 2014 to the period of 1 July 2014-25 May 2015, showing that the company has invested available cash in the renewal and expansion of its fleet.
183 I reject this submission for the following reasons. First, wages and superannuation expenses would have decreased upon Mr Spence's termination of employment which would have increased the amount of profit. Further, legal expenses of approximately $50,000 are set out under 'Expenses' for the relevant profit and loss statement for 1 July 2014-25 May 2015. They were payable to Trinix Lawyers, the solicitors on the record for the Company in this proceeding. Accordingly, these expenses have been taken into account.
184 Second, depreciation expense is referrable to tax, rather than a cash expense. In any event, even if it were otherwise, it would be offset by the first point I outlined above. Third, I consider the increased plant and equipment value relevant to the asset value of the Company, not to the issue of its distributable profit. Accordingly, I regard the calculations in the table as a reasonable estimate of distributable dividends from which is calculated the dividends payable to Mr Spence for these periods of time.
185 A 33% share of the estimated dividends for the following periods would be:
(a) For the period to 30 November 2014 - $50,624.
(b) For the period to 25 May 2015 - $87,364.
186 I would not grant relief in relation to the estimated dividends for the period 1 July 2014 to 30 November 2014 as I infer any undeclared dividend would have been taken into account upon the agreed valuation of the Company as at that date.
187 However, I find that Mr Spence is entitled to his one-third share of dividends on profits since 30 November 2014 to 25 May 2015 of $36,740 ($87,364 less $50,624).
188 Accordingly, there will be an order that each of Mr McGillivray and Mr Sweetapple should forthwith pay Mr Spence $300,000 in consideration of the transfer by him, to each of them, of five shares in the Company.
189 Further, there will be an order that the Company pay Mr Spence $36,740.
THE CROSS-CLAIM
190 I have considered the Company's cross-claims as identified in their closing submissions. The Company cross-claims under the following six heads:
(a) Mr Spence's unpaid loan account.
(b) Payment taken by Mr Spence on 28 October 2014, purportedly in discharge of an entitlement to long service leave.
(c) Amounts received by Mr Spence as fees from RRVIC and RRQLD.
(d) Excessive payments of remuneration to Mrs Mildon.
(e) Disputed expenses charged to the company by Mr Spence.
(f) Expenses and lost profits relating to RRQLD and RRNSW.
Unpaid loan account
191 The amount claimed is $3,427.18 and is admitted by Mr Spence.
Payment taken as long service leave
192 Mr Spence caused the Company to make a payment of $25,651.45 on 28 October 2014. He was paid approximately $15,000 of this sum with the balance paid in respect of PAYG tax.
193 The records of the company show that the amount of $25,651.45 was taken as payment of his long service leave.
194 The Company asserts, correctly, that as that 28 October 2014, Mr Spence did not have any long service leave entitlements because he had not been employed continuously by the Company as at that date for 10 years nor had his employment then been terminated. He had worked continuously up to that time for the Company for 9 years 3 months.
195 Mr Spence would have been entitled, pursuant to the Long Service Leave Act 1958 (WA) s 8(3) to an amount of long service leave being a proportionate amount on the basis of 82/3 weeks for 10 years of continuous employment. This is in circumstances relevantly, where his employment was terminated other than for serious misconduct.
196 Mr Spence's employment was terminated by the Company one month later on 28 November 2014. Although the Company pleads that Mr Spence's employment was terminated for serious misconduct it has not, in my view, established this to have been so. I make certain findings below as to Mr Spence's conduct. However, I do not find that any of it was serious misconduct. Indeed I have rejected the majority's allegations of misconduct, serious or otherwise.
197 Accordingly, on termination he was entitled to a proportionate amount of long service leave on ordinary pay. I do not understand the Company to dispute the amount paid to Mr Spence but rather his entitlement to it. Whilst he arranged for the payment to be made before his employment terminated he plainly had in mind that it would shortly, one way or another, be terminated. He had earlier made up his mind to leave the employ of the Company and indeed informed Mrs Mildon of this which I earlier referred to. He knew at least from the Company's letter of 8 October 2014 that it was looking to terminate his employment. In this letter, the Company sent to Mr Spence a list of matters requiring Mr Spence "to respond immediately" and to take the letter as:
an official and formal warning letter. Your full response to this letter and requests herein is required within seven days, failing which we will take your inaction as yet another blatant and reckless disregard of directions and your duties as a director and employee of the Company constituting serious misconduct, upon which we reserve our rights to immediately terminate your employment with the Company.
198 This it did on 28 November 2014. In other words he caused payment for an entitlement which had not then accrued but which did accrue shortly thereafter, on 28 November, as he knew it would. Even assuming a technical breach of duty by Mr Spence in this respect, the Company has suffered no loss or damage as it would have been liable to pay the very same amount to Mr Spence upon his retirement.
Amounts received by Mr Spence as fees from RRVIC and RRQLD
199 Mr Spence admitted in his amended reply and defence to cross-claim that he received $27,237.40 in director's fees from RRVIC over the period from March 2012 to September 2014. The Company claims that he is liable to account to it for those payments.
200 The admitted amount broadly corresponds with the aggregate amount of invoices submitted by Alderann to RRVIC, for "management fees". Mr Spence acknowledged in cross-examination that they were more correctly described as "management fees". I do not, in any event, consider this distinction to be a material one.
201 During this time Mr Spence was employed and remunerated as Managing Director of the Company.
202 The majority were aware that Mr Spence was a director of RRVIC but asserts they were not aware that he was receiving and retaining fees for that role.
203 Despite this knowledge the majority submit that Mr Spence's role as a director of RRVIC placed him in a position of potential conflict with his duties as Managing Director of the Company. They accept that he had their informed consent to hold the position of director of RRVIC, but assert that he did not have their informed consent to receive and retain any remuneration for that position.
204 I do not accept that Mr Spence was in a position of conflict. Mr Spence was in receipt of salary for carrying out his employment duties as Managing Director for the Company. There is no suggestion that he did not perform those duties. Indeed the evidence is that the Company prospered under his management. The additional work done by him for RRVIC was for the benefit of that Company and its shareholders, including the majority. There was no breach of duty, whether statutory or as a fiduciary of the Company, in receiving fees for those services. The work done by Mr Spence for RRVIC was additional to the duties he performed for the Company. Did the majority think he was doing this extra work for nothing?
205 I reject the claim for compensation in this respect.
206 The position is no different in respect to his directorship of RRQLD, or his receipt of fees from that company. He performed work for that company as a director. It was not a competitor of the Company. Indeed, it was a source of income for the Company. That he took a shareholding in RRQLD was a breach of his fiduciary duty to the Company. It was a benefit that should have been obtained on behalf of the Company. He has, for some time, acknowledged this and that those shares are held on trust for the Company. Again the work he performed for RRQLD was in addition to the work he performed as Managing Director to the Company.
Excessive payments of remuneration to Mrs Mildon
207 The Company submits that after 6 March 2012, it was unnecessary for Mrs Mildon to work more than standard hours, and that standard hours can be measured by the evidence presented by Mr McGillivray.
208 The problem with this is that what Mr McGillivray asserts to be "standard" hours is an expression of his personal opinion. Little assistance can be gained from a comparison of what she was paid compared to other bookkeepers. Moreover, it is evident that Mr Spence, as Managing Director, gave her additional duties which may be characterised as including "business hostess" and "ice-breaker" functions at business meetings.
209 The Company submits this is implausible and that no small company like the Company could afford this to employ a person for these functions. This general submission is not attractive. It is not in issue that under Mr Spence's management the Company grew and prospered. As Managing Director of the Company it was his judgment that utilising Ms Mildon in such roles was for the benefit of the Company. Beyond the general submission referred to, nothing was advanced by the Company which proves otherwise. The majority benefited from his management of the Company. The evidence does not justify a finding that he breached his duties as Managing Director of the Company by, in effect, causing the Company to pay Mrs Mildon for work either not done or which was not necessary.
210 The Company demonstrated that there was at times a less than professional relationship between Mr Spence and Mrs Mildon. That is a separate matter. He is not on trial for his moral standing.
211 I reject the claims in relation to payments to Mrs Mildon.
Disputed expenses charged to the Company by Mr Spence
212 Messrs McGillivray and Sweetapple assert that they carried out investigations into the books and records of the Company and identified expenditure which was not necessary for or beneficial to the company's business. They compiled a schedule of the relevant expenses and that schedule is in evidence. The process by which the schedule was compiled is described by Mr McGillivray. Most of the content of the schedule is factual.
213 The cross-claim under this head was prepared on the basis that the Company would claim all improper expenditures, but credit Mr Spence with the $17,500 compensation payment made in respect of expenses incurred before the 2 March meeting. The Company is now prepared to accept that the $17,500 payment discharged Mr Spence's liability for expenses incurred up to 2 March 2012, so that its claim is limited to those expenses listed in para 5 of the Defence and incurred after 2 March 2012. This reduces the amount of the claim to $70, 455.63, made up as follows:
β’ 2012 financial year from 2 March 2012 to 30 June 2012: $3,095.76
β’ 2013 financial year $50,982.98
β’ 2014 financial year $16,376.89
214 The Company submits that by presenting the evidence referred to above, the majority, in their capacity as directors of the Company, have made out a prima facie case that the relevant expenses were not incurred for the benefit of the Company. It submits that the onus passes to Mr Spence to justify the expenses as properly incurred but that this attempt to do so has been in the most general and generic sense.
215 I do not accept that there has been any evidentiary onus shifting to Mr Spence.
216 As to the claims that expenses were not incurred for the benefit of the Company a number of points arise. First, merely because Mr Spence entertained fellow directors in RRVIC, RRQLD and RRNSW does not mean that it was not in the interests of the Company. The Company was doing business with each of those companies. Mr Spence said that he was engaged at those times in advancing the business interests of the Company. It has not been demonstrated to the contrary.
217 I am unable to find on the evidence that any of the expenditure incurred between 2 March 2012 and 30 June 2012 was unauthorised by the Company. Mr Spence had a general authority to incur business related expenditure on its behalf. There is nothing self-evidently unnecessary or excessive in the expenses described for that period.
218 I find that for the following financial year ended 30 June 2013 certain expenditures were unjustified and should have been allocated to Mr Spence's loan account.
219 The expenditure incurred on the trip to Europe by Mr Spence in April 2013 when he travelled with Mr Nelson falls into this category. These visits I find related primarily to Mr Nelson's business and not that of the Company. Mrs Mildon also accompanied Mr Spence. However, her airfare was charged to Mr Spence's loan account and was paid to the Company by him.
220 The total of these non-Company expenses for this trip I assess at $8,500. This represents a rounded approach to the expenditure from 2 April 2013 to 30 April 2013 set out in the table in para 5 of the Defence.
221 Mr Spence took Mrs Mildon on trips to Singapore in November and December 2012. The purpose of the September 2013 trip was to meet with Mr Harry Gandhi of Unique Group to discuss the possible sale of the Company. As I outlined earlier, Mr Spence explained Mrs Mildon's presence by saying Mr Gandhi had met Mrs Mildon previously and "more or less suggested [that] it would be nice to meet her again".
222 Mr Spence obviously judged that taking Mrs Mildon ought assist in securing a sale of the Company for the benefit of its shareholders. Whilst the majority, had they had the day to day management of the Company, may not have done this, I am not prepared to find that it was not appropriate for Mr Spence to do so.
223 Mr Spence undertook frequent trips to the Eastern States, often using the pretext of a "Global Group meeting". However, he conceded that a number of the trips were connected with establishing RRQLD, which he described as "that customer". He also claimed in the 30 July meeting that he had taken annual leave for these trips. A distinction needs to be drawn, however, between the trips undertaken to help establish RRQLD and the later trips undertaken to conduct business between the Company and RRQLD.
224 I am satisfied that RRQLD became, in effect, a customer of the Company. Meetings in relation to that company were accordingly for the benefit of the Company. To the extent that any of those expenses related to the acquisition of shares in RRQLD by Mr Spence's private company he accepts that these shares are held on trust for the Company. Viewed in that way such expenditure, which is unspecified, will adhere to the benefit of the Company.
Expenses and lost profits relating to RRQLD and RRNSW
225 The Company submitted that while purporting to engage in its business, Mr Spence actually engaged in the establishment and development of other companies in which he had taken a personal interest to the exclusion of the Company, and which were potential competitors of the Company. By doing so he made improper use of his position as a director of the Company to:
(a) gain a direct advantage for someone else (RRNSW and RRQLD);
(b) gain an indirect advantage for himself; and
(c) cause detriment to the Company
in contravention of s 182(1) of the Act.
226 Travel expenses relating to the establishment of the Company form part of the claim for improper expenses, above. The Company's claim under this head may be divided into several parts, which are dealt with below.
Lost opportunity of material equity participation in national Rigging Rentals network, and business risk of commitment to national network without equity participation
227 The Company forthrightly acknowledges that it is extremely difficult for it to quantify its claim under these heads.
228 Nonetheless, without any evidence whatsoever to support it the Company seeks compensation payable to the company under s 1317H of the Act at $100,000. No evidence was tendered of hiring opportunities foregone by the Company as a result of some of its equipment being located, for on-hire, in the Eastern States. Such a claim has no evidentiary foundation and is in the realm of pure speculation. I reject it.
Lost revenue from equipment sent to RRQLD and RRNSW
229 Mr McGillivray said in evidence that the Company has suffered loss by providing equipment on consignment to RRQLD and RRNSW.
230 Mr Spence gave evidence that the provision of equipment to RRQLD and RRNSW brought benefit to the Company.
231 The Company asks the Court to infer that in sending equipment to RRQLD and RRNSW, Mr Spence acted for the benefit of those companies and to the detriment of the Company in terms of lost revenue or the cost of replacement equipment.
232 Again, the Company acknowledges that it has been difficult to for it to quantify the expenses and lost profits associated with the provision of equipment on consignment to RRQLD and RRNSW, and the purchase of replacement equipment to meet demand in WA. Nonetheless it asks the Court to assess its loss under this head at an estimated figure of $50,000 and order Mr Spence to pay that amount in compensation. There is no relevant evidence which could enable the Court to "assess" such a compensation claim. I reject this claim.
Time spent by Mr Spence on the affairs of RRQLD and RRNSW and not taken as leave
233 The Company seeks an order that Mr Spence compensate it by reimbursing the remuneration attributable to the days not worked in the Company's business. Mr McGillivray has identified a total of 71 business days when Mr Spence claimed to be engaged in the business of the Company but, according to Mr McGillivray, was actually travelling on trips which related primarily to the establishment or business of RRQLD or RRNSW. This is mere assertion on Mr McGillivray's part and in the most general of terms.
234 As I have already explained, Mr Spence said at the 30 July meeting that he had taken leave for trips taken in connection with the "establishment" of RRQLD, as opposed to trips undertaken to conduct business between the Company and RRQLD. I do not accept that merely by asserting it to be so that Mr McGillivray's evidence contradicts this.
235 Moreover, Mr Spence has given evidence that all of the work and travel during those days was related to the business of the Company. I see no basis to reject this evidence. Travel and expenses related to RRQLD and RRNSW was for the actual and potential benefit of the Company in earning business income.
RELIEF ON CROSS-CLAIM
236 Accordingly, the cross-claim succeeds to the extent of $3,427.18 in respect of the unpaid loan account and $8,500 in respect of expenses incurred which were not related to the business of the Company, being $11,927.18 in total.
237 I will hear the parties as to the costs of the cross-claim.
Orders
238 On the question of costs of Mr Spence's claim, as there are orders against the Company in one respect and the majority in other respects, the appropriate order will be to hear the parties on the question of costs. Accordingly, I will make the following orders:
1. The second and third defendants, within 28 days of judgment, each pay the plaintiff $300,000 in consideration of the delivery of written share transfer documents, to each of them, of five shares in the first defendant.
2. There be liberty to the parties to apply, on 48 hours' notice, on any issue concerning Order 1.
3. The first defendant pay to the plaintiff the sum of $36,740.
4. The plaintiff pay to the first defendant the sum of $11,927.18.
5. The parties confer on the questions of costs of the claim and the cross-claim with a view to providing the Court with a minute of consent orders as to these costs by 4:00pm (WST) on Friday, 13 November 2015.
6. There be liberty to the parties to apply as to the orders to be made on the questions of costs on 48 hours' notice, in the event that these, in whole or in part, cannot be agreed.
I certify that the preceding two hundred and thirty-eight (238) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour.
Associate:
Dated: 29 October 2015
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Stankovic v The Hills Shire Council (No 3) [2012] FCA 523
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2012/2012fca0523
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2024-09-13T22:46:43.242847+10:00
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FEDERAL COURT OF AUSTRALIA
Stankovic v The Hills Shire Council (No 3) [2012] FCA 523
Citation: Stankovic v The Hills Shire Council (No 3) [2012] FCA 523
Parties: MICHAEL STANKOVIC v THE HILLS SHIRE COUNCIL, TERRY GRANT VAN DER VELDE and JASON SHANE CRONAN
File number: NSD 690 of 2011
Judge: EMMETT J
Date of judgment: 4 May 2012
Legislation: Bankruptcy Act 1966 (Cth) s 52
Cases cited: Jess v Scott (1986) 12 FCR 187
Stankovic v The Hills Shire Council [2012] FCA 521
Date of hearing: 4 May 2012
Place: Sydney
Division: GENERAL DIVISION
Category: No catchwords
Number of paragraphs: 25
Counsel for the applicant: The applicant appeared in person
Counsel for the first respondent: M Condon
Solicitor for the first respondent: M Pearce of The Hills Shire Council
Counsel for the second and third respondents: D Ash
Solicitor for the second and third respondents: Watson & Watson
Solicitor for Kent Attorneys: T Orlizki of Kent Attorneys
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 690 of 2011
BETWEEN: MICHAEL STANKOVIC
Applicant
AND: THE HILLS SHIRE COUNCIL
First Respondent
TERRY GRANT VAN DER VELDE
Second Respondent
JASON SHANE CRONAN
Third Respondent
JUDGE: EMMETT J
DATE OF ORDER: 4 MAY 2012
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The applicant's application for leave to file and serve a notice of appeal out of time, filed on 19 May 2011, be dismissed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 690 of 2011
BETWEEN: MICHAEL STANKOVIC
Applicant
AND: THE HILLS SHIRE COUNCIL
First Respondent
TERRY GRANT VAN DER VELDE
Second Respondent
JASON SHANE CRONAN
Third Respondent
JUDGE: EMMETT J
DATE: 4 MAY 2012
PLACE: SYDNEY
REASONS FOR JUDGMENT
1 I have before me an application for leave to file and serve out of time a notice of appeal from orders made by the Federal Magistrates Court on 12 May 2009. On that day, Raphael FM ordered that a sequestration order be made against the estate of the applicant, Mr Milovan Stankovic, who is also known as Michael Stankovic. His Honour ordered that all proceedings under that order be stayed for a period of 21 days, and ordered that the costs of the applicant, The Hills Shire Council, be taxed and paid from Mr Stankovic's estate.
2 The application for an extension of time was filed on 19 May 2011. The respondents to that application are The Hills Shire Council (the Council) and the trustees in bankruptcy appointed following the making of the sequestration order (the Trustees). The application for an extension of time is opposed by the respondents. Kent Attorneys, a firm of solicitors who had acted for Mr Stankovic in relation to various different sets of litigation (Kents), and who appeared on the hearing of the bankruptcy petition, also oppose the grant of an extension of time.
3 Mr Stankovic appeared without legal representation today, although at various times lawyers have appeared for him in the proceeding. On 3 June 2011, Mr Spencer Ferrier, solicitor, filed a notice of appearance in court. On 14 September 2011, a notice of change of lawyer was filed, stating that Mr Stankovic had appointed Ms Simone Pagano, of Pagano Burlovich Lawyers, to represent him in the proceeding in place of Mr Ferrier. Mr Ferrier filed a notice of ceasing to act on 16 September 2011. No notice of ceasing to act has been filed in relation to Ms Pagano. However, as I indicated in reasons that I gave earlier today for refusing Mr Stankovic's application for an adjournment (see Stankovic v The Hills Shire Council [2012] FCA 521) there was some evidence, proffered in connection with that application, that Ms Pagano was not free to represent Mr Stankovic today.
4 The draft notice of appeal attached to the application for leave filed on 19 May 2011 specifies three grounds. They are as follows:
1. "Compensation monies received by the Applicant/Appellant were not considered when sequestering my estate" [sic]
2. "Pursuant to s116[2] Bankruptcy Act 1966 [Cth], protected monies are exempt the provisions of s116[1]" [sic]
3. "Compensation monies are protected monies" [sic]
5 Those grounds do not make a great deal of sense. The thrust of the complaint by Mr Stankovic appears to be that, although he has substantial assets, those assets are derived from moneys paid to him as compensation for injuries received in the course of his employment. He says that those moneys, and the property that represents the moneys, do not form part of his estate for the purpose of distribution to creditors. While that question has been ventilated from time to time by Mr Stankovic in the course of this proceeding, and in another related proceeding concerning the review of a decision of the Trustees, it is not a matter that was ventilated before the Federal Magistrates Court when the sequestration order was being sought by the Council. Further, it appears that, on 3 May 2012, Mr Stankovic commenced a fresh proceeding in the Court seeking review of decisions of the Trustees in relation to the treatment of property that Mr Stankovic says was acquired with the proceeds of workers compensation payments.
6 Even if Mr Stankovic now has some well-founded complaint about the conduct of the Trustees in relation to exempt assets, that has nothing to do with the question of whether a sequestration order should have been made. The question of what property of Mr Stankovic's was divisible among his creditors was not raised before the Federal Magistrates Court. There was no error on the part of the Federal Magistrates Court in that regard. It is clear that an appeal based on the grounds specified in the draft notice of appeal could not possibly succeed, and would be doomed to failure. That is a basis for refusing the application for an extension of time.
7 However, in the course of oral submissions today, Mr Stankovic also raised other grounds upon which he complained about the making of the sequestration order. First, he complained that the Federal Magistrates Court took account of contentions advanced on behalf of Kents as a supporting creditor. Raphael FM recorded that Kents claimed a debt of $244,677, together with interest, in respect of bills of costs rendered to Mr Stankovic between January and July 2008. Mr Stankovic had not requested assessments of the bills under the Legal Profession Act 2004 (NSW), as he would have been entitled to do. His Honour observed that those bills represented debts for which Kents were entitled to prove in Mr Stankovic's bankruptcy, although they were not bills of costs that had yet been made the subject of a judgment of a court. They therefore could not have been the subject of a bankruptcy notice. Mr Stankovic's complaint about Raphael FM's reference to Kents is that he now asserts that there was some arrangement that the fees were to be paid only after a property had been sold. That is not a matter that appears to have been put before the Federal Magistrates Court.
8 The second matter complained of by Mr Stankovic in the course of his submissions today concerns the reference made by Raphael FM to evidence advanced by Mr Stankovic that he had received an offer of a line of credit from the ANZ Bank of approximately $500,000. Mr Stankovic submitted to me today that his Honour ought to have adjourned the hearing of the bankruptcy petition to enable those arrangements with the bank to be finalised. However, his Honour observed that the offer from the ANZ Bank was incomplete, and that there appeared to be another document that set out the conditions upon which it was proposed that the loan be given. His Honour considered that he had so little evidence of the loan that he did not believe that he could take it into account to the extent that he would decline to grant a sequestration order.
9 Mr Stankovic apparently contended in the Federal Magistrates Court that the proceeding should be dismissed under s 52(2) of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act), on the basis that the Court was satisfied that he was able to pay his debts. The reasons of Raphael FM indicate that one of the grounds upon which Mr Stankovic opposed the making of a sequestration order was that he was solvent, by reason of his ownership, at least in part, of a parcel of land that he said was worth at least $5 million, a value that appears to have been conceded by the Council.
10 Raphael FM referred to the fact that the property identified by Mr Stankovic as having a value of at least $5 million was held in joint names and was unlikely to be sold for some time. There is no evidence before me of the arrangements with the ANZ Bank that would suggest that there was any error on the part of Raphael FM in declining to take the arrangements into account. In fact, his Honour granted a stay of the sequestration order for the maximum period of 21 days. His Honour's reason for doing so was that Mr Stankovic said that all he needed to do to have the loan from the ANZ Bank materialise was to obtain his wife's signature on the documentation and present it to the ANZ Bank. Mr Stankovic said that, if he received payment from the ANZ Bank, he would pay the Council. Raphael FM was not prepared to dismiss the application, but considered that the appropriate course was to make the sequestration order subject to the stay. If the debt had been paid, it would have been open to Mr Stankovic to seek annulment of the bankruptcy. There does not appear to be any basis for concluding there was any error on the part of Raphael FM in that regard.
11 A third matter raised by Mr Stankovic as a ground for complaint concerns the debt that was owing to the Council, and which formed the basis for a bankruptcy notice upon which the Council's petition was founded. Raphael FM referred to what, as his Honour understood it, was a long-running dispute between Mr Stankovic and the Council over certain land. It appears that there was an appeal on foot against certain decisions of the New South Wales Land & Environment Court. However, his Honour observed that the costs order that was the basis of the petition did not relate to the proceedings that were the subject of the appeal. His Honour was unable to see how Mr Stankovic's complaints about the Council, including the existence of the appeal, constituted sufficient cause, for the purposes of s 52(2) of the Bankruptcy Act, for refusing to make a sequestration order. His Honour referred to assertions by Mr Stankovic that the Council had brought the case for an improper motive. His Honour was not satisfied that that assertion had been made out, and was not satisfied that any successful appeal that was then current would alter the situation.
12 In the course of his submissions about the Council today, Mr Stankovic went beyond what appears to have been put to Raphael FM. His submissions involved an assertion that the order for costs that was made by the Land & Environment Court was incompetent, because it was made in a proceeding that had been struck out or dismissed for want of appearance and had not been reinstated. The evidence as to that matter is not entirely clear. Mr Stankovic has tendered an extract from the record of the Land & Environment Court in proceeding 41243 of 2004. Insofar as it is possible to understand that extract, the course of the proceeding that resulted in the costs order appears to be as follows.
13 The proceeding in the Land & Environment Court had been fixed for hearing on 19 January 2005. However, on that day McClellan CJ ordered that the hearing date be vacated and that the proceeding be stood over to 16 February 2005 at 9.15am before a class 4 judge of that Court. On 16 February 2005, the matter was apparently called on before Lloyd J. Mr Stankovic appeared in person, but there was no appearance for the Council. It appears that Lloyd J made an order that the proceeding be dismissed for want of prosecution. There is a further note on the file that, on 22 February 2005, a motion was filed to be listed for 4 March 2005. That appears to have been an ex parte application made to the Land & Environment Court, and the note suggests that Mr Stankovic was to be notified of that application.
14 On 4 March 2005, the Land & Environment Court apparently made an order, although the terms of the order are not clear. At that time, the Council was represented by counsel and Mr Stankovic appeared in person. The parties were directed to approach the Registrar for a hearing date. A note on the file made later on the same day indicates that the hearing of 19 January had been adjourned and that the proceeding would be fixed for hearing on 14 March 2005 before a judge.
15 On 14 March 2005 the proceeding came before Pain J for hearing. Her Honour gave reasons for making orders on that day, which included orders restraining Mr Stankovic from carrying out or undertaking a use of pig keeping on his property. Her Honour also made a declaration that that property was being used as a junkyard, in breach of provisions of the Environment Planning and Assessment Act 1979 (NSW), and made an order restraining Mr Stankovic from carrying out or undertaking the use of a junkyard on the property. The final order made by Pain J was that Mr Stankovic pay the costs of the proceedings. In due course, costs were assessed and judgment was entered for the Council in the Local Court for the amount of the costs taxed and assessed. That is the order that apparently founded the bankruptcy petition.
16 Mr Stankovic's complaint appears to be that there was no proper reinstatement of the proceeding that had been dismissed by Lloyd J on 16 February 2005. It would be curious for Pain J to have embarked on a hearing, made the orders that I have indicated, and given reasons for those orders, if her Honour had not ordered the reinstatement of the proceeding. In any event, the Land and Environment Court is a superior court of record. The material before me does not support any contention that the order for costs made by the Land & Environment Court was incompetent. In any event, as I have said, that matter was not ventilated before Raphael FM.
17 Even if the proposed notice of appeal raised the additional matters to which I have referred, I am not persuaded that there is any substance at all in those matters. I am not persuaded that there is any prospect that any such ground could succeed, in the event that an extension of time were granted. Any such grant would therefore be futile.
18 In any event, the respondents also oppose the grant of an extension of time by reason of the excessive delay on the part of Mr Stankovic in making the application. No complaint is made about the conduct of the proceeding, once it was commenced on 19 May 2011. The matter was adjourned by consent to enable Mr Stankovic to take steps to obtain access to funds, such access having been denied by orders made by the Family Court of Australia. The complaint is as to the delay between the making of the sequestration order on 12 May 2009 and the filing of the application for an extension of time on 19 May 2011, more than two years later.
19 Under the Federal Court Rules in force on 12 May 2009, any notice of appeal from the orders of the Federal Magistrates Court was required to be filed and served within 21 days after the date on which the judgment appealed from was pronounced. Order 52 rule 15.1(b) provided that a notice of appeal could be filed and served within such further time as was allowed by the Court or a judge, upon application filed within that period of 21 days. Clearly, that requirement was not satisfied. There was, however, a provision in Order 52 rule 15.2 to the effect that, notwithstanding anything in the preceding sub-rule, the Court or a judge, for special reasons, might at any time give leave to file and serve a notice of appeal. Thus there is power for the Court to extend the time for filing a notice of appeal, notwithstanding that the application is brought after the expiration of a period of 21 days.
20 The expression special reasons is intended to distinguish the case from the usual course, according to which the relevant period is 21 days. It may be so distinguished wherever the Court sees a ground that does justify departure from the general rule in the particular case. Such a ground would be a special reason because it would take the case out of the ordinary (see Jess v Scott (1986) 12 FCR 187 at 195). In considering whether an extension of time should be granted, several factors are ordinarily to be taken into account. Apart from the question of the merits of the substantial application β that is, the merits of the appeal assuming leave were granted β one such factor is whether or not there is an acceptable explanation for the delay, such that it would be fair and equitable in the circumstances to extend time. Another factor would be whether any prejudice to the respondents would be caused by the delay.
21 In his application, Mr Stankovic has relied on three affidavits sworn by him on 19 May 2011, 31 January 2012 and 9 March 2012. There is very little material in those affidavits directed to explaining the delay between 12 May 2009 and 19 May 2011. In that regard, it is of some significance that, shortly after the making of the sequestration order, Mr Stankovic paid the amount claimed by the Council. He then made two applications to the Federal Magistrates Court. The first was an application to extend the stay ordered by Raphael FM. It appears that on 5 June 2009 Barnes FM refused that application. Her Honour observed that, where there is no appeal, the Federal Magistrates Court has no power to grant a stay beyond the period of 21 days allowed for in s 52(3) of the Bankruptcy Act. Her Honour was not satisfied that she had power to extend the stay beyond the period of 21 days. The significance of that observation is that it might at least have drawn Mr Stankovic's attention to the fact that he may have had a right of appeal.
22 Rather than dismissing the application for an extension of the stay, her Honour considered that the appropriate way to deal with the application was to adjourn the matter to the date for the return of a separate proceeding commenced by Mr Stankovic on 20 May 2009, seeking annulment of the bankruptcy. I have no evidence relating to the application for an annulment, other than that an order was made by Smith FM, on 13 October 2009, that the application for an annulment be dismissed by consent. Thus, it appears that Mr Stankovic had some knowledge of a basis for seeking relief in respect of the sequestration order. There is no suggestion in his evidence that he sought legal advice and that his lawyers failed to take steps in time. In the course of his submissions, he said that, at the end of 2010, he consulted Mr Ferrier. There is nothing to suggest that he had made any attempt before then to seek advice as to the possibility of an appeal. The only material is the evidence that he sought an extension of the stay, and that he made an application for an annulment that was dismissed by consent.
23 One must, of course, have sympathy for an individual who appears for himself. Mr Stankovic's first language is not English and he has some hearing disabilities. Nevertheless, he is articulate. Although I have doubts about the merits of his submissions, I have had no difficulty in understanding those submissions.
24 The delay in this case is extraordinarily long. The length of the delay consolidates the strength of any vested right that the Council has in the judgment that it obtained from the Federal Magistrates Court. The only way in which the question of delay was addressed by Mr Stankovic in his affidavit evidence was to say that he had difficulties in obtaining legal representation and has had financial difficulties over the past few years, during which he has been involved in legal proceedings. He also asserted that he was late because of the conduct and misconduct of the legal profession through all of the courts. He asserted that everything was misconceived by the legal professionals, and that the duty of care and obligation to the courts was ignored. He asserted that, because of that, it took him so long to ascertain that, as he alleges, the case before the Land & Environment Court had not been reinstated. He said that, following the orders of 12 May 2009, it was difficult for him to obtain representation, and that he had on various occasions asked the Trustees for assistance but that the Trustees refused to assist him. Those matters, of course, have no bearing on the question presently before me.
25 I am not persuaded that there is a satisfactory explanation for Mr Stankovic's delay in applying for an extension of time. Coupled with the complete lack of any merit in the proposed grounds, or any other grounds that have been suggested, I do not consider that it is appropriate to extend the time for filing a notice of appeal from the orders of the Federal Magistrates Court of 12 May 2009. The application for leave to file and serve out of time, filed on 19 May 2011, should be dismissed with costs.
I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.
Associate:
Dated: 25 May 2012
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SZLWE v Minister for Immigration and Citizenship [2008] FCA 1343
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FEDERAL COURT OF AUSTRALIA
SZLWE v Minister for Immigration and Citizenship [2008] FCA 1343
SZLWE v MINISTER FOR IMMIGRATION AND CITIZENSHIP and REFUGEE REVIEW TRIBUNAL
NSD 979 OF 2008
PERRAM J
19 SEPTEMBER 2008
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD 979 OF 2008
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN: SZLWE
Appellant
AND: MINISTER FOR IMMIGRATION AND CITIZENSHIP
First Respondent
REFUGEE REVIEW TRIBUNAL
Second Respondent
JUDGE: PERRAM J
DATE OF ORDER: 19 SEPTEMBER 2008
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The appeal be dismissed.
2. The Appellant pay the costs of the First Respondent.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD 979 OF 2008
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN: SZLWE
Appellant
AND: MINISTER FOR IMMIGRATION AND CITIZENSHIP
First Respondent
REFUGEE REVIEW TRIBUNAL
Second Respondent
JUDGE: PERRAM J
DATE: 19 SEPTEMBER 2008
PLACE: SYDNEY
REASONS FOR JUDGMENT
1 This is an appeal from the Federal Magistrates Court. That court dismissed the Appellant's claim for writs of certiorari and mandamus directed to the Second Respondent. To understand the issues which arise in the appeal it is necessary to say a few words about the Appellant's circumstances.
2 The Appellant arrived from Lebanon in Australia on 9 March 2007. On 1 June 2007, he applied for a protection visa which is the kind of visa applied for where a person seeks asylum on the basis that he or she is a refugee. By s 36 of the Migration Act 1958 (Cth) ("the Act"), a protection visa could be granted by the Minister to the Appellant if the Minister were satisfied that the Appellant was a non-citizen to whom "Australia has protection obligations under the Refugees Convention as amended by the Refugees Protocol". The Refugees Convention is defined in s 5 of the Act to mean the Convention relating to the Status of Refugees done at Geneva on 28 July 1951. Article 1A(2) of that Convention defines a refugee as a person who:
β¦ owing to a well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion, is outside the country of his nationality and is unable or, owing to such fear, is unwilling to avail himself of the protection of that country; or who, not having a nationality and being outside the country of his former habitual residence as a result of such events, is unable or, owing to such fear, is unwilling to return to it.
3 Although the question for the Minister was whether Australia had protection obligations to the Appellant, the question of whether he could be satisfied that the Appellant was a refugee within this definition was an important part of the decision making process.
4 The Minister was not required to resolve the Appellant's application personally. By s 496 the Minister could delegate any of his functions under the Act which, naturally enough, included those under s 36. The Appellant's application was processed by such a delegate who, on 27 August 2007, declined to grant a protection visa. The Appellant was not left without a remedy. Part 7 of the Act provides a regime by which such decisions may be reviewed. Section 457 establishes the Refugee Review Tribunal ("the Tribunal") and ss 411 and 414 imposed upon the Tribunal, in this case, the duty to review the decision made by the delegate. On 17 September 2007, the Appellant availed himself of this regime and applied to the Tribunal for a review of that decision. Pursuant to s 418, the Secretary to the Department conveyed to the Tribunal the delegate's reasons for the decision together with its file.
5 Based on those materials, the Tribunal was not satisfied that it could accede to the Appellant's application for a review. Accordingly, it was obliged by s 425 to invite the Appellant to appear before it to give evidence and present arguments about the issues relating to the review. A hearing for that purpose took place on 6 December 2007. On 20 December 2007, the Tribunal delivered its decision by which it affirmed the delegate's decision not to grant the protection visa.
6 It is useful to note at the outset three aspects of the Tribunal's decision. First,it misdescribed the Appellant as having been a member of the Lebanese armed forces when, in fact, he had been a member of a militia known as the Lebanese Forces. Secondly,it found that the Appellant did not fear persecution on the basis of a political opinion. Thirdly,after delivering its reasons for affirming the delegate's decision it sent them to a barrister and migration agent, John Eyeson-Annan, at a time when it knew that Mr Eyeson-Annan had been suspended as a registered migration agent.
7 The Appellant then sought the issue of writs of certiorari and mandamus from the Federal Magistrates Court. Its jurisdiction to grant these writs was circumscribed by the provisions of s 476 of the Act and the High Court's decision in Plaintiff S157/2002 v Commonwealth (2003) 211 CLR 476. The combined effect of those matters is that review in the Federal Magistrates Court is only available where jurisdictional error is established.
Political opinion
8 Of the three matters previously mentioned, it was only the question of political opinion which was ventilated before the learned Federal Magistrate. The Appellant pointed to a passage in the transcript of his hearing before the Tribunal on 6 December 2007 which was as follows:
THE INTERPRETER: No, they asked me for the main office like in Beirut for the main you know like security office in Beirut to go there and attend so that was on the 22nd when I went, yeah. Yeah, 8.30 I went to the investigation. Yeah, fine. Yeah, I went inside, I waited until my turn came and they took me inside to the investigation, you know, department. They start asking me questions, 'where do you work, what time you work and how long you've been working. I told them I've been working in this kind of work for five years; I work for 12 hours every day. They said to me, okay, they said we have information about you that in 2004 I used to work security for the Americans in Iran, that's why they stopped the procedures of my passport. I said I've been like I've been working for five years in my work, that's what I'm saying to you like for such a long time I've been working and this is my passport. You gave it to me from your office from 2001 for 2002 so how could - I could I β¦. then? Okay, they said that they are really sure about this information, they've got evidence about this information that I've been to Iran, they've got information about it and they said okay, I told them, all right, show me this information and show me my photo that I was working there so I can believe it. I stayed in the investigation room for about two hours, too hours and a half until 10.30, 11. I was giving them all the evidence that I'm a person that never left, like I didn't leave Lebanon, not even one day, one night. I was showing them places that I was working, I didn't go anywhere, I didn't leave, I didn't leave Lebanon at all. For no reason they caused me trouble, at that stage they didn't give me my passport. They said we'll let you know regarding your passport but after one week from this date someone in my work saying to me after one week they said, someone in my work said to me there's someone from the police office, like there's somebody from the security office, they're asking for you, from the β¦. office. Yeah, then I spoke to the person in charge of the station and they say like this is a person like and like he hasn't been anywhere; I never went outside and he's been working all this time so why they stopped his passport. Yeah, after like when he's talking to my office that I've been working there and didn't leave at all like after 52 days on the 22nd of the 1st they gave me the passport, on the 23rd of the 1st, like there's been like a protest in Lebanon on the like all the guys they were doing like a protest in Lebanon, you know that was with the former governor, like β¦. like all this.
9 The Tribunal then asked a number of questions, including the following question:
MR DELOFSKI: So what do you think will happen to you if you return to Lebanon?
THE INTERPRETER: Like if they invented you know the story of like I was a security officer in Iraq for the Americans, I mean I don't know what they might frame to me when I return and you see like the situation in Lebanon now is really bad. They are not able, you know, to arrest anybody who is doing all this trouble. It's a country without a governor, without anything.
10 In my opinion, allowing for the obvious language difficulties, the following matters may be extracted from that exchange:
(a) the Appellant had applied for a passport;
(b) he went to the security office at Beirut on 22 December 2006;
(c) he was taken into an interview as part of an investigation;
(d) he was asked where he worked and how long he had worked there;
(e) he was told that they β that is, those conducting the investigation β had information that the Appellant had worked in 2004 in security in Iran for the Americans;
(f) it was that work for the Americans in Iran which had caused his passport application to be delayed;
(g) the Appellant denied that this was true β that is, he denied categorically that he had worked for the Americans in Iran;
(h) his investigators said they were "really sure about this information" and that they had "evidence about this information that [you've] been to Iran";
(i) the interview continued for another 2.5 hours until 10.30 (whether in the morning or the evening is unclear);
(j) during that interview he sought to persuade them that he had not left Lebanon during the period it was alleged he was in Iran working for the Americans;
(k) he did not receive his passport at that time;
(l) he subsequently did receive his passport; and
(m) he was concerned that if the officials had been willing to make up the story that he was a security officer in Iraq (not Iran) then, when he returned home, he might be harassed by the making of further untrue allegations.
11 The Appellant had previously made a similar claim in his original application to the delegate. In that document β which was signed by the Appellant on 17 May 2007 β he had said:
I have experienced the abuse from civilians and authorities, I have also been harrased by workers when I went to apply for my passport. In Lebanon (Beirut) they accused me for something I did'nt do, I applied for my passport on the 7th 12 06 and instead of it taking 3 days to be approved, they gave it to me on the 22nd of Jan 07, after they harassed me accusing me of being in another country working and mistreating me, interigating me, and they were all false alligations made about me, but they only did it to harrass me. they will do anything to try and pin things on to you. Just to harass you.
12 It will be seen that the Appellant characterised the allegation against him that he had worked in Iran for the Americans as an example of the abuse that he was likely to receive if he returned. In particular, he was concerned that some other, equally untrue, allegation might be made against him.
13 The Tribunal dealt with this matter directly:
The applicant said that he applied for a passport in late 2006 and had been told to pick it up in 5 days. When he returned in 5 days to pick up the passport he was told that it was not ready. A week later he was told to attend an office for further questioning about his application. He attended the interview and was asked a lot of questions including whether he had worked for the Americans, to which he responded that he had not. After some further delays, he was eventually issued with a passport on 22 January 2006.
The applicant recounted another incident when he was unwittingly caught up in a violent incident in Beirut involving protesters and the Lebanese armed forces. Some people had been shot.
The applicant said that if he returns to Lebanon he fears he might be "framed". He said that there was no effective government or adequate protection in Lebanon.
β¦ In describing his experiences to the Tribunal and in his written statement of claims, the applicant did not allude to any Convention nexus, even when the Tribunal asked the applicant directly whether his fear of harm could be attributed to any of the 5 Convention reasons. Rather, the applicant saw himself as an unwitting victim or innocent bystander caught up in a difficult and violent environment arising from the outbreak of civil war in Lebanon as well as conflicts and skirmishes between different rival groups.
Based on the evidence, the Tribunal is not satisfied that the applicant was persecuted in the past for reasons of his political opinion, imputed or otherwise, religion, membership of a particular social group or any other Convention reason. Nor does the Tribunal accept that there exists a real chance that he will face persecution for a Convention reason on his return to Lebanon.
14 Before the learned federal magistrate, the Appellant argued that the Tribunal failed to consider a claim of imputed political opinion which, it was said, arose clearly on the material before the Tribunal even though it was not directly raised by the Appellant. If such a claim had arisen clearly on the materials before the Tribunal and if the Tribunal had failed to deal with that claim then it may be that the Tribunal would have failed to have carried out the function of reviewing the delegate's decision: see NABE v Minister for Immigration (2004) 144 FCR 1 at 19-20 [61] per Black CJ, French and Selway JJ. Such a failure would constitute a jurisdictional error: NABE (2004) 144 FCR 1.
15 For such an error to arise, however, it would be necessary that a case based upon imputed political opinion arose clearly on the material before the Tribunal. I do not think that it did. The material which was before the Tribunal showed that the Appellant was concerned that if he returned to Lebanon he might be framed in respect of matters of which he was completely innocent. His fear that such framing might occur was based on his previous experience of having had false allegations made against him at the passport office. In that context, it is apparent that it is the making of the false allegations which now forms part of the persecutory conduct relied upon. Once that is appreciated, it becomes plain that in order to make good the claim there needed to be some suggestion that that persecutory conduct was being inflicted for a Convention reason. But there was no such material before the Tribunal. The Appellant did not suggest that the false allegations were being made against him because he held a particular political opinion.
16 It is, of course, conceptually confusing that the persecutory conduct relied upon consisted of false allegations about the Appellant to the effect that he had worked for the Americans in Iran. It may be accepted that the allegation that the Appellant had worked for the Americans in Iran was capable of giving rise to an imputation that the Appellant was an American sympathiser. That he was not an American sympathiser (as appears to be the case) did not matter for it is established that the political opinion in question need not actually be held β it suffices that those who are alleged to persecute believe that the person in question holds the opinion: Chan v Minister for Immigration and Ethnic Affairs (1989) 169 CLR 379 at 416 per Gaudron J, 433 per McHugh J; Minister for Immigration and Ethnic Affairs v Guo (1997) 191 CLR 559 at 571 per Brennan CJ, Dawson, Toohey, Gaudron, McHugh and Gummow JJ; see also Canada (Attorney-General) v Ward[1993] 2 SCR 689 at 746 per La Forest J (delivering the judgment of the court).
17 However, the material before the Tribunal did not suggest that it was the holding of this opinion which was the reason that the Appellant was being persecuted. His evidence instead was to the effect that the making of such false allegations had become usual in Lebanon and was something to which everyone was exposed. Thus, in truth, the case was not one in which it was imputed to him that he was an American sympathiser and was, therefore, persecuted for being such a sympathiser. Rather, it was one in which people in general in Lebanon were exposed to the risk that false and baseless allegations might be made against them. Put another way, the Appellant's account of events in Lebanon indicated a strange state of affairs in which ordinary citizens going about their business might be exposed to the making of baseless allegations. Once that is appreciated, it can be seen that there could be no claim based on imputed political opinion: persecution for no reason cannot be persecution for one of the reasons set out in Article 1A(2) of the Convention.
18 It follows that I do not think that the material before the Tribunal clearly presented a case based on imputed political opinion. Accordingly, the Tribunal did not fail to conduct the review required by s 414 by not considering such a case. It committed no jurisdictional error.
Confusion of membership of Lebanese forces with membership of Lebanese Armed Forces
19 It is then useful to say something about the Tribunal's confusion of the Appellant's membership of the Lebanese forces with membership of the Lebanese Armed Forces. In the Appellant's amended application to the Federal Magistrates Court such a claim was expressly included. However, at the hearing in the Federal Magistrates Court the Appellant, who was represented by counsel, abandoned that argument. There may be some circumstances in which an appellate court will permit a party who has expressly abandoned a point at trial to raise it afresh on appeal. Gyles J would have permitted such a course in Dovuro v Wilkins (2000) 105 FCR 476 at 527 [181] at least where the point involved no prejudice to the other party. Branson and Finkelstein JJ took the opposite view: 487-488 [38] and 508-509 [119]-[120]. There may be something to be said for the view that where a point is expressly abandoned that the doctrine of waiver is relevant to the question: cf. Browne v Dunn (1894) 6 R 67 at 75 per Lord Halsbury, 80 per Lord Bowen; applied by the Privy Council in Yorkshire Insurance Co v Craine [1922] 2 AC 541 at 552-553 per Lords Buckmaster, Atkinson, Sumner, Parmoor and Wrenbury. If that were so, the question of whether an appellate court should entertain a fresh ground might not be relevant β there might be no ground to raise. However, whether the question is posed as one about the circumstances in which an appellate court should permit a point abandoned below to be resurrected on appeal, or, instead, one of waiver leading to the conclusion that the point no longer juridically exists β the outcome is the same in this case. I would not permit the abandoned ground to be entertained.
20 However, for completeness, even if it had been permitted to be raised, it would not have altered the outcome of the appeal. It is possible that when the Tribunal makes an error of fact that it may, in some circumstances, fail to deal with a claim raised before it and hence fail to comply with its obligation to review: NABE (2004) 144 FCR 1 at 20 [63]. In this case, however, the Appellant's claim that he had been a member of the militia was not connected to any of his fears if he should return to Lebanon.
Sending of notice of decision and decision to suspend migration agent
21 On 12 December 2007, the Tribunal sent a letter notifying its intention to hand down its decision to Mr Eyeson-Annan who had been the Appellant's migration agent. Mr Eyeson-Annan had, by then, been suspended from practice as a migration agent, a fact of which the Tribunal had informed the Appellant at its hearing on 6 December 2007. On 20 December 2007, the Tribunal sent a letter enclosing its reasons for decision to Mr Eyeson-Annan. The Appellant contends that the sending of those two important letters to a person who had been suspended as a migration agent vitiates the decision of the Tribunal.
22 Section 430A(3) required the Tribunal to notify the parties of its intention to hand down its decision. Section 430A(4)(b) required that notice to be given in one of the ways specified in s 441A. However, s 441G(1) required the Tribunal to send the notice to an "authorised recipient" if such had been appointed in writing. If such an authorised recipient had been appointed, the Tribunal was taken to have given the notice to the Appellant if it had provided it to the authorised recipient.
23 In this case, the Appellant initially appointed Mr Eyeson-Annan as his migration agent on 17 May 2007. On the form appointing Mr Eyeson-Annan as his migration agent there was a section headed "Part E β Authorisation for migration agent to act on your behalf". Underneath that there then appeared the words:
My migration agent is authorised to act on my behalf and receive written communication (as permitted by law) in relation to: β¦ all matters.
24 Next to the words "all matters" there appeared a box which was ticked. On another part of the form entitled "Part G" Mr Eyeson-Annan (who also signed the form) agreed "[a]s the migration agent named on this form" to receive communications from the department. It is important to stress these words because they show that Mr Eyeson-Annan was appointed as the authorised representative because of his status as a migration agent.
25 Section 441G provides:
(1) If:
(a) a person (the applicant) applies for review of an RRT-reviewable decision; and
(b) the applicant gives the Tribunal written notice of the name and address of another person (the authorised recipient) authorised by the applicant to do things on behalf of the applicant that consist of, or include, receiving documents in connection with the review;
the Tribunal must give the authorised recipient, instead of the applicant, any document that it would otherwise have given to the applicant.
Note: If the Tribunal gives a person a document by a method specified in section 441A, the person is taken to have received the document at the time specified in section 441C in respect of that method.
(2) If the Tribunal gives a document to the authorised recipient, the Tribunal is taken to have given the document to the applicant. However, this does not prevent the Tribunal giving the applicant a copy of the document.
(3) The applicant may vary or withdraw the notice under paragraph (1)(b) at any time, but must not (unless the regulations provide otherwise) vary the notice so that any more than one person becomes the applicant's authorised recipient.
(4) The Tribunal may communicate with the applicant by means other than giving a document to the applicant, provided the Tribunal gives the authorised recipient notice of the communication.
(5) This section does not apply to the Tribunal giving documents to, or communicating with, the applicant when the applicant is appearing before the Tribunal.
26 It is apparent from sub-section (3) that an authority given to an authorised recipient may be varied or withdrawn at any time. The Act is silent on the question of how an authority may be withdrawn. The word "withdrawn" connotes a taking back or a retraction. That taking back or retraction need not be express. But if it is not express there needs to be conduct by an applicant from which it may be implied or inferred that the Tribunal has been informed that an authority is no longer extant.
27 On 6 December 2007, the Tribunal informed the Appellant during its hearing that Mr Eyeson-Annan had been suspended as a migration agent. Discussion then took place as to whether its decision would be sent to the Appellant and, if so, at what address. The Appellant indicated that he wished it to be sent to him. At the conclusion of the hearing the Tribunal member said:
So I suggest we'll conclude the hearing now but after β immediately after the hearing you fill in that form with the help of the interpreter and the hearing officer and that will be the address we'll be sending you the decision, okay and notifying you of the handing down of the decision. Okay.
28 Although the position is not as clear as might be hoped it is to be inferred from this episode that the Appellant communicated to the Tribunal that the consequence of Mr Eyeson-Annan's suspension as his migration agent was that he wished to receive the decision himself. It may reasonably be inferred that the Tribunal was informed that Mr Eyeson-Annan's authority was no longer extant. Accordingly, it should be concluded that his authority was withdrawn under s 441G(3).
29 The notice of intention to hand down the decision was sent by facsimile to Mr Eyeson-Annan on 12 December 2007 as was the decision itself on 20 December 2007. However, because his authority had been withdrawn, sending the letters to him did not engage s 441G(2), and as a result that there was no corresponding deeming that the Appellant had received them. Both communications were also expressed to be sent "cc" the Appellant. However, the Tribunal has no postal log of that occurring and the Appellant denies it. I would infer that it was not sent to him and hence that there was no compliance either with s 430A(4)(b) or with s 430B(6)(b). That, however, is not the end of the matter for neither of those failures is jurisdictional. A failure to comply with the obligation to notify an applicant of an intention to deliver a decision in s 430A was held to be non-jurisdictional by Hely J in SZAMO v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 943 at [13] and likewise by Graham J in SZBPF v Minister for Immigration and Multicultural Affairs [2005] FCA 1532 at [12]-[13]. There is no reason to doubt the correctness of either of those decisions.
30 So too, a failure to comply with a statutory duty to provide reasons after the cancellation of a visa has been held not to be a jurisdictional error: Re Minister for Immigration and Multicultural and Indigenous Affair; ex parte Palme (2003)216 CLR 212 at 225-226 [44]-[48] per Gleeson CJ, Gummow and Heydon JJ, 227-228 [54]-[58] per McHugh J. Similar reasoning applies to the duty to provide reasons in s 430B(6): see SZFLM v Minister for Immigration and Citizenship [2007] FCA 863 at [4] per Madgwick J. It follows that although non-compliance with s 430A(4)(b) and s 430B(6)(b) is established no relief can be granted because neither was a jurisdictional error.
31 Before me the Minister correctly noted that this argument had not been run before the federal magistrate. Two matters flowed from that. First, it was said that as a matter of discretion the ground should not be permitted to be raised. Given the nature of the point and the absence of prejudice to the Respondent, however, it seems appropriate to permit it to be entertained. Secondly, it was said that it was possible the Court might not have jurisdiction to entertain the point. Shortly, that argument was that because this Court has no original jurisdiction by reason of s 476A of the Act, it followed that the entertaining of a ground not raised before the learned Federal Magistrate necessarily entailed an exercise of that proscribed original jurisdiction. Flick J noted this argument in SZLZM v Minister for Immigration and Citizenship [2008] FCA 1263 at [18] but did not decide it since it was unnecessary to do so. Not having heard full argument on the matter, and it not being necessary, I take the same course. However, any such argument would need to accommodate the Full Court's decision in Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at 434-435 [20], 438-440 [34]-[39] per Allsop J with Drummond and Mansfield JJ agreeing, and Applicant NAHV of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 129 FCR 214 at 218-219 [21] per Carr, Kiefel and Allsop JJ.
32 Each of the grounds of appeal not having been made out, the appeal must be dismissed with costs.
I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.
Associate:
Dated: 19 September 2008
The Appellant appeared in person.
Counsel for the First Respondent: S A Sirtes
Date of Hearing: 29 August 2008
Date of Judgment: 19 September 2008
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Australian Competition & Consumer Commission v Radio Rentals Limited [2005] FCA 1133
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2024-09-13T22:46:45.118481+10:00
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FEDERAL COURT OF AUSTRALIA
Australian Competition & Consumer Commission v Radio Rentals Limited
[2005] FCA 1133
TRADE PRACTICES β unconscionable conduct β s 51AA and s 51AB Trade Practices Act 1974 considered β retailer and mentally incapacitated customer and multiple dealings β frequent service and telephone calls β whether retailer knew or ought to have known of customer's disadvantage
TRADE PRACTICES β unconscionable conduct and the unwritten law β basis of unconscionable dealing doctrine β limits to knowledge requirement
CORPORATIONS β aggregation of knowledge possessed by employees β proof of knowledge for purposes of unconscionable dealings doctrine
Trade Practices Act 1974 (Cth) s 51AA, s 51AB
Social Security Act 1991 (Cth)
Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 cited
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 discussed
Bridgewater v Leahy (1998) 194 CLR 457 cited
Hart v O'Connor [1985] AC 1000 cited
Blomley v Ryan (1956) 99 CLR 362 referred to
Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 117 FCR 301 cited
Louth v Diprose (1992) 175 CLR 621 discussed
Micarone v Perpetual Trustees Australia Ltd (1999) 75 SASR 1 cited
Melverton v Commonwealth Development Bank of Australia, SCNSW, 30 June 1989 cited
Owen and Gutch v Homan (1853) 4 HLC 997 cited
Garcia v National Australia Bank Ltd (1998) 194 CLR 395 cited
Australian Competition and Consumer Commission v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253 cited
Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (No 2) (2000) 96 FCR 491 cited
Cameron v Qantas Airways Ltd (1994) 55 FCR 147 cited
Jones v Dunkel (1959) 101 CLR 298 considered
Hurley v McDonald's Australia Pty Ltd (2000) ATPR 41-741 cited
Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR 41-703 cited
Australian Competition and Consumer Commission v Keshow [2005] FCA 558 cited
Re HIH Insurance Ltd (in prov liq) & HIH Casualty & General Insurance Ltd (in prov liq) (2002) 41 ACSR 72 cited
Cubillo v Commonwealth (No 2)(2000) 103 FCR 1 cited
Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 not followed
Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 discussed
Re Chisum Services Pty Ltd (1982) 1 ACLC 292 referred to
Beach Petroleum N L v Johnson (1993) 115 ALR 411 cited
Dunlop v Woollahra Municipal Council [1975] 2 NSWLR 447 cited
Elliot v Nanda (2000) 111 FCR 240 cited
Stern v McArthur (1988) 165 CLR 489 cited
Quistclose Investments Ltd v Rolls Razor Ltd [1970] AC 567 cited
AUSTRALIAN COMPETITION & CONSUMER COMMISSION v RADIO RENTALS LIMITED (ACN 007 527 782) & WALKER STORES PTY LTD (TRADING AS IN RENT) (ACN 007 973 962)
No S 844 of 2003
FINN J
ADELAIDE
17 AUGUST 2005
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY S 844 OF 2003
BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT
AND: RADIO RENTALS LIMITED
ACN 007 527 782
FIRST RESPONDENT
WALKER STORES PTY LTD (TRADING AS IN RENT)
ACN 007 973 962
SECOND RESPONDENT
JUDGE: FINN J
DATE OF ORDER: 17 AUGUST 2005
WHERE MADE: ADELAIDE
THE COURT ORDERS THAT:
1. The application be dismissed.
2. The applicant pay the respondent's costs of the application.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY S 844 OF 2003
BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT
AND: RADIO RENTALS LIMITED
ACN 007 527 782
FIRST RESPONDENT
WALKER STORES PTY LTD (TRADING AS IN RENT)
ACN 007 973 962
SECOND RESPONDENT
JUDGE: FINN J
DATE: 17 AUGUST 2005
PLACE: ADELAIDE
REASONS FOR JUDGMENT
A. THE PRINCIPAL CLAIM ............................................................................................. 8
1. THE APPLICABLE PRINCIPLES ................................................................................ 9
(i) Section 51AA of the Trade Practices Act .............................................................. 10
(ii) Section 51AB of the Trade Practices Act .............................................................. 23
2. MR GROTH .................................................................................................................. 25
(i) Personal History ................................................................................................... 25
(ii) Personal Circumstances ........................................................................................ 38
RADIO RENTALS AND WALKER STORES ...................................................................... 61
MR GROTH'S DEALINGS WITH RADIO RENTALS (AND WALKER STORES) ............ 69
(i) The agreements ..................................................................................................... 75
(ii) The credit applications ......................................................................................... 120
(iii) Service Provision to Mr Groth .............................................................................. 134
(iv) Telephone Calls to Radio Rentals ......................................................................... 139
WITNESS ISSUES: ADVERSE INFERENCES .................................................................. 148
CONSIDERATION .............................................................................................................. 153
CONCLUSION ON THE PRINCIPAL CLAIM .................................................................. 197
THE ANCILLARY CLAIMS ................................................................................................ 204
(i) Raising Service Agreements without Mr Groth's knowledge or consent ................. 206
(ii) Transferring overpaid funds from one agreement to another without consent .......... 212
(iii) Accepting the return of goods ............................................................................... 216
CONCLUSIONS .................................................................................................................. 218
1 This proceeding concerns the dealings had by Ronald Groth with Radio Rentals Ltd ("Radio Rentals") and Walker Stores Pty Ltd ("Walker Stores"). Walker Stores operated through the agency of Radio Rentals. Radio Rentals was a retailer of, and Walker Stores leased out, electrical goods. Mr Groth has both an intellectual disability and a schizophrenic illness. He is in receipt of a disability pension which is his sole source of income. In the period between November 1996 and October 2002 he entered into fifteen rental, two loan and nineteen service agreements with Radio Rentals and three rental agreements with Walker Stores. These all related to electrical goods. The payments he made under those agreements totalled $20,700.43.
2 The Australian Competition and Consumer Commission ("the ACCC") has proceeded against the two companies under the Trade Practices Act 1974 (Cth) ("the TP Act"). It alleges that in entering into, and in enforcing, the thirty-nine agreements the companies were guilty of unconscionable conduct for the purposes of s 51AA and s 51AB of that Act. Put shortly the matter raises issues of some importance for consumers who may not be able adequately to manage their own affairs and for retailers dealing with such persons.
3 The unconscionable conduct alleged against each of the companies in entering into their respective agreements with Mr Groth is pleaded in the following terms:
"[Each company] knew or ought to have known from Mr Groth's presentation and verbal skills, that:
1. Mr Groth was a person with an intellectual disability;
2. Mr Groth could not read the agreements;
3. Mr Groth could not understand all the terms and conditions of the agreements;
4. Mr Groth was unable to understand all the rights, options and benefits he had under the agreements;
5. Mr Groth was unable to make a worthwhile judgment about whether entering into the agreements was in his best interests;
and knew or ought to have known from its records that:
6. it was unlikely to be in the best interests of Mr Groth to enter into the agreements with Radio Rentals [and Walker Stores];
7. Mr Groth was the recipient of a disability pension and that it was his sole source of income;
and at times knew or ought to have known from its records that:
8. the credit applications completed by its employees contained information that was incorrect, unrealistic and inadequate;
9. Mr Groth's monthly liability to Radio Rentals and Walker Stores ranged between $267.01 and $365.61;
10. Mr Groth's monthly liability to Radio Rentals and Walker Stores ranged between 30.2% and 40.5% of his income;
11. Mr Groth's monthly liability to Radio Rentals and Walker Stores would result in financial hardship whereby he was generally unable to afford the basic necessities of living (being food, clothing, accommodation, health and travel expenses, essential utilities and general household expenses) and other incidental personal expenses;
12. Mr Groth's actual monthly payments to Radio Rentals and Walker Stores which were significantly greater than his monthly liability to Radio Rentals and Walker Stores, would result in financial hardship whereby he was generally unable to afford the basic necessities of living (being food, clothing, accommodation, health and travel expenses, essential utilities and general household expenses) and other incidental personal expenses."
It is alleged as well that if the companies did not know the above matters, they were recklessly indifferent to them.
4 Additional to the above ("the Principal Claim") three ancillary complaints of unconscionable conduct are made against Radio Rentals relating to its (i) raising service agreements without Mr Groth's consent; (ii) transferring funds from one agreement to another without his consent; and (iii) accepting the return of goods after substantial payment. I will deal with each of these separately later in these reasons.
5 The critical issues raised by the ACCC's pleading relate to what Radio Rentals knew or had reason to know through its employees about Mr Groth's capacities and personal circumstances as a result of its dealings with him and from its records. Though both Mr Groth and a range of Radio Rentals employees gave evidence, it is unsurprising that, with the significant period of time spanned by the agreements, the recollection of these witnesses has dimmed to the point in many instances of being either quite incomplete or non-existent. The ACCC in consequence has attempted to structure its case in some measure around what should be inferred from the companies' own records and from Mr Groth's banking and other records of his financial dealings and commitments.
6 One consequence of the emphasis on documentary evidence at the trial was that in Ms Strong SC's closing address for the ACCC, it became apparent that the ACCC was not seeking to mount a single claim of unconscionable conduct founded cumulatively or compositely on the twelve matters set out above which took Mr Groth's intellectual disability as its starting point. I would note in passing that the relief sought in the Further Amended Application (par 1) and the Further Amended Statement of Claim (pars 95 and 97) both suggested the case was a composite one as did the ACCC's written "Outline of Opening". Rather, the ACCC at the end was seeking to propound two distinct claims of unconscionable conduct. The first, put shortly, was the composite claim. The second was a free-standing claim that the two companies took advantage of Mr Groth's known financial circumstances.
7 I will later indicate why I consider this new claim ought not to be accepted given what has been pleaded and the state of the evidence on financial hardship.
A. THE PRINCIPAL CLAIM
8 For ease in exposition I will refer, first, to the applicable legal principles in this matter; secondly, to Mr Groth's condition, capacities and personal circumstances; thirdly, to the various agreements entered into and to Mr Groth's related dealings with Radio Rentals.
1. THE APPLICABLE PRINCIPLES
9 There are two distinct bodies of law to which it is necessary to make reference. The first relates to s 51AA of the TP Act; the second, to s 51AB of the Act. Before considering these sections individually, I should note that it is common ground between the parties that the prerequisites of each of them are satisfied other than whether the respondents' conduct was unconscionable for the purposes of either section.
(i) Section 51AA of the Trade Practices Act
10 This section provides:
"(1) A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories.
(2) This section does not apply to conduct that is prohibited by section 51AB or 51AC."
11 Whatever may be the outer reach of this provision: see Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 at [42]-[46]; it is accepted on both sides in this proceeding that the presently relevant species of unconscionable conduct is the unconscionable dealings doctrine expounded, in particular, by the High Court in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; see also Bridgewater v Leahy (1998) 194 CLR 457; and see generally Bigwood, Exploitative Contracts, Ch 6 (2003). Put in short form, that doctrine involves the knowing exploitation by one party of the special disadvantage of another in a dealing between them: cf Berbatis Holdings Pty Ltd, at [5]; Bridgewater, at [75]-[76]; whether by active conduct on the exploiter's part or by "the passive acceptance of a benefit in unconscionable circumstances": Hart v O'Connor [1985] AC 1000 at 1024.
12 Where the dealing is contractual, the exploitation will often be evidenced in "an inadequacy of consideration moving from the stronger party": Amadio, at 475; and see Bigwood, at 267 ff. Nonetheless, a contractual dealing may in its context be unconscionable notwithstanding adequacy of consideration: ibid.
13 I have referred both to passive exploitation and to adequacy of consideration for this reason. In the present proceeding the unconscionable conduct alleged against Radio Rentals relates, primarily, to passive exploitation. It does not involve any assertion of inadequacy of consideration in any particular agreement as such.
14 What can constitute being in a position of "special disadvantage" vis-Ε-vis another has been exemplified in many cases: for a convenient collection of the cases see Bigwood, at 239-246. Of the circumstances or conditions that can so position a person in a dealing, I refer for illustrative purposes to Fullagar J's exemplifying catalogue in Blomley v Ryan (1956) 99 CLR 362 at 405:
"β¦ poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary."
The important qualification in the "special disadvantage" criteria is the requirement that the "disadvantage" be "special". As Mason J commented in Amadio (at 462):
"I qualify the word 'disadvantage' by the adjective 'special' in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasize that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party."
15 In this matter it is unnecessary to consider the possible reach of the special disadvantage requirement into what have been called circumstances of "transactional": see Bigwood, at 242 ff; or of "situational": e.g. Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 117 FCR 301 at 318 disadvantage. The type of disadvantage the ACCC alleges Mr Groth suffered is a well recognised one.
16 Critically for the purposes of the present application is the further requirement that unfair or unconscientious advantage is taken of the opportunity created by one party being in a position of disadvantage vis-Ε-vis the other: Amadio at 462. This raises the contentious question of the knowledge one party is required to have of the other's position of special disadvantage before the unconscionable dealings doctrine can be attracted.
17 Before turning to the case law on this matter, it is necessary to emphasise what I understand to be well accepted propositions. (i) It is not the function of the unconscionable dealings doctrine simply to relieve a person from an improvident bargain (i.e. "contractual imbalance": Hart v O'Connor, at 1024; or from a party's failure to in fact conserve his or her own interests in a dealing. As Deane J observed in Louth v Diprose (1992) 175 CLR 621 at 638: "[t]he intervention of equity is not merely to relieve the plaintiff from the consequences of his own foolishness". (ii) Central to the purpose of the doctrine is to relieve against taking "unconscientious advantage": Amadio at 462; or "exploitation" or "victimisation" of another: Hart v O'Connor at 1024; Bridgewater v Leahy at [75]-[76]; Louth v Diprose at 638. In short, it is to relieve against an abuse of power possessed by one party over the other by virtue of the other's position of special disadvantage.
18 For a dominant party's conduct to be characterised as unconscionable β and to be stigmatised as wrongful β that party necessarily must actually have, or must properly be able to be regarded as if he or she did have, knowledge of the other's position of special disadvantage vis-Ε-vis him or her: Micarone v Perpetual Trustees Australia Ltd (1999) 75 SASR 1 at [584]; Melverton v Commonwealth Development Bank of Australia, SCNSW, 30 June 1989, Hodgson J. To use the language of Mason J in Amadio (at 462), it must be shown that the dominant party "knows or ought to know" of the existence of the innocent party's disabling condition or circumstance and of its effect on him or her.
19 There has been a considerable scholarly debate in this country as to the reach to be given to "ought to know". For the most part it has been argued that we should not stray too far from the standard of actual knowledge: see for example Bigwood, at 250 ff. The more attenuated is the level of knowledge required, it is said, the more the doctrine itself becomes disconnected from its animating purpose of proscribing advantage taking or exploitation, the more it becomes a device for correcting defective consent or contractual imbalance: ibid; see also Duggan, "Unconscientious Dealing" in Parkinson (ed), The Principles of Equity, 146-148 (2nd ed, 2003); but contrast Burns, "The Equitable Doctrine of Unconscionable Dealing and the Elderly in Australia" (2003) 29 Monash ULR at 342. Whatever the merits of these views β and I have in the past expressed like opinions: see for example "Equity and Contract" in Finn (ed) Essays on Contract, 140-142; they are not of present moment. The contours of Australian law on this matter are reasonably settled and binding on me.
20 The accepted starting point today is Amadio's case. In addition to his "know or ought to know" observation Mason J later elaborated on the knowledge requirement (at 467) in the following terms:
"β¦ if A having actual knowledge that B occupies a situation of special disadvantage in relation to an intended transaction, so that B cannot make a judgment as to what is in his own interests, takes unfair advantage of his (A's) superior bargaining power or position by entering into that transaction, his conduct in so doing is unconscionable. And if, instead of having actual knowledge of that situation, A is aware of the possibility that that situation may exist or is aware of facts that would raise that possibility in the mind of any reasonable person, the result will be the same."
Or to put the matter as Deane J did in the same case (at 474):
"[Was the] disability β¦ sufficiently evident to the stronger party to make it prima facie unfair or 'unconscientious' that he procure, or accept, the weaker party's assent to the impugned transaction in the circumstances in which he procured or accepted it."
21 While the courts subsequently have resorted to various formulae to encapsulate the knowledge falling short of actual knowledge which will nonetheless be sufficient, sight must not be lost of what is the subject of the required knowledge (be it actual or something less). It is knowledge of a particular state of affairs which itself embodies a judgment as to the disabled party's ability to conserve his or her own affairs in the parties' dealing. It is that state of affairs which is to be "sufficiently evident" to the stronger party. If that person does not actually know of that state of affairs and is not "wilfully ignorant" of it (in the sense that he or she is intent on not knowing it despite what is evident to him or her: cf Owen and Gutch v Homan (1853) 4 HLC 997 at 1035), that person must at least be aware of circumstances that would cause him or her or a reasonable person in his or her position to suspect from what is evident that that state of affairs may exist.
22 I have avoided resort in the above to formulaic descriptions β "constructive knowledge (or notice)" or "duty to inquire", etc. These tend to have their own provenances which can deflect attention from the inquiry required to be made β hence Kirby J's comment in Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 430 that "[c]onstructive notice should not be sufficient for unconscientious dealing".
(ii) Section 51AB of the Trade Practices Act
23 Section 51AB(1) provides that a corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services to a person, engage in conduct that is, in all the circumstances, unconscionable. The term "unconscionable" is undefined. However, s 51AB does refer to a non-exhaustive list of matters to which the Court may have regard in determining whether a corporation has contravened s 51AB(1).
24 Unlike s 51AA, s 51AB does not limit unconscionable conduct to conduct that is unconscionable within the meaning of the unwritten law. As others have pointed out, there is no reason when construing the section to import such a limitation into it: see Australian Competition and Consumer Commission v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253 at [30]-[37]; Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (No 2) (2000) 96 FCR 491 at [24]. Indeed the section on its face in referring to a "possible supply" travels beyond the unwritten law as I understand it. There is, in my view, no reason not to give the term its ordinary possible meanings in the context of a supply or possible supply of goods or services. These have been expressed, variously, as "serious misconduct [or] something clearly unfair or unreasonable": Cameron v Qantas Airways Ltd (1994) 55 FCR 147 at 179; "showing no regard for conscience; irreconcilable with what is right or reasonable": Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 117 FCR 301 at [44]; see also Hurley v McDonald's Australia Pty Ltd (2000) ATPR 41-741 at [22]; or, simply, conduct that is "unfair": Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR 41-703 at [46]; and see generally Australian Competition and Consumer Commission v Keshow [2005] FCA 558 at [91] ff.
25 For reasons I later give, there is probably little practical difference between s 51AA and s 51AB as applied to the conduct of Radio Rentals that is in question in this proceedings.
2. MR GROTH
(a) Personal History
26 Before outlining Mr Groth's condition, capacities and personal history, it is important that I emphasise that this case is not concerned with Mr Groth's objective circumstances as such. Rather its concern is with how he was, or ought to have been, perceived by the Radio Rentals employees with whom he dealt or who dealt with his affairs. As will become apparent, this difference is of fundamental importance to the proper resolution of this matter. To anticipate my conclusion, notwithstanding the significant disability and incapacities from which he suffers, these were not so made evident to Radio Rentals as to justify the conclusion that Radio Rentals and Walker Stores engaged in unconscionable conduct for the purposes of s 51AA and s 51AB of the TP Act.
27 Mr Groth was born at Renmark, South Australia in 1942. He contracted polio when aged nine and was hospitalised for a considerable period. He had considerable educational difficulties. He left school aged fourteen having only progressed to grade five. He has never worked; he first went on the pension (as he put it) when he was seventeen and at all presently relevant times he has been the recipient of the Disability Support Pension. It would appear from information provided by Centrelink that from December 1996 (shortly after Mr Groth's first Radio Rentals agreement) until December 2002 (when Radio Rentals offered a settlement to Mr Groth), Mr Groth's fortnightly pension progressed from $351.80 per fortnight to $524.00 per fortnight. I note in passing that there has been some dispute between the parties as to other benefits and concessions Mr Groth was said by the respondents to have received. Mr Groth lived with his mother until her hospitalisation in 1981. She died in 1982.
28 In mid 1966 during a period in which Mr Groth apparently had episodes of exhibitionism he had a psychiatric consultation at the Royal Adelaide Hospital. The note of that consultation stated that his IQ "would be somewhere in the range of 50 and 60 and he is unable to see just how seriously society views his offence".
29 During the 1980s Mr Groth committed a number of behavioural offences and was committed on occasion to either Hillcrest or Glenside psychiatric hospitals. Medical reports of this period described him as having mild or borderline intellectual retardation. His IQ was assessed in 1981 at approximately 75 to 80 and in 1984 at being in the range of 70 to 79. It was not until late 1985 after a three month stay in Hillcrest Hospital that he was diagnosed as suffering from schizophrenia for which the anti-psychotic medication, Modecate, was prescribed.
30 Prior to 1988 and when not hospitalised, it appears Mr Groth resided with various of his relatives or else lived in hostels. In 1988 he made contact with his sister, Margaret Vickers, who has given evidence in this proceeding, and he moved to Sydney that year to live with her and her partner, Mr Bernie Wood. Mrs Vickers weaned Mr Groth off Modecate in the time he was living in Sydney as she came not to believe he was a schizophrenic.
31 Mr Groth left Sydney without telling Mrs Vickers or Mr Wood in early 1991 and returned to Adelaide. He was, according to Mrs Vickers, "terrified of me when I raised my voice". This happened "lots of times" in early 1991 and may account for his precipitate departure from Sydney. He re-offended in Adelaide and was re-committed to Hillcrest Hospital in May 1991. He resumed medication for his psychotic condition and by March 1992 he was prescribed Fluphenazine for it.
32 Though he resided with relatives in Adelaide, Mr Groth returned to his sister in Sydney for varying periods from late 1993 until 1996. In late 1996 he returned to Adelaide to live independently. He successfully applied to the South Australian Housing Trust for rental accommodation at a unit in Novar Gardens into which he moved in November 1996. Mr Groth was recognised by his cousin, Leslie Thomson, at Novar Gardens a day or two after he took up residence in his unit. Mr Thomson and his wife, Cheryl, lived around the corner from him. Mr Groth saw Mr Thomson almost daily while living at Novar Gardens and was shown around the area including the location of shops and how to use buses by him.
33 It was on 22 November 1996 that Mr Groth entered into the first of the rental contracts with Radio Rentals that are the subject of this proceeding.
34 I will outline in some detail the sequence of agreements entered into by Mr Groth. Here I merely note aspects of his personal history. He lived at his Novar Gardens unit until early June 2002. From time to time he went to Sydney to stay with Mrs Vickers and Mr Wood and in June 2002 he returned to Sydney to live with them.
35 I should interpolate here that it is Radio Rentals' evidence that, over the years, Mr Groth had an exemplary credit paying history. There were a few times when he was behind in his payments due either to direct debit rejections or, on two occasions, to Radio Rentals' error. This did not affect his credit rating with the company. I would also note that Mr Groth's monthly rental liability for the most part ranged between 25 and 35 per cent of his monthly income. I draw this figure from a schedule annexed to the ACCC's Further Amended Statement of Claim (Schedule B) which is not reproduced in these reasons.
36 It was about the time of his return to Sydney that Mr Groth's financial difficulties began to emerge. Mr Groth had several credit cards which he obtained in the early 1990s. The statements of account of one of these β variously described as a Coles, Coles/Myer, or Target card β exhibits a quite significant and atypical increase in the expenses incurred by Mr Groth between December 2001 and June 2002 with a corresponding escalation in both the monthly balance and minimum monthly amount payable over that period. The monthly balance rose from $240.50 to $1,574.31; the minimum monthly amount payable, from $10.00 to $52.00. Mr Groth's Harris Scarfe account revealed a like trend in the same period. While the monthly balances did not reach the order of the Target card (charges incurred contributed significantly to the balance), the minimum monthly payment by June 2002 was $48.00 from a previous norm of $10.00 monthly.
37 By September 2002 Mr Groth's difficulties were such that he had insufficient funds in his bank account to meet direct debit payments to Radio Rentals and his commitments on his Target and Harris Scarfe cards. Mrs Vickers became aware of Mr Groth's Radio Rentals and Walker Stores agreements. She sought legal advice on Mr Groth's behalf concerning the agreements. This resulted in exchanges with Radio Rentals' lawyers which led ultimately to a settlement between Mr Groth and the two companies that was finalised on 14 January 2003.
(b) Personal Circumstances
38 It cannot seriously be disputed that Mr Groth suffers some level of intellectual retardation and that he has significant incapacities. As I earlier indicated, it is not necessary that I reach a definitive view on the level of his retardation and the extent of his incapacities as such. My concern rather is with what ought to have been apparent to others from how he presented, his conduct and his actions and with what these suggested about his abilities and capacity. I defer making my findings on this latter matter until later in these reasons.
39 Two expert reports were prepared for this proceeding β the one, by Dr Michael Wood, a psychologist who was called by the ACCC; the other, by Professor Robert Goldney, a psychiatrist called by Radio Rentals. Additionally, evidence has been given (i) by Mr Groth; (ii) by Mrs Vickers and Mr Bernie Wood of their respective observations of Mr Groth over the years; and (iii) by some number of Radio Rentals' employees of their recollections of him.
Dr Wood
40 Dr Wood interviewed Mr Groth for 2Λ hours and administered tests to assess his intellectual functioning. Mr Groth's reading, spelling and arithmetic were all assessed at handicap level; his oral comprehension was at a significantly below average level as was his memory. Dr Wood concluded that he was of very limited intellectual ability; his IQ was 64 which placed him in the bottom 1% of the population; and he had difficulty understanding the implications of his actions. Dr Wood considered that Mr Groth's past diagnosis as suffering from a psychosis was probably incorrect and there was no evidence of the presence of a psychosis at the time of the interview. And given Mr Groth's marked deficit in learning and memory, Dr Wood considered it to be close to impossible for him to have ever understood how to use a video recorder or more complex electronic equipment. The possibility of his reading and following instructions supplied with appliances was unlikely.
41 In a meeting with ACCC officials and lawyers prior to his interview of Mr Groth, Dr Wood expressed the view then that "in a broad sense" on the basis of what he had been told of the ACCC case, Mr Groth was disabled. He agreed in cross-examination that he never changed that view.
42 In his notes of his interview with Mr Groth he noted that Mr Groth was a "fit looking man"; "fluent, clearly spoken". In this respect he described Mr Groth's presentation, in part, as follows:
"Mr Groth presented at the interview as a tall reasonably tidily clad individual. It is not known whether any special effort had been made by him or another person to ensure that he was dressed appropriately. The first and most obvious indication of his intellectual handicap on first meeting him was his speech. He spoke little, using only the most basic words."
43 In cross-examination he confirmed that the reference in his notes to his first impression of Mr Groth's speaking abilities was that he was "fluent, clearly spoken".
44 In re-examination he gave the following answers upon which the respondents place considerable reliance:
"Did your impression change during your two and a half hours?---Yes, it did.
In what way?---He is not fluent in that sense. His speech was easily β I could understand it clearly, but he was certainly not fluent in that the amount of information he provided was limited. On formal testing of his fluency, as described before, he is extremely limited in actually generation of β spontaneous generation of words.
Are you able to estimate how far into the two and a half hours was it when your first impression changed?---About 35 to 40 minutes."
45 Dr Wood also conceded in cross-examination that, when he read Professor Goldney's report he changed his view on whether Mr Groth suffered from schizophrenia. Nonetheless he said that if he had known this at the time, it would not have changed his opinion as to Mr Groth's functioning. Mr Groth was not demonstrating any symptoms at the time. His understanding was that Mr Groth was on Modecate at the time to keep himself stable. As noted below, this was incorrect.
46 Dr Wood agreed that a person with a disability could, by a course of conduct over life, compensate for, or tend to hide, the disability. However, he did not think Mr Groth's history demonstrated insight into his own behaviour.
Professor Goldney
47 Professor Goldney's examination of Mr Groth took "probably" 1Λ hours. He did not test Mr Groth's cognitive functioning as that had been tested extensively by Dr Wood. His report noted that Mr Groth's conversation did not demonstrate any obvious thought disorder, and that he was able to conceal symptoms of his schizophrenic illness until late in the interview after rapport had been established.
48 The report reviewed past assessments that had been made of Mr Groth in specific clinical/psychological settings. It noted that even when accessed in a clinical situation, "there is a wide range of variation in Mr Groth's reported IQ". It was noted that in a number of general medical settings involving specialists, no comment was made on his intellectual ability, suggesting he "could make reasoned decisions about his own health and give permission for surgery". Professor Goldney stated that the general medical setting examples indicated to him β
"β¦ at times Mr Groth was well able to present himself in a manner which did not immediately suggest that he was markedly intellectually disabled."
He considered there was convincing evidence of Mr Groth having a schizophrenic illness along with his "borderline" intellectual retardation.
49 Turning to Dr Wood's report, Professor Goldney indicated that it did not give due consideration to Mr Groth's psychotic illnesses: "[t]his is probably because of Mr Groth's capacity to conceal symptoms". Contrary to Dr Wood's view of how Mr Groth presented, Professor Goldney considered he presented well in the interview situation and "it was not until quite searching questions were asked that the extent of his limitations became apparent".
50 Professor Goldney went on to note that Dr Wood indicated that Mr Groth "spoke little, using only the most basic words". He commented that "that was neither my assessment of his speech at interview, nor my interpretation of his detailed responses in the [268 page]transcript" of an interview of Mr Groth by the ACCC with which he had been supplied.
51 The Professor's final comment on the Wood report was that Dr Wood:
"β¦ has not considered sufficiently the context in which assessments are made. Previously I have referred to the fact that when Mr Groth was assessed in a general medical setting there was minimal reference to his intellectual capacity. Indeed, even when he had been assessed in a psychiatric/psychological setting there had been a wide difference of opinion in regard to his intellectual capacity. A psychologist and/or psychiatrist is in an enviable position of being able to ask questions of a patient/client, questions which would not be appropriate for other persons in the community to ask."
52 The report returned to the importance of the context in which an assessment occurred. Having noted what had earlier been said on this matter, the report went on:
"Extending the contextual argument further, consider the situation of a shop assistant and the shop assistant's assessment of a person. A shop assistant is not in a position to make detailed enquiry about a person's cognitive or mental state functioning. Indeed, this is not expected of such a person. Furthermore, even if there were concerns about the capacity of a person, it would require a very considerable degree of cautious judgment in terms of pursuing the matter, lest offence be given or the shopper feel discriminated against."
53 Professor Goldney mistakenly assumed that Dr Wood did not assign a specific IQ figure for Mr Groth (it was 64). He interpreted Dr Wood's assessment to delineate a person of borderline intellectual ability with an IQ of 75 to 80. He previously had expressed his own view that (i) Mr Groth's degree of intellectual retardation was "probably of the borderline degree"; and (ii) β
"Mr Groth has been able to present in a relatively unremarkable manner. He does not have obvious behavioural manifestations of disorder and he is able to participate in conversation in quite an engaging manner. Thus I consider that his intellectual retardation is in itself not particularly obvious, but when his schizophrenic illness is more apparent, then the combination of disorders would make him more liable to engage in activity which would bring his abnormal behaviour to attention."
54 In giving evidence in chief, Professor Goldney indicated that Health Insurance Commission records did not disclose that Mr Groth had been provided with anti-psychotic medication after 1996. He also indicated that Mr Groth's illness, if not active at the time of Dr Wood's tests, may have had very little effect on Mr Groth's performance, but there may have been "subtle cognitive disturbances". Nonetheless he accepted in cross-examination that the symptoms of active schizophrenia are not necessarily able to be observed.
Mr Groth, Mrs Vickers and Bernie Wood
55 The evidence of Mr Groth, Mrs Vickers and Mr Wood is that Mr Groth had significant reading difficulties. Mr Groth stated he could "only read a little bit"; he did not read Radio Rentals documents before signing them; and he was not able to read letters he received in Sydney from Radio Rentals in 2002 and that Bernie Wood read them to him (this was confirmed by Mr Wood).
56 Mr Groth's own evidence on how he paid phone and electricity bills in cash exemplified his inability to do simple arithmetical calculations. He indicated he simply gave money to the person he was paying at the Post Office who would take out the money for the bills and would give him the change. He said he was not able to count the change and he hoped the person he was dealing with was honest. He also gave evidence that he did not know in dollar terms how much of his pension was going to Radio Rentals and he never worked out how much was left over. He equally indicated when he first went to Radio Rentals he did not think about what he could afford.
57 The evidence given by Mr Groth, confirmed in substance by that of Mrs Vickers and Bernie Wood, was that he had a quite limited ability to operate ordinary machines and appliances of any complexity. He was unable to operate ATM machines; he returned the first microwave he rented after three days as he was unable to use it; and he could not use a number of the functions of VCRs he rented.
58 Finally, there is evidence that he was suggestible. He purchased a "wireless" and a fan at the suggestion of a man he was boarding with; he accepted the choices of appliance proposed by Radio Rentals sales staff; he obtained his Harris Scarfe card at the suggestion of a person he boarded with; and after his neighbour told him about Radio Rentals' direct debit system and how to arrange the service, he did "the same thing".
59 I would interpolate at this point that the above evidence, so far as it goes, provides some level of support for Dr Wood's conclusions about Mr Groth's reading and arithmetical capacities.
The Radio Rentals Personnel
60 I will defer consideration of the evidence of these witnesses as to how Mr Groth presented to them until I outline the sequence of dealings they had respectively with Mr Groth.
RADIO RENTALS AND WALKER STORES
61 The following accounts of the businesses and general practices of the two companies are drawn primarily from the affidavits of the Radio Rentals personnel who gave evidence and which is prΓ©cised in the respondents' closing address (at par 67 ff). The description of procedures followed in entering into a rental/leasing agreement is intended to provide some context for what later follows. It does not embody any finding of fact as to the actual practices and procedures followed in respect of any individual agreement that is disputed in this proceeding. Neither does it necessarily reflect the appreciation of those practices and procedures of all of the Radio Rentals employees who dealt with Mr Groth when a rental agreement was entered into.
62 Radio Rentals has been operating in South Australia for 50 years and is the largest electrical retailer in the State. It also has agencies in New South Wales, Victoria, Queensland, Western Australia and the Northern Territory. It offers a number of methods by which customers may pay for products: (i) payment in cash; (ii) agreements to rent products with the opportunity to make an offer to acquire the product at the end of the rental term; and (iii) loan agreements with various interest rates.
63 The company maintains a call centre which has two departments, Finance and Service, having separate numbers. As will be seen, calls made to Radio Rentals by Mr Groth assume some significance in the ACCC's case. It claims he made 329 calls to Radio Rentals between February 1998 and November 2001. The Finance Department call centre was usually staffed by 7 to 10 personnel who took calls from customers related to their accounts. The call centre personnel log the customer's inquiry in Radio Rentals' system ("the RR system"). That system maintained a separate credit history for each account held with it by a customer. Considerable reliance has been placed on Mr Groth's credit histories in this matter.
64 The Service Department call centre was generally staffed by 6 to 8 people who dealt with customer calls in relation to products said to be faulty or requiring a service. The call information was logged into the RR system for the Service Department. In the period 1996 to 2002, Radio Rentals had 40 to 45 service technicians servicing both white and brown goods. A service facility was provided (i) for products that were the subject of rental agreements free of charge; (ii) pursuant to service agreements with Radio Rentals for maintenance and repair for particular customer owned products; and (iii) for cash-on-delivery work otherwise provided to a customer. Service calls were instigated by calls to the Service call centre. Service technicians received job sheets the evening before a particular job was to be undertaken. As will be seen, Mr Groth made regular use of service technicians, three of whom have given evidence.
65 Turning to the rental and loan processes, where a customer wished to obtain a product by way of a rental or loan agreement, the sales personnel would complete an application for credit (otherwise known as a "confidential") on the basis of information provided by the customer. In the period 1996 to 1 November 1998 applications for credit were prepared manually. The salesperson would take the customer to his or her desk located in an area adjacent to the shop floor and obtain from the customer information to fill in a pre-printed form which required, among other things: (i) the customer's name and identification; (ii) the customer's address, for how long the customer had been at the address and whether the customer owned the property or was renting or boarding; (iii) the customer's previous address; (iv) employment details or source of income, family details, other relatives and friends and credit references; and (v) details of monthly expenditure including rent, car expenses, living expenses, monthly income and any other credit. I will refer later to particular aspects of the credit application form.
66 Once completed, the manual credit application was faxed from the particular retail store to Radio Rentals' head office. The Acceptance Department would then review the application applying a manual score card system. The score card went through various criteria for which points were allotted. These criteria included ratings for "Current Customer", "CRAA Assessment", "Residential Stability" and "Employment". I would note that the points able to be scored by current customers with good ratings were numerically much greater than those able to be scored under any of the other criteria. If as a result of the application of the score card system a customer got less than 24 points the application would be rejected. Middle range points of 25 to 34 would require further investigation and a review of the application by a manager. Points above 35 would result in an approval of the application. This process generally took between 30 minutes and an hour according to one of the sales personnel who gave evidence. On about 1 November 1998 the credit application system became automated. Thereafter the customer's details were entered directly on-screen and the application was assessed electronically. Once transmitted to credit approval, the computer system applied an automated score card to the application and produced an automatic approval, review recommendation, or a decline advice depending on the points score attributed to it. If Radio Rentals had approved another application within the previous six months, the system would automatically flag the new application for review in which case it was assessed manually.
67 Once the application for credit was approved by the acceptance department the sales personnel would prepare a rental or loan contract. I would interpolate that the standard terms and conditions of each are lengthy and complex and would not invite the close scrutiny of an ordinary purchaser. It is said by sales staff who gave evidence that as a matter of standard practice they would go through the terms and conditions of either the rental or loan agreement, but not every provision, and would highlight the terms of the agreement including:
(a) the cost of the product;
(b) the term of the rental or loan agreement;
(c) the monthly repayment and due date;
(d) the payment obligations;
(e) the residual value of the product at the end of the rental term;
(f) the ability to make an offer to purchase products at the end of the rental term;
(g) the ability to upgrade products by returning existing products and the qualifying period to do so;
(h) that the equipment would be installed by Radio Rentals personnel at no additional charge;
(i) the service facility whereby Radio Rentals service personnel would attend to effect any repairs of the product during the rental term at no additional charge; and
(j) any warranty applicable to the product.
68 Walker Stores, as earlier noted, was not a retailer. Its business was leasing electrical goods. It traded under the business names in Rent and Homes. Radio Rentals was its agent in South Australia from November 2001.
MR GROTH'S DEALINGS WITH RADIO RENTALS (AND WALKER STORES)
69 Because of the scope and complexity of the issues raised here, it is necessary to break down Mr Groth's dealings with Radio Rentals into the following discrete categories: (1) dealings with sales personnel; (2) credit applications; (3) service provision by Radio Rentals; (4) telephone calls to Radio Rentals.
70 Before dealing with these individually, there are a number of background matters to which I need refer. First, the first four rental agreements were entered into at Radio Rentals' Rundle Mall store, the balance at its Elizabeth store. To get to the Elizabeth store, Mr Groth had to take a bus into Adelaide and then a train to Elizabeth which is about 25 kilometres north east of the city. His evidence is that, on his first trip to Elizabeth, his cousin came with him.
71 Secondly, as will be seen, Mr Groth returned a number of appliances shortly prior to the expiry of the rental period and rented new like appliances in their stead. This facility (described by Radio Rentals as "upgrading") was provided for in the rental agreements and its use was "not uncommon at all" according to Tony Karutz, a Radio Rentals salesman.
72 Thirdly, because I will be making reference to how Radio Rentals employees perceived Mr Groth in light of his presentation, voice and conduct, I should at this point foreshadow my own view of how he presented as a witness. I will later discuss this matter at greater length in the context of considering the evidence generally on how he presented. Mr Groth was in the witness box for over a day. While somewhat slow of speech, he was fluent and clear in what he said. His language was not that of an educated person but neither was it childlike. In some matters he displayed a considerable memory. While he gave evidence of his own limitations, I do not consider that he obviously presented as being mentally retarded by virtue of his appearance, speech or manner of communication.
73 Fourthly, the ACCC has annexed five schedules to the Further Amended Statement of Claim which deal, variously, with the particulars of Mr Groth's agreements with the respondents (Schedule A), particulars of his cumulative liability to the respondents on entry into each of the agreements (Schedule B), particulars of financial hardship based on his monthly income and monthly expenses (Schedule C), particulars of amounts actually paid on six particular agreements (Schedule D), and both a table of actual payments made by Mr Groth to the respondents each month and a table of financial hardship resulting from those actual payments (Schedule E). Though these Schedules have been of some assistance given both the number of agreements in question in this proceeding and the period of time to be considered, I have not reproduced them in these reasons. They are of considerable length and in important respects not self-explanatory. In these reasons I have used some generalisations drawn from them.
74 While some aspects of these schedules are contentious (particularly Schedule C), they provide the underpinning of the ACCC's case against Radio Rentals insofar as it relies upon alleged financial hardship suffered by Mr Groth in consequence of his ongoing liabilities to Radio Rentals. The figures used in the Schedules have been drawn from documentary evidence insofar as these relate to Mr Groth's pension, rent, and actual liability to, and actual payments made to, Radio Rentals from time to time. A purpose of Schedule E in particular, when considered with Schedule C, is to demonstrate that Mr Groth regularly paid Radio Rentals more in a given month than was his actual rental liability for that month.
(i) The agreements
75 Before referring to the evidence on a number of the agreements individually, I should refer to the history and nature of his rental and loan agreements. The service agreements, insofar as they give rise to dispute, are dealt with separately later in these reasons: see "Ancillary Claims"; although some reference will be made to them below. The following is based on Exhibit 9 and is a prΓ©cise of the history set out in the respondents' closing address.
(a) Transaction history
76 On 22 November 1996 Mr Groth entered into a rental agreement for both a Fisher & Paykel refrigerator and a Fisher & Paykel washing machine ("the first agreement"). On 3 November 1998 Mr Groth returned that refrigerator (as he was entitled to do under the rental agreement at no additional cost) and replaced it with a Maytag refrigerator of similar capacity ("the seventh agreement"). On or around 4 April 2002 Mr Groth returned that refrigerator and replaced it with a Fisher & Paykel refrigerator of similar capacity ("the thirty-third agreement"). This agreement was terminated on or about 25 November 2002 and the refrigerator returned to Radio Rentals in the context of the settlement. Mr Groth paid the instalments due under these agreements either on time or in advance. On 14 April 1999 Mr Groth offered to purchase the Fisher and Paykel washing machine (as he was entitled to do under the agreement) and Radio Rentals accepted the offer. On 13 September 2001 Mr Groth entered into a rental agreement for a new Fisher & Paykel washing machine ("the twenty-sixth agreement"). Mr Groth did not trade in his previous washing machine on the new washing machine. The new agreement was terminated on or about 25 November 2002 and the washing machine returned in the context of the settlement. Mr Groth paid the instalments due under these agreements either on time or in advance.
77 On 5 December 1996 Mr Groth entered into a rental agreement for a Phillips colour television ("the second agreement"). On 17 March 1999 Mr Groth offered to purchase the television and the Radio Rentals Group accepted the offer.
78 On 19 February 1997 Mr Groth entered into a rental agreement for a hi-fi stereo video cassette recorder (VCR) ("the third agreement"). On 14 October 1999 Mr Groth offered to purchase the VCR and Radio Rentals accepted that offer. Mr Groth also entered into a rental agreement for a Sony hi-fi stereo video cassette recorder on 24 April 2001 ("the twenty-fourth agreement"). This agreement was also terminated on or about 25 November 2002 and the VCR returned to the Radio Rentals Group. Mr Groth paid the instalments due under these agreements either on time or in advance.
79 On 28 May 1997 Mr Groth entered into a rental agreement for a microwave oven ("the fourth agreement"). Mr Groth returned the microwave three days later on 31 May 1997, advising that he was unhappy with its functions. Mr Groth paid three months' rental payments, that is about $72 (the fee for terminating the agreement before the end of the Minimum Rental Term). On 11 February 1998 Mr Groth entered into a rental agreement for a microwave oven ("the fifth agreement"). On 6 October 1999 Mr Groth offered to purchase the microwave and the offer was accepted. On 28 October 1999 Mr Groth entered into a rental agreement for another microwave ("the fifteenth agreement"). On or about 2 November 2000 Mr Groth offered to purchase this microwave and Radio Rentals accepted that offer.
80 On 1 September 1998 Mr Groth entered into a loan agreement for a Vax barrel vacuum cleaner ("the sixth agreement"). Mr Groth paid the loan in full on 25 February 2000. Mr Groth paid the instalments due under this loan either on time or in advance.
81 On 23 February 1999 Mr Groth entered into a new rental agreement for a Philips 48β51cm mono colour television and cabinet ("the eighth agreement"). On 3 November 2000 Mr Groth traded in or exchanged that television (as he was entitled to do under his rental agreement) and replaced it with a Philips 62-63cm colour television ("the twentieth agreement"). At the same time Mr Groth offered to purchase the cabinet and Radio Rentals accepted that offer. This agreement was terminated on or about 25 November 2002 and the television returned in the context of the settlement of claims by Mr Groth against the Radio Rentals Group. Mr Groth also entered into a rental agreement for a Philips 62-63cm colour stereo television on 7 April 2000 ("the sixteenth agreement"). This agreement was also terminated on or about 25 November 2002 and the television returned. Mr Groth paid the instalments due under these agreements either on time or in advance save for an occasion in late 2002.
82 On 14 April 1999 Mr Groth entered into a rental agreement for a Fisher & Paykel clothes dryer ("the tenth agreement"). On 18 September 2000 Mr Groth offered to purchase the dryer and Radio Rentals accepted that offer.
83 On 28 April 1999 Mr Groth entered into a rental agreement for a Sony hi-fi stereo shelf system ("the twelfth agreement"). On 23 March 2001 Mr Groth returned that stereo and replaced it with a Sony mini hi-fi system ("the twenty-third agreement"). That agreement was terminated on or about 25 November 2002 and the stereo returned in the context of the settlement with Radio Rentals. Mr Groth paid the instalments due under these agreements either on time or in advance.
84 On 2 August 2001 Mr Groth entered into a loan agreement for a Dimplex heater ("the twenty-fifth agreement"). Mr Groth made frequent repayments toward this loan. However, the account fell into arrears in mid 2002. Unlike his other accounts, Mr Groth fell behind with some payments on this account. Given the conduct of his other accounts it is not apparent why this was so. This loan agreement was subsequently terminated in the context of the settlement of the claims made by Mr Groth against Radio Rentals, and Mr Groth returned the heater.
85 On 22 November 2001 Mr Groth entered into a rental agreement for a Sony Mavica digital still camera ("the thirty-first agreement"). This agreement was terminated on or about 25 November 2002 and the camera returned in the context of the settlement. Mr Groth paid the instalments sue under the inRent agreement either on time or in advance.
86 On 14 February 2002 Mr Groth entered into a rental agreement for a Pioneer DVD/VCD/CD player ("the thirty-second agreement"). This agreement was terminated on or about 25 November 2002 and the DVD player returned in the context of the settlement. Mr Groth paid the instalments due under the agreement either on time or in advance.
87 Apart from the fifteen rental and two loan agreements, Mr Groth entered into nineteen annual service agreements with Radio Rentals. This figure includes in a number of cases a sequence of successive agreements (or "renewals") in respect of the same appliance. Each agreement required Mr Groth to make a monthly payment of between $8.00 and $10.00. They were in respect of goods which he previously had rented and had subsequently purchased.
88 To exemplify the cumulative effect of the above sequence of rental and other agreements on Mr Groth's relationship with the respondents, from 28 October 1999 (the date the 15th Agreement was entered into) he had at least nine agreements with the respondents. Towards the end of the relevant period (from 14 February 2002 to November 2002) Mr Groth had 13 current agreements with the respondents pursuant to which he was required to make monthly payments.
89 This final matter to which I should refer relates to Mr Groth's payments to the respondents under the various agreements. He generally made fortnightly payments save that from about April 2001 his rental liabilities were directly debited from his bank account. It is apparent from the transaction histories that Mr Groth regularly paid more β and on occasion significantly more β than he was required to pay under many of his various agreements. The consequence of this in the case of the rental agreements was, it seems, to accelerate their payment out at which time he had the option of offering to pay a residual amount to purchase the appliance in question. A number of appliances were so bought. In the case of the service agreements which he entered into after purchasing an appliance, the effect of overpayment was to trigger a payment in full notice in Radio Rentals' system which in turn led either to the raising of a new service agreement if there was a credit balance on the paid up agreement, or to an offer being made to enter into a new annual service contract and, if a further payment was received, to the raising of an agreement.
(b) Specific transactions
8890 By way of preface to what follows, I should indicate that six Radio Rentals service personnel gave evidence. Three had no recollection of Mr Groth at all and could only say that in dealing with him they would have followed their standard practices in explaining the agreement. The other three had varying recollections, the most explicit being Tony Karutz and David Haywood who were involved respectively with the last two of the rental agreements entered into by Mr Groth. Mr Karutz was the salesperson for nine of the agreements, though his evidence is that he recalls serving him on four or five occasions.
8991 To the extent that these witnesses rely simply upon their own practices in explaining agreements and in filling out credit applications, I treat that evidence with some circumspection given that, as several acknowledged, Mr Groth was a regular customer and, at least from the time that credit applications were automated, they had on-screen access to what purported to be previous details (financial and otherwise) of Mr Groth. There is, in my view, a real likelihood that on occasion the explanations given as to terms and, for that matter, the inquiries made in relation to the credit application were more relaxed than may have been the case with a person without a rental history with the company.
92 I should also indicate that, while Mr Groth demonstrated a considerable memory of his dealings with Radio Rentals, I consider aspects of his evidence unreliable particularly in relation to the explanation given him of the rental agreements. I equally place little weight on the alleged lack of discussion both of his existing liability to Radio Rentals, or its level, at the time of some of the agreements and of whether he could afford the agreement he was then entering into. Given the function the sales personnel saw themselves as performing β they did not give credit approvals β I do not consider the context of the sales floor to be one where such discussion could have been expected as of course.
9193 Distinctly, there is some evidence which I accept that Elizabeth is a "lower demographic" area; that, to use Mr Haywood's words "[a] lot of the customers at the Elizabeth store were on pensions"; and again to quote Mr Haywood, "[i]t is not unusual for people to deck out their whole house with appliances from [Radio Rentals] and to spend more than $300 per month". I should also note, because the point is made by some of the salespersons who have been called, that Mr Groth used his pension card regularly at Radio Rentals when providing identification. The card did not in express terms identify him as having a disability pension although it appears to have had the annotation "DSP" on its reverse side.
9294 Finally, in considering the evidence of Radio Rentals' personnel, the respondents emphasise that none who had a recollection of Mr Groth were challenged in cross-examination as to their evidence that they did not know that he was intellectually disabled or unable to understand his rights and obligations, and that it was not put to the salespersons that they took unfair advantage of him.
9395 The specific transactions now to be considered are drawn primarily (but not exclusively) from those emphasised in the ACCC's closing address (pars 55 to 70).
(i) First agreement β First Refrigerator and Washing Machine
9496 It was Mr Groth's evidence that, as he had just moved into his Novar Gardens unit, he needed a fridge and washing machine. When he went to Radio Rentals he told this to the salesperson (whom he identified as "Barry" (Barry Silverman)). He took the washing machine which he was told was one that was "real easy to operate". Mr Silverman has no recollection at all of dealing with Mr Groth. Mr Groth's evidence is that he did not read any document before he signed and he could not recall if Barry explained the terms and conditions to him.
(ii) Second agreement β First Television
9597 It was Mr Groth's evidence in chief that he did not choose the first TV but that it was selected for him and was already packed up ready to be delivered when he came in to the store in response to a phone call from Radio Rentals. He said he had previously told "Larry" (Larry Fanto) that he was only looking for a TV at the time and he did not really want one yet. He only took it because "[t]hey had it all ready". In cross-examination, he indicated he rang Radio Rentals concerning a television; before he got the above phone call from Larry he had been into Radio Rentals looking at televisions; and he might then have spoken to Larry though he could not remember. Mr Groth also indicated that he had no trouble with the television when it was set up in his flat: "[t]hey showed me how to operate it". It later kept on breaking down all the time.
9698 Mr Fanto, who also dealt with Mr Groth for the third and fourth agreements, had no recollection of Mr Groth. He was cross-examined on the credit applications made by Mr Groth. He indicated that the financial information as to expenses etc were supplied by the customer. He indicated that it was not his practice to query an "unrealistically low amount for living expenses" (for the second agreement it was $160 per month). Equally he said that if the figures given by the customer as to existing commitments to Radio Rentals were wrong, they were the figures given and it was not his job to check them. He said in re-examination that such checking was not the role of sales staff. The acceptance department did the checking.
(iii) Third agreement β First VCR
9799 All that need be said of this dealing is that Mr Groth remembered the salesman was Larry. His evidence is that he could only work the video function. All the other things were "too complicated". He could not even set the clock. It was Mr Groth who selected the VCR.
(iv) Fourth agreement β First Microwave
98100 This microwave was returned by Mr Groth's cousin three days after it was purchased. Mr Groth's evidence was that he could not operate it. He had previously indicated to Radio Rentals he wanted to return it as he was not happy with its function. He said in evidence that he was not aware that if he returned it before the end of the minimum rental period, he would have to pay three months rental. Radio Rentals' credit history of this agreement noted both Mr Groth's reason for wanting to return the microwave and that a Radio Rentals employee offered to show him how to use it properly but the customer just wanted to return it and was "quite happy" to pay the three months rental for it. Mr Groth confirmed the accuracy of what was recorded.
99101 Mr Groth rented a second and less complex microwave ("just an ordinary microwave") in February 1998.
(v) Sixth agreement β Loan agreement for Vacuum Cleaner
100102 The salesperson who dealt with Mr Groth for this agreement has not been identified in evidence. Mr Groth's evidence is that when he entered into it, the only explanation of a loan agreement was that it was the same as a rental agreement. He understood "that a loan was only having a loan of it and when you were finished you had to give it back". In re-examination he accepted that, at what I would infer was a later date, he rang up Radio Rentals and that they told him what a loan agreement was.
(vi) Eighth agreement β Second Television
101103 Mr Neville Sparks was the salesperson who dealt with Mr Groth for this agreement. He has no recall at all of dealing with Mr Groth. He was cross-examined on the credit application for this agreement. Its similarities with that for the seventh agreement are said by the applicant to be such as to give rise to the inference that the eighth was an adaptation of the seventh. The existing Radio Rentals liability for the eighth is said to be understated by $57 per month.
102104 Mr Sparks was also cross-examined on the figure included for living expenses in the credit application for $120.00 per month (or $27.69 a week). He said they did query low figures but they could only go on what they are told : "[t]he application approval system is not me".
(vii) Tenth Agreement β Dryer
103105 All that needs to be noted of this rental is that Mr Groth chose the clothes dryer himself. The reason he gave for renting it was because at Novar Gardens one clothesline had to be shared by eight people.
(viii) Twelfth agreement β First Hi-Fi
104106 This was the first agreement in which Tony Karutz was the salesperson. He could not recall selling the Hi-Fi to Mr Groth. His evidence is that he cannot recall when he first came to remember Mr Groth by sight, but he did recall dealing with him on four or five occasions (not including the present). This, nonetheless, is an appropriate point at which to outline Mr Karutz's impressions of Mr Groth as recorded in his affidavit:
"25. Mr Groth was always very pleasant and polite. Mr Groth's presentation did not change over the period I was dealing with him. In my initial dealings with Mr Groth I noted nothing out of the ordinary about him about which I have any recollection. After dealing with Mr Groth several times I noted from speaking with him that I found he was a little slow, but I don't mean that he appeared to be intellectually disabled, just that his speech was a little slow. I recall that Mr Groth always seemed to know what product he wanted when he came to the store."
105107 Having indicated that Mr Groth asked for him by name on most occasions; phoned him in advance before coming to the store on some occasions; knew on one occasion the brand he wanted (Fisher & Paykel); questioned him on occasion about products he was looking at (for example how it worked) β Mr Karutz swore:
"31. I did not suspect or know that Mr Groth was intellectually disabled. The fact he was a pensioner was not a cause for concern as it was not, in my experience, unusual. I deal with pensioners regularly, particularly at the Elizabeth store. β¦
32. I never had reason to doubt that Mr Groth knew what he was buying. I cannot recall Mr Groth ever suggesting that anyone might need to help him work things out or suggesting this was necessary.
33. β¦ Mr Groth had been dealing with [Radio Rentals] for quite a few years and I remember that his accounts were in good shape. I recall that his accounts were never in arrears. I did not have reason to think that he would have trouble making his payments. In my observation, Mr Groth was an excellent customer in that he seemed to have no problems paying and paying on time.
34. I obtain the relevant information from the customer but it is not up to me to judge what an acceptable credit level is. It is totally up to the credit acceptance department to determine this. I did not ever look at Mr Groth's monthly credit with [Radio Rentals] and think to myself 'oh gee that's high β I don't believe he has got that much'. I never had a reason to. He had been dealing with [Radio Rentals] for a number of years, and by reference to his account history, he always paid on time and so there was never any reason to doubt him."
106108 Returning to the Hi-Fi agreement, Mr Groth's evidence is that he indicated to the salesperson he wanted a hi-fi but not one that also played records as he did not have any.
(ix) Sixteenth agreement β Third Television
107109 Mr Groth said the reason he bought this larger television was because the "other TV played up β¦ and my eyes weren't what you'd call real good, so I thought if I got a bigger screen I could see it better". He said as well of this agreement, as he did of some number of others, that no mention was made of the money he was already paying to Radio Rentals.
(x) Twentieth agreement β Fourth Television
108110 Tony Karutz, the salesperson for this agreement, had no recollection of it. It was entered into six months after the sixteenth agreement for the third television. The reason Mr Groth gave for renting this television is that it was for his bedroom so he could watch it in bed. This agreement is contentious for the reason that two separate credit applications were filled out for it. The first (Exhibit I) was for a thirty-six month term with a monthly repayment rate of $60. Mr Groth's monthly income is incorrectly stated to be $1,733.33 (which is double the correct amount) and his living expenses are stated to be $433.33. The same figures appear in the credit application for the twenty-third agreement. Again Mr Karutz was the salesperson.
109111 The second credit application for the twentieth agreement which was later approved was for 60 months. The original of that application could not be located. A copy of the application that was put in evidence was from a printout made after Mr Groth's settlement with Radio Rentals. It shows the same incorrect figure for income. The living expenses figure is $316 which was the default figure as at the time of the printout.
110112 The ACCC has sought to make much of the two applications and the apparent inconsistencies between them. Radio Rentals accepts the inaccuracy in the income figures but it also questions the accuracy of the living expenses of $443.33 in the Exhibit I application. What is notable about that figure is that it departs significantly from the living expenses figure of $120.00 that had characteristically been inserted in Mr Groth's previous applications. After the twenty-third agreement (the next rental agreement) where the figures for income and living expenses appear to have been transposed, living expenses then revert to what appear to be default figures commencing as $300.00. The evidence of Ms Goode, a Radio Rentals employee, is that the figure of $433.33 "would have been the calculation in the default system" at the time the application was done. However, her evidence on that system is that it was not introduced until September 2001. The twentieth agreement was entered into on 3 November 2000.
(xi) Twenty-fourth agreement β Second VCR
111113 The salesperson for this agreement was George Haffner. He remembered dealing with Mr Groth having previously spoken to him on the phone about his buying a VCR. Mr Haffner's evidence is that when Mr Groth called he knew what he wanted. He asked questions and seemed to have quite good knowledge about the product. When Mr Groth came to the store he asked for Mr Haffner. In his affidavit Mr Haffner states:
"I recall that Mr Groth was neatly dressed. I do not recall that he had any physical disability or that there was anything unusual that stood out about him. He appeared normal and nothing about his speech or the way he spoke stood out to me."
Mr Haffner also stated that he recalled applying his usual practice in relation both to the credit application and the rental agreement: in filling out a credit application he would not question the income or living expenses provided by the customer; he would explain certain things in the rental agreement, but would go into less detail with existing customers who "generally have a good understanding of how the rental system works". He said that Mr Groth told him he was an existing Radio Rentals customer and "said words to the effect that he understood what I told him".
112114 In cross-examination he indicated he could not remember in any detail what he went through with Mr Groth. He did not discuss whether Mr Groth could afford to enter into the agreement. Mr Groth gave evidence to the same effect. As Mr Haffner put it: "[t]hat's where our acceptance department probably comes into it".
(xii) Twenty-fifth agreement β Heater
113115 Mr Karutz was again the salesman. He could not recall the details of the transaction. Mr Groth's evidence is that he was told that a heater could not be rented, it had to be bought (Mr Karutz confirmed that such was the case). He said that it was not explained to him that he would be paying interest or how much he would be paying under the loan agreement. The reason he gave the salesperson (he could not remember it was Mr Karutz) for wanting the heater is that he had a small one at home "that wasn't doing any good". He saw the bigger one there and took it. Mr Groth made no use of the heater: "I found out it was very dear on power".
(xiii) Twenty-sixth agreement β Second Washing Machine
114116 The salesman was Mr Karutz who recalled this dealing. His evidence is that Mr Groth called him before coming to the store and said he wanted a new Fisher & Paykel washer. While not confirming the phone call Mr Groth indicated he did ask about a Fisher & Paykel machine "because they're easier to operate" and he did indicate that he said he wanted "a machine that would hold everything instead of doing all the separate washes all the time". He rented the biggest machine.
(xiv) Thirty-first agreement β Digital Camera
115117 Though Mr Karutz was the salesman for this agreement, Mr Groth said he did not know the person he was talking to at the store. He said he went to the store and was looking at cameras. He told the salesperson "I like cameras" and was told he could rent cameras as well. The salesperson showed him a digital camera and said:
"β¦ you can take photos and put them on the β through the β computers, I think. I can't be quite sure but I think that's what he might have meant."
Mr Groth said in evidence-in-chief he was not able to use a digital camera; he probably did not want one; it was explained to him that under an "inRent agreement" for the camera he would not have to pay rent on the day of the agreement but at a later date; and he never used the camera as he did not know how to.
(xv) Thirty-second agreement β DVD/VCD/CD
116118 The salesman for this agreement in February 2002 (the second last of the rental agreements) was David Haywood. His evidence is that he received a telephone call from Mr Groth inquiring what DVD brands he recommended and he gave him information about a particular model. Mr Groth came to the store and asked for him. Mr Haywood explained general features of DVD players to him; he showed several DVDs to Mr Groth but did not go through their features; he recommended the model he had mentioned on the phone; he explained how to work it; Mr Groth was not confused and understood what he was explaining; and Mr Groth took that machine. Of Mr Groth, the affidavit states:
"24. I recall Mr Groth used a Department of Social Security pension card for identification. I photocopied the front and back of the card. The fact that he was on a pension did not concern or alarm me. A lot of the customers at the Elizabeth store were on pensions.
25. Mr Groth wasn't scruffy or badly presented. He was neatly and casually dressed and nothing stood out about him. He had a fairly normal manner for a man in his late 50's or early 60's. I do not recall him displaying any physical disability such as a limp.
26. I didn't notice anything unusual about the way Mr Groth spoke particularly in the context of some of the customers I had at Elizabeth.
β¦
31. To my observation, Mr Groth seemed to understand what I was saying to him about the product and the obligations that arose under the rental contract."
117119 As to Mr Groth's credit application, he stated that when he brought it up on the screen it would have contained the information from the most recent agreement which he then updated with Mr Groth. The living expenses figure of $303.00 was generated by the RR system. The monthly surplus figure of $173.00 did not raise any alarm bells with him and he did not consider it at the time. As he said in his affidavit: "I had no role in the credit approval process".
(ii) The credit applications
118120 I should indicate that the ACCC relies upon the credit applications for two purposes β first, as evidence of how Mr Groth presented to the relevant salesman on the day each particular application was completed; and secondly as evidence of the respondents' records from which they knew or ought to have known of financial hardship to Mr Groth.
119121 By way of background it is appropriate that I make some reference to Mr Groth's actual finances over the period of his dealings with Radio Rentals. I have already indicated that from December 1996 until December 2002 Mr Groth's fortnightly pension progressed from $351.80 per fortnight to $524.00 per fortnight. Though there has been some dispute as to whether he was also in receipt of rent assistance during this period, it seems clear from the terms of the Social Security Act 1991 (Cth)(ss 117, 1064(1), 1064-A1, 1064-D1 and 13 "Government rent") that he was not entitled to receive this benefit and there is no evidence that he did. It is the case that Mr Groth would annually, request and be paid, advance payments of his pension of $500.00 which he would repay in the course of the ensuing 12 months.
120122 The above, on the evidence, would seem to constitute the totality of Mr Groth's recurrent monetary receipts in the period of present relevance. He was, as a pensioner, also entitled to a number of concessions which included at least pharmaceutical benefits assistance and electricity and telephone concessions. According to calculations made by the ACCC (from Telstra and AGL invoices to Mr Groth) the monthly average of his phone and electricity payments was $32.00. His monthly rental payments to the South Australian Housing Trust ("SAHT") for his Novar Gardens unit progressed from $118.73 in late November 1996 to $153.83 in late September 2002. The rental payments were deducted by Centrelink from Mr Groth's pension and paid directly to SAHT, the balance of the pension being paid into his bank account. And as I have already indicated, his monthly rental liability to the respondents was, for the most part, in the range of 25 to 35 per cent of his monthly income from time to time.
121123 Turning to the credit applications, I have referred earlier to the information required to be provided in a credit application. In the period during which the credit application was filled out manually, the application form had at its top a box headed "MTHLY PAYMENT" into which the monthly rental for the appliance in question was to be written. Near the foot of the form appeared the following box:
MONTHLY EXPENDITURE Living Expenses $ MONTHLY NET INCOME $
Mortgage/Rent $ Existing RR Credit $ MONTHLY EXPENDITURE $
Car Expenses $ Other Credit $ MONTHLY SURPLUS $
After the application process was computerised the on-screen form again provided for the monthly payment to be stated near the head of the application. Towards its bottom, the following appeared:
FINANCIAL DETAILS
Mortgage/Rent Other Credit Repayments Monthly Income (Joint/Single)
β¦ β¦ β¦
Vehicle Expenses Existing RR Credit Monthly Expenditure
β¦ β¦ β¦
Living Expenses (Groceries) Proposed RR Credit Monthly Surplus
β¦ β¦ β¦
122124 I would note in passing that the ACCC's case places some importance on the amounts inserted for "living expenses" in Mr Groth's pre and post-computerised credit applications. While the evidence given by the salesmen as to the provenance of these figures was inconsistent I do not consider this to be of particular moment given that, for the most part, they had no independent recall of filling out the applications. What the evidence does suggest is that in some cases the sum inserted appears to have been carried forward from the previous credit application made by Mr Groth; in others, it appears to have been computer generated.
123125 The ACCC relies in particular on the sums inserted for living expenses in seven of the applications. In the second agreement it was $160 per month; in the seventh, eighth, tenth, twelfth, fifteenth and sixteenth, it was $120 per month.
124126 The ACCC also points to errors of calculation made in various (10) of the applications concerning the item "Existing RR Credit" (which was intended to record Mr Groth's existing monthly credit liability to Radio Rentals at the time of the application). It also points to 5 applications which contained incorrect information as to Mr Groth's income, the error on two occasions showing a monthly income about twice Mr Groth's actual income.
125127 I do not intend to reiterate the evidence of the salesmen concerning the filling out of the various applications, other than to indicate that I accept the evidence of some of them that it was not their function to determine what was an acceptable credit level for a customer.
126128 Ms Jodie Goode, the Finance Product Manager of Radio Rentals, gave evidence as to the credit application assessment procedures for the period relevant to this proceeding. From her affidavit, and from Radio Rentals' documentation tendered by the ACCC, it is apparent that from at least May 1997 a credit policy document applied to the assessment of credit applications. That policy contained a reference to the Uniform Consumer Credit Code 1996, the substance of which (as stated in the 1997 policy document) was that:
"In accordance with the requirement of the Consumer Credit Code 1996 the salesperson is required to ensure that the debtor fully understands the nature and implications of the transaction.
The Consumer Credit Code 1996 also requires that reasonable inquiry be made of the debtor at the time of entering into a contract, that the debtor is able to maintain payments in accordance with the terms of the contract, without causing substantial hardship."
127129 I note in passing that both Mr Haffner and Mr Karutz indicated in cross-examination that they were aware of the above requirements and that Mr Karutz accepted they were part of his obligations as a salesperson.
130 I have earlier described the procedures followed, and the scorecard system employed, in assessing credit applications. On each occasion in which Mr Groth made a credit application, it was granted. Ms Goode reviewed the records of Mr Groth's credit payment history over the period of his dealings with Radio Rentals and expressed the view that his history was "exemplary". She also gave evidence that she re-scored Mr Groth's applications for both the manual and automated scorecard periods prior to giving evidence. In all cases his approval score exceeded the minimum score for automatic approval. Ms Goode accepted that she did not have the actual figures available for the twentieth agreement and when she was later shown the Exhibit I version of the credit application that was made for that agreement, she accepted it was not one that would have been accepted automatically because it would not have reached the "minimum monthly surplus" figure that Radio Rentals set from time to time if its erroneous monthly income figure was halved to reflect what was Mr Groth's actual income.
130131 It was Radio Rentals' policy (at least from mid 1997 on the evidence) that one factor in the scorecard system was that an application had the "minimum monthly surplus as defined on the scorecard". The actual surplus was calculated from the figures provided by the customer for monthly income and monthly expenditure. If the customer had "insufficient surplus" the application was rejected.
131132 The minimum monthly surplus figure was one settled upon by Radio Rentals from time to time. No explanation was given of the basis of its calculation. From about September 2001 the possibility was removed of a person being able to reach the minimum monthly surplus by deflating his or her living expenses figure. According to Ms Goode, the company introduced its minimum default figure for living expenses at that time.
132133 The final matter I would note is that the ACCC sought to cross-examine Ms Goode on matters going to whether Radio Rentals had breached its own credit policies. This matter was not pleaded. It was not part of the case as I understood it or as the respondent had defended it. Radio Rentals' credit policies and approval processes were not attacked in the pleadings and evidence was not presented with that in mind. I did not permit the raising of these matters.
(iii) Service Provision to Mr Groth
133134 It is clear from the documentary evidence that over the years of his dealings with Radio Rentals Mr Groth made many calls for service of his appliances. It is equally clear from the evidence that the faults reported by Mr Groth were found, in the main, to be user and installation problems rather than significant faults in appliances as such.
134135 Three Radio Rentals service technicians who serviced goods at Mr Groth's unit gave evidence of their dealings with him. Jeffrey Smith, who attended Novar Gardens on thirteen service calls, indicated that he considered Mr Groth was always neatly dressed and he kept his unit tidy and clean; he was always polite and appreciated the effort made; he was a little slow in speech but not anything out of the ordinary; he was able to explain the problems he was experiencing; and he appeared to understand the explanations given him. Mr Smith considered that the calls made were not out of the ordinary and were similar to those made by "a lot of people". He was unaware from his dealings with, and observations of, Mr Groth that he had an intellectual disability or that, as alleged by the ACCC, he could not read and understand agreements or make worthwhile judgments in his own interests or that he was unable to afford the basic necessities of life.
135136 Mr John Richards gave evidence to like effect. He went to Novar Gardens on six occasions. He did not have to deal with a serious problem with an appliance. Mr Richards indicated that from the nature of the service calls he made, it was apparent that Mr Groth had difficulty setting clock timers and functions such as tuning channels. This was definitely not out of the ordinary. Calls of that type were very common in his experience and it is very typical to be called out for minor problems such as clock and timer issues. Mr Richards rejected the suggestion put to him in cross-examination that Mr Groth seemed childlike to him. He considered Mr Groth to be sincere, straight to the point; he was fairly precise; and he had no problem with him.
136137 The third technician, David Hardwick, had no specific recollection of Mr Groth though he recalled going to his unit on one occasion. It is unnecessary to comment further on his affidavit which is of little assistance to me.
137138 To anticipate my later finding I accept the evidence of the service technicians that they were unaware of Mr Groth's disability and its effects. Both Mr Smith and Mr Richards gave reasonably detailed accounts of their impressions of Mr Groth; they were not challenged on them; and I accept what they said.
(iv) Telephone Calls to Radio Rentals
138139 I have referred earlier to Radio Rentals' call centre and to its two departments, finance and service. The ACCC has tendered Telstra's records itemising local calls made by Mr Groth from his home telephone numbers over the period 26 November 1996 and 28 November 2001. In that period almost 330 calls were made to various Radio Rentals telephone numbers of which there were 10 during that time. The ACCC has prepared a monthly schedule of those calls which reveals that there were 12 months in which 15 or more such calls were made.
139140 The ACCC's contention is that this constituted an extraordinary number of calls which must have placed Radio Rentals on notice that Mr Groth was a person unable to operate the goods he was renting or was unable to manage his money. The respondents correctly point out that the above calls were directed primarily to five different Radio Rentals numbers β the Elizabeth store (54), Service and Repairs (53), Head Office (109), General Number (67) and Accounts and Deliveries (38) β and that some number of the calls had a duration of less than two minutes.
140141 Joanne Karutz from the Service department and Linda Lawrence from the Finance department gave evidence. They both could recall having spoken to Mr Groth on the telephone. Mrs Karutz gave evidence that everybody in the Service department was asked if they recalled speaking to Mr Groth. She did. Mrs Lawrence gave similar evidence in relation to the Finance department.
141142 Mrs Karutz' recollection related to a call regarding a refrigerator he was renting. Her affidavit detailed the course of that call and a return call she made, the details of which are unnecessary to be reproduced here. She described him as polite; he appeared to understand what she explained to him; and she did not recall Mr Groth having any difficulty with speech or anything unusual. She had no problems with him and he was not a customer that was talked about in the call centre for causing any problems. She did not know any of the matters about Mr Groth that are alleged by the ACCC.
142143 The service calls records of Radio Rentals show that 73 faults were reported by Mr Groth over the period December 1996 to May 2002. Consistent with the evidence of the technicians, the great majority of those were user problems.
143144 Mrs Lawrence dealt with account related calls. She described the usual types of inquiries made related to whether a customer could return a particular item, what options they had for upgrading an appliance and where they stood on their payments. A log of the conversation with a customer is recorded in the customer's account history which is maintained on Radio Rentals' computer system. Mr Groth's credit histories were exhibited to her affidavit. They revealed she spoke with him on 10 occasions between 17 June 1999 and 22 November 2001. Three of these related to the offer to purchase amount for an appliance, one to the status of accounts, three to payment arrangements, one to a delivery inquiry, one to payment dates and one to a direct debit inquiry.
144145 Mr Groth appeared to understand explanations Mrs Lawrence gave him because he did not question what he was given as advice. His calls "were everyday calls, not unusual at all". She did not form the impression that he was intellectually handicapped or that he spoke slowly although she noted that his voice was "drony". She was not aware of the number of calls Mr Groth made to Radio Rentals.
145146 The credit histories annexed to Mrs Lawrence's affidavit discloses that Mr Groth called the Finance department on many occasions to inquire as to the state of his accounts. They also reveal that he was almost invariably in advance.
146147 I will later refer in a little detail to the evidence of Loretta Moretta when considering the "Ancillary Claims". Ms Moretta at times of present relevance was, variously, General Manager of the Service department and Call Centre Manager. For present purposes I would merely note that she put in train the inquiries that led to the identification of service technicians, and staff in the Service department and Finance department who could recall dealing with Mr Groth. She supplied their names to the lawyers but she played no part in the selection of who gave evidence.
WITNESS ISSUES: ADVERSE INFERENCES
147148 Each side has complained of the failure of the other to call particular witnesses. The ACCC's complaints are various. First, it contends that a service technician, Wayne Avion who still works with Radio Rentals, could have been called but was not without explanation. According to Radio Rentals' records Mr Avion appears to have made service calls to Mr Groth on 10 occasions. Secondly, the ACCC challenges the failure to call (a) four other salespersons who dealt with Mr Groth on one or more occasions; (b) call centre operators who answered Mr Groth's "numerous calls"; and (c) the person responsible for processing or overseeing the procedures for approval of Mr Groth's credit applications.
148149 The ACCC seeks to use these failures to found a Jones v Dunkel inference against them that their evidence would not have helped the respondents' case. It is said I should take account of this in deciding whether to accept any particular evidence which has been given which relates to matters including the way Mr Groth presented at the Radio Rentals stores, in his flat or on the phone when he dealt with the salesmen, service technicians and call centre operators.
149150 I do not consider this to be a case in which every person who had dealings with Mr Groth over a six year period was required to be called. Given the nature of the respondents' businesses and the functions performed by the various classes of persons who dealt with Mr Groth or his applications, the likelihood of many of these having any reliable memory (significant or otherwise) of Mr Groth is not great. This is demonstrated in the evidence of the employees who have, in fact, given evidence.
150151 While I am prepared to accept that the reason these various persons were not called was because they would not positively advance the respondents' case, I do not infer that the failure to call them was protective of that case. This is not a case where there has been an absence of evidence from witnesses who normally the respondents would have been expected to have called: Re HIH Insurance Ltd (in prov liq) & HIH Casualty & General Insurance Ltd (in prov liq) (2002) 41 ACSR 72 at [448]. The inference I would draw from the failure to call them is that, given the nature of the various functions they performed together with the elapse of time, the persons in question would not have been able to contribute evidence useful to the resolution of the matters in issue: cf Cubillo v Commonwealth (No 2)(2000) 103 FCR 1 at 119.
151152 Radio Rentals complains of the ACCC's failure to call Leslie Thomson and his wife, Cheryl, who lived around the corner from Mr Groth at Novar Gardens and who saw Mr Groth regularly and, in Mr Thomson's case, almost daily. Again I am unprepared to draw an adverse inference from this failure. I consider it quite unlikely that their evidence would have enhanced that actually given in the ACCC's case. I equally consider, having regard to the issues in this case, such lay opinion evidence as they may have given would have been unlikely to have been of particular value in resolving those issues.
CONSIDERATION
152153 Put in composite form the ACCC's case is that Radio Rentals and Walkers Stores knew or ought to have known or were recklessly indifferent to the circumstances that, from how Mr Groth presented and from its own records, he suffered significant and serious disadvantages such that it was unlikely to be in his best interests to enter into his various agreements with Radio Rentals and Walker Stores and that incurring his monthly liabilities to them resulted in financial hardship.
153154 It is generally contended that he presented as childlike and the Radio Rentals sales personnel ought to have been aware of this. Dr Wood's assessment of Mr Groth, it is said, should be accepted as accurate. Apart from the circumstances of his entry into the rental, loan and service agreements, aspects of Mr Groth's other dealings with Radio Rentals (in relation to service calls for minor user problems, phone calls generally and overpayments of monthly liability) or Radio Rentals own records of those dealings (especially in his credit histories and service records) were out of the ordinary and ought to have alerted Radio Rentals both to his inability to conserve his own interests and to the financial hardship he suffered. As to the last of these, reliance is placed on the various calculations relating to his financial circumstances contained in Schedules C and E to the applicant's pleadings.
154155 The respondents' case, in contrast, was that Mr Groth's presentation and verbal skills as revealed in court and to the medical witness were such that his disability was not apparent. Neither was it, nor ought it to have been, known by Radio Rentals' employees. Reliance is placed upon Professor Goldney's opinion as to the importance of context in making judgments about a person's capacities. Further, it is said, there is no evidence that the terms of the agreements were inherently unfair or burdensome or that Radio Rentals staff took unconscientious advantage of Mr Groth. The case of financial hardship is not supported by the evidence. The contentions as to allegedly unrealistic information in the credit applications and to inadequate monthly surpluses do not have a foundation in the evidence for a finding of unconscionable conduct by reason of the approval of credit based on the information supplied by Mr Groth. It was not open on the pleadings to challenge Radio Rentals' credit application and approval procedures as being inappropriate. Even accepting the figures in Schedule C, Mr Groth had surplus funds available for expenditure. He only fell into financial difficulties in early 2002 when he began to spend significant sums on his other credit cards.
155156 My own views are as follows. I am satisfied that Mr Groth suffers both from schizophrenia and intellectual retardation which is at least borderline. I similarly am satisfied that his reading, spelling and mathematical abilities are quite limited and that while he has some capacity to operate ordinary machines and appliances, it is nonetheless fairly limited. Having said this I do not unqualifiedly accept Dr Wood's assessment of him. It involves judgments as to Mr Groth's oral expression, comprehension, memory and capacity to compensate for his disability which are inconsistent both with my own appreciation of him from his court appearance and with what is revealed in aspects of the evidence before me.
156157 It is unnecessary that I express a definitive view on the precise extent of Mr Groth's disability. The issue before me is not whether he had the capacity to contract. Rather it is with whether those who contracted with him would have known, or ought to have known, that he was specially disadvantaged. This places the focus upon what was, or ought to have been, evident to those dealing with him about his disabilities and incapacities.
157158 Necessarily, I observed Mr Groth closely when he gave evidence. As I earlier indicated, while his speech was somewhat slow and his diction slightly distinctive, he was fluent and clear in what he said. His language was not that of an educated person but neither was it childlike. His dress was neat. His manner courteous. In some matters he displayed a considerable memory. While he gave evidence of his own limitations, I do not consider that he obviously or immediately presented as being mentally retarded by virtue of his appearance, speech or manner of communication. I thus agree with Professor Goldney's appreciation both of how Mr Groth could present and of his speech. I clearly disagree both with Dr Wood's views as to his language use, presentation, memory and capacity to comprehend concepts and with the ACCC's characterisation of Mr Groth's performance before me.
158159 I accept Professor Goldney's opinion that Mr Groth's history in general medical settings indicated that at times he was well able to present himself in a manner which did not immediately suggest he was markedly intellectually disabled. I consider that this clearly occurred in some of his dealings with Radio Rentals personnel as I will indicate. I equally accept Professor Goldney's opinion that assessments of Mr Groth's capacities are likely to be affected by the context in which an assessment is to be made. I do not consider that his disabilities are so evident as to invite suspicion as of course, whatever the setting.
159160 Turning to Mr Groth's dealings with Radio Rentals personnel, it is significant that none of the salespersons who were called and who had a memory of him knew or suspected he was intellectually disabled. The evidence of what transpired as each agreement was made β to the extent that there is evidence at all β is not particularly reliable and often somewhat contradictory. Memories are unreliable and what may in fact have been reconstructed can assume the character of reality. Having said this I accept the evidence of the salespersons' perceptions of Mr Groth. What they said is consistent with the view I arrived at after close observation of him. I should add, because of the attention paid to this matter by the ACCC in its cross-examination of the salespersons, that the types of encounters they had with Mr Groth on the sales floor were not such as would necessarily or at all invite suspicion about his intellectual capacity. If on occasion protracted because of the time involved in obtaining credit approvals, the various encounters appear to have been routine and perfunctory in a setting which would not naturally invite critical appraisal of a person such as Mr Groth.
160161 On a number of occasions, Mr Groth explained to the salesperson the reasons for his wanting a particular appliance; on others, he specified the make of appliance he wanted; and again, on several occasions, he made prior phone contact concerning an appliance after which he saw the salesperson to whom he spoke. His conduct on such occasions was consistent with the projection to those with whom he dealt of an ability to determine, and to make choices about, what was in his own interests even if such was not in fact the case.
161162 Equally Mr Groth's politeness and evident attentiveness were themselves together probably capable of conveying comprehension of explanations given to him when the contrary may well have been the case.
162163 While the ACCC placed considerable emphasis upon Mr Groth's inability to read and understand the terms and conditions of his various agreements, it does concede (in the particulars to par 95.3 of the Further Amended Statement of Claim) that he understood what I would regard as the central characteristics of the agreements into which he entered. Though the Radio Rentals salespersons gave evidence of their "usual practice" in explaining agreements to customers β evidence necessitated by a lack of memory of what they actually did with Mr Groth β it seems likely that, with Mr Groth being a regular rental customer, such explanation as was given of the general, as opposed to the specific and distinctive terms, of the various agreements he entered into was attenuated because of an assumed, though incorrect, understanding attributed to him.
163164 The manner in which the credit applications were filled out and the figures contained in them were generated have to be considered in the light of what I have already said. If Mr Groth had not otherwise given the salespersons reason to suspect his disabilities, did his various credit applications do this? I limit the inquiry to his disabilities because knowledge of them is intrinsic to the ACCC's composite claim.
164165 By way of preface to answering this I should make the following comments. I am satisfied that the living expenses and monthly income figures that appeared in the credit applications were ultimately based upon information supplied by Mr Groth save where they were default figures (I except the twentieth and twenty-third agreements from this). I say "ultimately" for this reason. I consider it likely that in the "manual" application period, the living expenses figure was often carried forward from one agreement to the next. I am not prepared to infer that Radio Rentals' salespersons routinely put figures into the credit applications without Mr Groth's involvement in the process. It may well have been the case that the carry forward occurred with Mr Groth's knowledge at the time because he had been asked on each occasion whether his expenses had changed. I consider a like-process probably explains the carry forward of the default figures.
165166 It is clear from their evidence that the salespersons called regarded themselves as amanuenses in the filling out of the application forms. Others, not they, were responsible for determining whether the application made should be approved. If they did not consider themselves the gatekeepers of the approval process, it is unsurprising they seemed not to have scrutinised critically the figures in the credit applications. I should add I do not consider the cross-examination of them on the issues of living expenses and monthly surpluses as being of assistance for present purposes. They did what they did in a particular setting on a particular basis. The cross-examination, in effect, asked them to venture opinions on matters in which they did not see themselves at the relevant time as having any real function although there is some inconsistent evidence about the querying of low living expenses figures.
166167 If the credit application forms were capable at all of generating suspicions with anyone in Radio Rentals, it could only have been with the credit assessment personnel. I will deal with them later.
167168 The final matter concerning the applications to which I need presently refer concerns the twentieth and twenty-third agreements. I do not consider that the two credit applications made for the twentieth agreement have probative value in this proceeding. The monthly income figure given is clearly inaccurate. There is sufficient uncertainty about the accuracy of the living expenses figure for me not to be able to conclude that it is accurate. It is not a default figure; it deviates significantly from what preceded it in earlier agreements; and it could, along with the monthly income figure, be ascribable to human error.
168169 I conclude, then, in relation to the Radio Rentals sales personnel who gave evidence that Mr Groth's disabilities and incapacities were not sufficiently evident to any of them as to fix Radio Rentals with knowledge of those disabilities and incapacities.
169170 As I have foreshadowed when dealing with their evidence, I have reached a like conclusion in relation to the service technicians who gave evidence. The only additional comment I would make is that Mr Smith and Mr Richards both emphasised that their calls to Mr Groth's unit were for problems which were not out of the ordinary compared with other Radio Rentals customers. An inability to set clocks and timers on electrical appliances is not necessarily suggestive of mental incapacity.
170171 I likewise accept the evidence of the two witnesses from the call centre who gave evidence β Mrs Karutz and Mrs Lawrence β that they had no reason to suspect he suffered the disabilities with which this proceeding is concerned.
171172 There is then no basis for finding that any of Radio Rentals personnel who actually dealt with Mr Groth knew or ought to have known that he was in a position of special disadvantage when entering into the various agreements.
172173 When one turns to the case as pleaded against Radio Rentals and Walker Stores, I would, in consequence, be compelled to reject one of the foundations of the ACCC's case. This is, that when the companies entered into their agreements with Mr Groth they knew or ought to have known "from Mr Groth's presentation and verbal skills" that he was a person with an intellectual disability; he could not read the agreements; he could not understand all the terms and conditions of the agreements; he was unable to understand all the rights etc he had under the agreements; and he was unable to make a worthwhile judgment about whether entering into the agreements was in his best interests: see Further Amended Statement of Claim pars 95.1-95.5 and 97.1-97.5. The evidence simply does not support a finding that Mr Groth's presentation and verbal skills made those matters "sufficiently evident" (to use Deane J's shorthand description in Amadio) to the two companies.
173174 It is then unsurprising, as the respondents have noted in final address, that the ACCC's case during cross-examination became focused on Radio Rentals records concerning Mr Groth and on the alleged financial hardship suffered by him. So emphatic was this that, as I earlier noted, the ACCC sought in oral submissions to propound a stand alone case that the respondents took advantage of Mr Groth because it knew his financial circumstances and in particular that he had an inadequate monthly surplus.
174175 The use the ACCC seeks to make of Radio Rentals' records is somewhat more expansive than the Further Amended Statement of Claim would mandate. Be this as it may the telephone records reveal 329 calls to Radio Rentals' various phone numbers between February 1998 and November 2001. It is submitted that this was an extraordinary number of calls which must have placed Radio Rentals on notice that Mr Groth was unable to operate the goods he was renting or was unable to manage his money. The ACCC contends that the Service department records which record that 73 faults were reported by Mr Groth during the period December 1996 and May 2002 took, reveal the former of these incapacities; the credit histories, insofar as they disclose both Mr Groth's frequent inquiries concerning both where he was up to in repaying his accounts and his regular overpayments, disclose the latter.
175176 I have a variety of difficulties with these contentions. The various communications made by Mr Groth to the call centre which were entered in Mr Groth's credit and service histories were made by individual Radio Rentals employees. The submission does not suggest that any individual operator had or ought to have had the knowledge that the ACCC ascribes to Radio Rentals, although that operator did have at least the knowledge of what was entered at the time of its entry. Rather it seems to be based on an aggregation of what was so known by each individual call centre operator, with Radio Rentals being ascribed such knowledge about Mr Groth as that aggregated information might reveal.
176177 In support of this somewhat startling proposition, the ACCC relies upon the observation made in the joint judgment of the High Court in Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 582-583:
"As Bright J said in Brambles Holdings Ltd v Carey [(1976) 15 SASR 270 at 279]:
'Always, when beliefs or opinions or states of mind are attributed to a company it is necessary to specify some person or persons so closely and relevantly connected with the company that the state of mind of that person or those persons can be treated as being identified with the company so that their state of mind can be treated as being the state of mind of the company. This process is often necessary in cases in which companies are charged with offences such as conspiracy to defraud.'
A division of function among officers of a corporation responsible for different aspects of the one transaction does not relieve the corporation from responsibility determined by reference to the knowledge possessed by each of them β¦"
177178 I would note a like submission in the Victorian Court of Appeal in Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 in reliance on the above passage to aggregate certain facts known to various company servants and agents so as to give rise to a factual totality from which a dishonest intent, held by none of the individuals, might be inferred. The submission was rejected. In the words of Tadgell JA at 145; see also Ashley AJA at 160-161:
"Neither that passage in Krakowski nor any other principle justifies the simple aggregation of the knowledge of a number of persons individually unaware of fraud, or facts which ought to disclose it, to create a notional person with a dishonest intent. The High Court in Krakowski was not purporting in the passage relied on to lay down any such principle but to authorise a consideration of the knowledge and circumstances of all relevant persons β including what may properly be inferred β in order to ascertain the mind of the corporation."
178179 In my view the situation is no different where the aggregated knowledge to be attributed to a company is a prerequisite to a finding that it engaged in unconscionable conduct (or an equitable fraud). The present submission cannot properly be characterised as one in which the individual operators who recorded entries etc were involved in "different aspects of one transaction". The records embody unrelated events, transactions and communications. There has not been β and on the state of the pleading could not be β any suggestion that the records sought to be aggregated have been contrivedly or artificially kept in a disaggregated form. There is, I would add, no evidence either that it was the duty of any Radio Rentals employee to monitor customer records to discern suspicious or out of the ordinary occurrences in those records or that any employee actually interrogated records in circumstances that would have alerted a reasonable person to suspicious or out of the ordinary occurrences in the records interrogated. In such circumstances, the state of mind to be attributed to Radio Rentals can be no different from, and no less innocent than that of, the personnel who made the entries in its records.
180 Mr Groth's pattern of overpayment may well have invited suspicion in the context of the other matters relied upon in the composite claim, had those other matters been established. Of itself, it cannot sustain the burden the ACCC imposes on it. A practice which results in the early payment out of a rental agreement and an accelerated opportunity to purchase the appliance in question is too neutral in character for it to be able to be said, reasonably, that it made Mr Groth's inability to conserve his own interests sufficiently evident, especially in a context in which he sustainedly met his obligations to the respondents. The overpayment on service agreements appears, as will later be seen, to have led to the raising of seven further such agreements without Mr Groth's consent. These are dealt with separately below. Further, while the records can be said to show the pattern relied upon, that of itself does not establish that Radio Rentals can be imputed with knowledge of that pattern and of its possible consequences for him in light of what his credit applications revealed, for the reasons I have given above in relation to aggregation of information.
179181 If the ACCC's submission were to be accepted to its full extent as put, it would have potentially alarming consequences for large, multi-function, corporations. It could also raise, potentially, rather significant privacy issues.
180182 In rejecting the submission in the circumstances of this matter I am not suggesting that in no circumstances can or should disaggregated information be aggregated. While I express no concluded view on this matter, I incline as have others to the view that separate information held by an officer or agent of a corporation can be aggregated with information held by another at least where the first such person has "the duty and the opportunity to communicate it to the other": Re Chisum Services Pty Ltd (1982) 1 ACLC 292 at 298; see also Macquarie Bank Ltd, at 161-2.
181183 The final comment I would make is this. The contexts can vary widely in which the question of attribution of knowledge to a corporation can arise in virtue of knowledge possessed by one or more of its officers and agents: cf for example, Beach Petroleum N L v Johnson (1993) 115 ALR 411 at 566; Dunlop v Woollahra Municipal Council [1975] 2 NSWLR 447 at 484-485; Elliot v Nanda (2000) 111 FCR 240. Here I confine myself to circumstances in which what is sought by the aggregation of the knowledge is to alter the character of that knowledge when it is attributed to the employer corporation where no justification for the aggregation (e.g. participation by several employees in the same transaction) has been made out.
184 There are twois one distinct matters concerning Radio Rentals' records that requires mention. First, I have earlier referred to instances of inconsistencies and errors in some number of the credit applications submitted for approval. The ACCC has pleaded that Radio Rentals knew or ought to have known from its records that some credit applications submitted by its employees contained information that was incorrect, unrealistic and inadequate. Insofar as this claim relates simply to a failure to detect errors of calculation in respect of Mr Groth's actual monthly rental liability and misstatements of Mr Groth's monthly income, the submission is without substance. While the evidence discloses instances of human error, there is no suggestion the credit application and approval procedures were inadequate or inappropriate in the circumstances. There is no evidence in any instance of the credit approval personnel being put on inquiry by the terms of a credit application itself. There is no evidence to suggest that any particular employee had a duty to check the applications against Radio Rentals records. This is simply no justification advanced for the submission that the respective bodies of information are able to be aggregated so as to disclose these errors. Secondly, at the risk of undue repetition, the credit histories revealing overpayments by Mr Groth cannot properly be aggregated with the individual credit applications to impute a knowledge to Radio Rentals that his actual circumstances were different from, and worse than, the position stated in the application.
185 To the extent that the ACCC's complaint is that the credit applications revealed unrealistic and inadequate living expenses and monthly surpluses from time to time, it is, in essence, one of knowledge of financial hardship.
184186 As I have earlier indicated, the ACCC at the end of oral submissions sought to put its case on either of two bases. The first was the composite case which focussed primarily upon what Radio Rentals knew or ought to have known of Mr Groth from his presentation and verbal skills but which focussed as well on the financial hardship Mr Groth experienced because of the level of his monthly rental liability from time to time as revealed in his credit applications. The second was a stand alone case of taking advantage of Mr Groth because it knew of his financial circumstances.
185187 The respondents have objected, properly in my view, to the ACCC now seeking to make out the stand alone case. It was not pleaded as such. I have already referred to the scorecards system for the grant of credit approval used by Radio Rentals and to the fact that approvals were given to Mr Groth's rental and loan applications. The stand alone case, as best I understand it, necessarily involves an attack on Radio Rentals credit application and approval procedures. Yet it has not led evidence to this end. There is nothing to suggest that these procedures were inappropriate, uncommercial or inconsistent with ordinary credit approval practices in the period from 1996 to 2002. Neither, given the manner in which the case was pleaded and opened, were the respondents given appropriate notice of the stand alone case and the corresponding opportunity to justify its credit approval procedures and the setting, for example, of minimum monthly surpluses and of default figures for living expenses.
186188 A case of inflicting financial hardship alone is a quite different one raising a quite different inquiry from one in which financial hardship is relied upon to demonstrate advantage taking where the cause of the disadvantaged position of the person suffering hardship is separately identified and is relied upon, as here, to establish why a particular person was known, or ought to have been known to be, unable to conserve his or her own interests.
187189 In a stand alone case, where all that is seemingly relied upon to prove unconscionable conduct is that the allegedly disadvantaged person overcommits himself or herself, questions of individual autonomy and of the extent of one's responsibility to one's neighbour loom large. Such issues have not been seriously agitated in the ACCC's late discovered case.
188190 If that case had been properly pleaded and pursued, this would have been a very different proceeding from that which I entertained. As I foreshadowed, it is far too late and unfair for the ACCC to be allowed to run it now.
189191 My earlier findings in relation to what Radio Rentals knew or ought to have known from Mr Groth's presentation and verbal skills and from its records other than from what was revealed in the credit application, leaves the ACCC, for practical purpose, relying upon the allegation of known financial hardship in circumstances where I have rejected the balance of their composite case. This, in my view, dooms the case as pleaded to failure in any event.
190192 Nonetheless I will make the following observations on financial hardship in the context of the composite case. If, contrary to my findings referred to above, the ACCC had established that Radio Rentals knew or ought to have known of Mr Groth's inability to conserve his own interests, the hardship part of that case would itself have been given colour and significance by that factual setting and by what Radio Rentals otherwise knew or ought to have known about Mr Groth. Stripped of that setting and knowledge, it necessarily wears a somewhat different complexion.
191193 Considered from Radio Rentals standpoint, Mr Groth becomes a customer whose credit applications and the approval process reveal as being prepared to submit a significant percentage of his income from time to time to the renting and purchasing appliances from Radio Rentals. For more than five years he maintained an exemplary credit. And in respect of each application he satisfied Radio Rentals minimum monthly surplus requirement. Even accepting that the figures given for living expenses could be said on occasion to be unrealistically low (at least before the advent of the default figure), a hardship case necessarily had to demonstrate that a person in Mr Groth's position, having his circumstances and needs, would generally be unable to afford the basic necessities of living from the sum represented from time to time by the aggregate of the living expenses and monthly surplus disclosed in the credit applications. Proof of that was a matter of evidence, not of judicial notice. I would note in passing that in the schedule relied upon by the ACCC to demonstrate financial hardship based on Mr Groth's monthly liabilities (Schedule C), that aggregate figure at its highest is $507.20; at its lowest is $350.54; and is on average $414.68.
192194 I have excluded from the above any discounting of the aggregate sum because Mr Groth regularly paid Radio Rentals more than his actual liability. I have done this because, as I have earlier indicated, I do not consider that that information can simply be aggregated with the information contained in the individual credit applications to fix Radio Rentals with knowledge that Mr Groth's actual financial circumstances might be worse than revealed in his credit applications when processing those applications.
193195 The evidence that Mr Groth actually experienced financial hardship because of his monthly rental and loan liabilities to the respondents is quite unsatisfactory. The evidence establishes he was single; he went out only very occasionally; and he did not socialise. His needs, apparently, were few. But if, as Mr Groth said in evidence, he spent $30 to $40 a week on food β "[t]hat was only left" β there is little by way of explanation of how he spent the balance of the aggregate sums to which I have referred (beyond his regular overpayments to Radio Rentals which clearly reduced his available monthly funds but for which Radio Rentals bore no knowing responsibility). To the extent that there is evidence that Mr Groth fell into actual financial difficulties, this occurred in early 2002 after he made substantial commitments on his charge cards with other retailers. His actions at that time again demonstrated his inability in fact to conserve his own interests. But those difficulties were not the consequence of unconscionable conduct on the respondents' part. I should add that I have derived little assistance in this matter from Mrs Vickers' evidence of the extent to which she supported Mr Groth in the second half of 2002. His inability to manage his finances by that time had clearly manifested itself and led in time to the unravelling of his relationship with Radio Rentals after it was put on notice of his disability.
194196 Mr Groth's actual circumstances may have bordered on the straitened. But I am not satisfied on the evidence that the ACCC has made out its case of financial hardship in fact of which Radio Rentals was or ought to have been aware and for which it bore responsibility.
CONCLUSION ON THE PRINCIPAL CLAIM
195197 This proceeding has highlighted three matters. The first is the peculiar vulnerability of persons like Mr Groth who are unable in fact to conserve their own interests but who do not, as of course, put people with whom they deal on notice of their incapacities. They are, in consequence, attributed innocently with powers they do not possess. This can redound to their distinct disadvantage, as the circumstances of this matter demonstrate.
196198 The second matter highlighted flows from the first. It is that, in the conduct of day-to-day retail transactions and related dealings, too much cannot be expected of ordinary people doing routine jobs by way of critical appraisal of their employers' customers and their affairs. They ought not have attributed to them powers and responsibilities which are foreign to what can reasonably be expected of them in virtue of what they do in its particular setting. It is for this reason that companies can properly be expected in the protection of their own interests (and, derivatively, of the interests of those with whom they deal) to have in place appropriate risk management practices β practices now facilitated by modern technology. I would emphasise in passing that the present case as pleaded was not about the respondents' risk management practices as such.
197199 The third matter relates to the problem of attributing knowledge or a state of mind to a corporation in light of what might be inferred from aggregating information derived from a multiplicity of discrete transactions and dealings involving corporate employees who adventitiously to participate in some of those matters without suspecting in any way that anything is out of the ordinary. To permit such aggregation in circumstances such as the present for the purposes of attributing a particular state of mind to a company as a prelude to a finding of unconscionable conduct can only "eviscerate" unconscionable conduct of its meaning: cf Stern v McArthur (1988) 165 CLR 489 at 503. For the purposes of the unconscionable dealings doctrine it would result in a company being held guilty of exploitation or victimisation of another without any officer or agent of that company having any suspicion, or any reason to suspect, at all that the company was so acting. In the case of s 51AB, the company would be held to have acted unreasonably or clearly unfairly, without having reason to appreciate it was so acting.
200 It is one thing to proscribe advantage taking by a commercial enterprise of a specially disadvantaged person. It is quite another to make that enterprise in effect that other's insurer. In light of the findings I have made, the ACCC's principal claim must be dismissed.
200201 For the purposes of the s 51AA claim, while Mr Groth could be said to be in a position of special disadvantage, he was not on my findings knowingly taken advantage of by the respondents. He was not victimised or exploited. As I earlier indicated, it is not to the point that, with different risk management practices, the respondents may have been able to detect Mr Groth's circumstances and to take steps to assist him. That is not the case before me although it has faint echo in the ACCC's written closing submission where it is said that corporate businesses and their sales agents "have a responsibility to ensure that they do not take unfair advantage of customers". This responsibility, it is said "requires businesses to be alert to the fact that some of their customers may be vulnerable". All I would say of this is that the positive, neighbourhood-like, obligation implicit in this stands apart from the law of unconscionable dealing as it has been conceptualised to date and it appears to be distinctly tort like in character, conjuring up as it does a negligent failure to discharge this claimed "responsibility".
201202 The unfair conduct judgment required to be made by s 51AB is similarly not open in light of my findings. Doubtless, the relative bargaining positions of the respondents and Mr Groth were unequal: cf s 51AB(2)(a). What the evidence does not disclose is unfair use of this by Radio Rentals. There is little doubt that Mr Groth did not understand the detail of the general terms and conditions of his various agreements with the respondents: cf s 51AB(2)(c). Nonetheless I am satisfied that this was not sufficiently evident to those from Radio Rentals with whom he had dealings. There is no evidence to suggest that the terms he was required to accept differed from those required of other customers or that unfair tactics were used against, or unfair pressure was exerted upon, him in relation to his dealings with the respondents.
202203 The course of events in this matter were unfortunate indeed. But the case as pleaded affords no proper reason for passing adverse judgment on the respondents under s 51AB because of their participation in those events. They have not been shown to have acted unfairly.
THE ANCILLARY CLAIMS
203204 These allege unconscionable conduct by the respondents in (i) raising service agreements without Mr Groth's consent; (ii) transferring funds from one agreement to another without his consent; and (iii) accepting the return of goods after substantial payments had been made on them. Each of these claims presuppose that the circumstances of the Principal Claim have been established and that these are simply further exemplifications of the unconscionable conduct on Radio Rentals part.
204205 As they must fail, given the fate of the Principal Claim, I do not intend to deal with these at length.
(i) Raising Service Agreements without Mr Groth's knowledge or consent
205206 On seven occasions, four of which were on the same day (24 October 2002), Radio Rentals raised new service contracts for Mr Groth and transferred moneys overpaid on other agreements to those new contracts. The sums involved were, variously, $32, $8, $8 and, in the case of the same day agreements, $13.20 each. In none of these instances did Mr Groth give prior consent to the raising of the agreement or to the transfer from one account to another. All of these agreements were in substance renewals of annual service agreements that had expired.
206207 Radio Rentals according to the evidence, made the assumption that customers wished to continue their agreements at least if they continued to make payments on the expired agreements. Mr Groth made no complaint concerning what had occurred and made service calls on several of them.
207208 The four agreements that were raised on the same day pose a distinct problem. Four days before they were raised, Radio Rentals were put on notice by Mr Groth's disability lawyers acting for him and advising that all existing agreements were to be rescinded. This communication did not appear in the relevant credit histories. There had been an earlier communication from Mrs Vickers to Radio Rentals in September 2002, which was recorded in the relevant credit histories, which foreshadowed possible cancellation of accounts. Nonetheless the four agreements were raised, the reason for this being, apparently, that a weekly computer search identified four annual service contracts as due for expiry and the new contracts were raised accordingly.
208209 In light of my findings on the Principal Claim, I am, in the case of three of the service contracts, left only with evidence of a business practice by no means only applied to Mr Groth which is the subject of criticism by the ACCC. The case has not been fought on the basis of the propriety or otherwise of that practice as such. Accordingly, while the practice may not necessarily be above criticism, I am not prepared to conclude that of itself it is sufficient to justify stigmatising the respondents' conduct as unconscionable for s 51AB purposes. I would note that no reliance has been placed on s 51AA in respect of any of the Ancillary Claims.
209210 Though the four same day contracts raise quite different considerations, they bespeak on inadequacy in risk management practices rather than the knowing exploitation of Mr Groth. I do not consider that Radio Rentals' conduct in raising those agreements was clearly unfair for s 51AB purposes, although the events which transpired provided clear lessons to be learned by the respondents. The contracts should never have been raised. If the matter was to be viewed through the prism of s 51AA (which it is not) it may be able to be said that, formally, Radio Rentals knowingly took advantage of Mr Groth given the lawyers' communication to it of 20 September 2002. In substance, though, Radio Rentals did not - at least simply by entering into the agreement in the manner it did. I do not have to consider what would have been the case had it sought to insist upon its rights under these agreements.
210211 I reject this claim.
(ii) Transferring overpaid funds from one agreement to another without consent
211212 Apart from the seven instances above in which funds were reallocated to new service contracts, Radio Rentals transferred funds between agreements without Mr Groth's actual consent. The aggregate amount so dealt with (including the seven service agreements) was $340.00 and the individual transfers only exceed $20.00 on three occasions, the largest sum being $45.20. The various transfers involved both rental and service accounts.
212213 The ACCC has not suggested that the transfers did not at the time discharge liabilities of Mr Groth to the respondents. Neither was it contended that the moneys paid to satisfy a particular indebtedness was impressed with a Quistclose like trust to satisfy that and no other purpose: cf Quistclose Investments Ltd v Rolls Razor Ltd [1970] AC 567.
213214 Whatever may have been the case if the sums in question had been of significant amounts, the transfers here hardly bespeak conduct that is unconscionable. On its own, the particular practice engaged in could be variously categorised as undesirable (because it iswas unauthorised and undisclosed), sensible (given the alternative of returning small sums) or of no particular significance (given the on-going debtor-creditor relationship of the parties). It would only have begun to assume the character of unconscionable conduct if the ACCC had made out its Principal Claim. This practice could then be seen as a manifestation of that conduct.
214215 I reject this claim.
(iii) Accepting the return of goods
215216 The ACCC's complaint is that,on two occasions when Radio Rentals entered into further agreements (for the second refrigerator and the fourth television) with Mr Groth, he returned like appliances on which he had paid $2,854.30 (of a term total of $2,962.00) and $1,103.20 (of a term total of $1,269.00) respectively. As the ACCC's submissions make plain, this particular submission is premised on Radio Rentals' knowledge of Mr Groth's circumstances and limitations. Had it had that knowledge, an adverse finding would have been difficult to resist. I have found to the contrary. Standing alone, the evidence returns no more than that Mr Groth availed of a facility provided for under his rental agreements.
216217 I reject this claim as well.
CONCLUSIONS
217218 I have rejected all of the claims made against the respondents.
218219 I will order that the application be dismissed and that the applicant pay the respondents' costs of the application.
I certify that the preceding two hundred and nineteen (219) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.
Associate:
Dated: 17 August 2005
Counsel for the Applicant: Ms E Strong QC with Ms K Bean
Solicitor for the Applicant: Australian Government Solicitors
Counsel for the Respondent: Mr A J Myers QC with Mr M C Hoffman
Solicitor for the Respondent: Minter Ellison
Date of Hearing: 18, 19, 20, 21, 22, 27, 28 and 29 April 2005
Date of Judgment: 17 August 2005
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Antonio v Minister for Immigration & Multicultural Affairs [1999] FCA 1210
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/1999/1999fca1210
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2024-09-13T22:46:45.732886+10:00
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FEDERAL COURT OF AUSTRALIA
Antonio v Minister for Immigration & Multicultural Affairs [1999]
FCA 1210
MIGRATION β appeal from decision of primary judge refusing application for review of Refugee Review Tribunal decision β whether breach of confidentiality, actual bias, failure to investigate β where applicants are citizens of the Republic of the Philippines.
Migration Act 1958 (Cth) ss 420, 424, 440 and 476
Convention Relating to the Status of Refugees 1951 as amended by the Protocol Relating to the Status of Refugees 1967, Article 1A(2)
Jia Le Geng v Minister for Immigration and Multicultural Affairs [1999] FCA 951, cited
Minister for Immigration and Multicultural Affairs v Eshetu [1999] 162 ALR 577, followed
Minister for Immigration and Ethnic Affairs v Singh (1997)74 FCR 533, followed
Singh (Heer) v Minister for Immigration and Ethnic Affairs (1987) 15 FCR 4, followed
Sun Zhan Qui v Minister for Immigration and Multicultural Affairs (1997) 151 ALR 505 applied
ANTONIO AND ANTONIO v
MINISTER FOR IMMIGRATION AND MULTICULTURAL AFFAIRS
AND JANET WOOD AND OTHERS
D1 of 1999
FRENCH, TAMBERLIN AND SACKVILLE JJ
DARWIN
3 SEPTEMBER 1999
IN THE FEDERAL COURT OF AUSTRALIA
DARWIN DISTRICT REGISTRY D1 of 1999
BETWEEN: DENRY ANTONIO
First Appellant
LETICIA ANTONIIO
Second Appellant
AND: MINISTER FOR IMMIGRATION
AND MULTICULTURAL AFFAIRS
First Respondent
JANET WOOD AND OTHERS
Second Respondent
JUDGE: FRENCH, TAMBERLIN AND SACKVILLE JJ
DATE OF ORDER: 3 SEPTEMBER 1999
WHERE MADE: DARWIN
THE COURT ORDERS THAT:
The appeal is dismissed with costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
DARWIN DISTRICT REGISTRY D1 of 1999
BETWEEN: DENRY ANTONIO
First Appellant
LETICIA ANTONIO
Second Appellant
AND: MINISTER FOR IMMIGRATION
AND MULTICULTURAL AFFAIRS
First Respondent
JANET WOOD AND OTHERS
Second Respondent
JUDGE: FRENCH, TAMBERLIN AND SACKVILLE JJ
DATE: 3 SEPTEMBER 1999
PLACE: DARWIN
REASONS FOR JUDGMENT
FRENCH J:
1 I agree with the reasons given by Tamberlin J and with the orders he proposes. Doctor Roman in his oral submissions to this Court identified clearly the four heads upon which the appeal was brought, they being actual bias, unfair procedures, misconstruction of the Migration Act 1958 (Cth) and the misapplication of or failure to apply international law with respect to human rights.
2 The relevant actual bias that must be established in this case is actual bias on the part of the Refugee Review Tribunal. To establish actual bias requires demonstration of a dysfunctional decision-making process, so that by reason of preconceived views or attitudes, the decision-maker is precluded from properly addressing the issues which are before him or her. This has recently been discussed by the Full Court in the matter of Jia Le Geng v Minister for Immigration and Multicultural Affairs [1999] FCA 951.
3 There was no evidence of actual bias on the part of the Tribunal. Some of the appellants' submissions seemed to derive an inference of bias from findings adverse to the credibility of the appellants on the part of the Tribunal. That, of course, does not amount to bias.
4 The assertions of unfair procedure and misconstruction of the Migration Act have been dealt with by Tamberlin J in his reasons. I simply observe that when O'Loughlin J dealt with this matter he dealt with it on a basis more favourable to the appellants than is now available, and the reason for that being that he assumed the correctness of the Full Court's decision in Eshetu v Minister for Immigration and Multicultural Affairs (1997) 71 FCR 300 and the availability of breach of section 420 as a ground of review. Since that time the High Court, in overturning Eshetu, has precluded non-compliance with that section from being available as a ground of review.
5 On the question of the misapplication, or disregard, of international law with respect to human rights, the relevant international convention is the Convention Relating to the Status of Refugees. The question that was before the Tribunal is whether, on the facts as it found them, the appellants fell within the terms of that convention. There is nothing in their reasons, or in the reasons of his Honour, to indicate that they misconstrued the meaning or application of the Convention.
6 What, in large part, this appeal and the application to his Honour reduces to is a complaint about the factual findings of the Tribunal and the sufficiency of the evidence to support those factual findings. As I pointed out to Doctor Roman at the beginning of this appeal, this Court is seriously constrained by the provisions of the Migration Act in the extent to which it can review decisions of the Tribunal. A case could arise in which this Court could be persuaded that the Tribunal has made an error in fact and yet be precluded by the limitations of the law from doing anything about it.
7 The constraints which operate upon the Court are set out in s 476 of the Migration Act. His Honour applied the law correctly in relation to s 476 subject to what was later said by the High Court in Eshetu.
8 There is nothing to suggest either he or the Tribunal has fallen into reviewable error and this appeal must be dismissed. I agree also it should be dismissed with costs.
I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French.
Associate:
Dated: 3 September 1999
IN THE FEDERAL COURT OF AUSTRALIA
DARWIN DISTRICT REGISTRY D1 OF 1999
BETWEEN: DENRY ANTONIO
First Appellant
LETICIA ANTONIO
Second Appellant
AND: MINISTER FOR IMMIGRATION
AND MULTICULTURAL AFFAIRS
First Respondent
JANET WOOD AND OTHERS
Second Respondents
JUDGE: FRENCH, TAMBERLIN AND SACKVILLE JJ
DATE: 3 SEPTEMBER 1999
PLACE: DARWIN
REASONS FOR JUDGMENT
TAMBERLIN J:
9 The appellants in this matter are husband and wife who are citizens of the Republic of the Philippines. They appeal from a judgment from O'Loughlin J who, on 22 January 1999, dismissed an application for review of a decision of the Refugee Review Tribunal ("RRT") given on 3 June 1998, which in turn affirmed a decision of a Ministerial delegate not to grant protection visas under the Migration Act 1958 (Cth) ("the Act").
10 The appellants arrived in Australia on 22 November 1995 and lodged separate applications for protection visas with the Department of Immigration and Multicultural Affairs on 30 September 1996. On 1 April 1997, the Ministerial delegate refused to grant them protection visas. On 30 April 1997, each appellant sought review of those decisions in separate applications to the RRT.
11 The question for consideration before the RRT was whether the appellants were "refugees" within the meaning of the Convention Relating to the Status of Refugees done at Geneva on 28 July 1951 as amended by the Protocol Relating to the Status of Refugees done at New York on 31 January 1967 ("the Convention"). Article 1A(2) of the Convention provides that a person is a refugee who:
"β¦ owing to a well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion, is outside the country of his nationality and is unable, or owing to such fear, is unwilling to avail himself of the protection of that country β¦"
12 The appellants' claim is that they each have a well-founded fear of persecution for a Convention reason, namely that there is a real chance they will be killed for their perceived membership of a politically motivated rebel army if forced to return to the Philippines. They also claim that they are aggrieved in that they and their children have been placed in jeopardy of their lives by the world wide publication of the Court's decision.
13 As noted by the RRT, the claims of each appellant turn on the matters raised by Mr Antonio and for practical purposes the two appeals can be considered together in this light.
Background and the RRT decision
14 Mr Antonio is a citizen of the Republic of Philippines. He claimed that through membership of a union in the Philippines he had formed a close and friendly association with a man named Eddie Pineda, who was an important figure in the New Peoples Army ("NPA"). Pineda was also said to be a union leader. During the years of his association with Pineda, Mr Antonio stated that he did not condemn Pineda, who was a known killer, because he considered Pineda was acting in the best interests of the union cause. Throughout his association with Pineda, he claimed to have met other leaders of the NPA and to have become aware of their activities as well as their identities. The appellants claimed that if they were to return to the Philippines, Mr Antonio would be invited to go back to the NPA and, if he refused, he would be killed. Mr Antonio claimed that his eldest daughter, who is still in the Philippines, informed his wife and himself about persons making inquiries as to their whereabouts.
15 Mr Antonio produced a number of letters from relatives in the Philippines. He also submitted a document, dated 29 December 1996, which stated that both applicants were wanted by the Philippines Police. The letter was said to be from the Mayor of Concepcion, to Mr Antonio's brother. The document reads, in part:
"β¦ on the intelligence finding of the Philippine National Police, your brother and sister-in-law are also wanted dead or alive by their former comrades in the Communist Party of the Philippines and they will be liquidated by the Liquidation Squad of the CCP, New Peoples Army."
16 Mr Antonio submitted a letter dated 28 September 1997, said to be from the Chief of Police of Concepcion to Mr Antonio's father, which stated that the "Order of Battle have been (sic) changed" and that the father had seven days to "surrender your son and his wife to avoid the shoot to kill order." Also submitted was a letter of 4 October 1997, said to be from the applicant's father, claiming that the applicant was an enemy in his country and a Communist and wanted by the Government dead or alive. The letter claimed, in addition, that the father had been harassed by both government agents and members of the NPA on account of his son. Mr Antonio submitted a document claimed to be a message to the NPA from the Chairman of the Central Committee of the Communist Party of the Philippines, dated 29 March 1997, and a letter from his daughter referring to persons coming back to the house and offering money for information as to the location of the appellants.
17 Mr Antonio said in evidence that there were no charges against him in the Philippines which, as the RRT noted, appeared to be contrary to his earlier claims that he was wanted by the Police. The RRT proceeded to consider the country information. This included information as to the signing of an accord which could lead to the end of a thirty-year long war between the military and the NPA.
18 The RRT made a series of findings in each decision. It accepted that each of the appellants were Philippine residents and that their cases should be considered in relation to the position in the Republic of the Philippines. However, the RRT member said that there was very little else in the appellants' claims which it did accept. The RRT found that the appellants were not convincing witnesses and that some of the documents were clearly false, including the letter of 29 December 1996 allegedly from the Mayor of Concepcion. The RRT pointed out that where applicants submit clearly false documents in an attempt to shore up their claims, doubts about their credibility are warranted. It considered, moreover, that there were serious inconsistencies in the evidence given by Mr Antonio and that the claims of the close association with Pineda were not plausible. In particular, the RRT did not accept a number of assertions concerning the borrowing of a car by Mr Pineda, and did not accept that if Mr Antonio was a close friend of Mr Pineda, he would not know Mr Pineda's address. The RRT disbelieved the claim that Mr Antonio continued a friendship with Pineda knowing that he was a murderer. It also did not accept that, although Mr Antonio was not associated with the NPA, he would be perceived to be a member of the NPA. Nor did the RRT accept that the appellants would be shot on sight by the Philippine National Police in circumstances where no charges had been raised against him in the Philippines.
19 The decision-maker found that the letter of 29 December 1996 lacked credibility, with its reference to Mr Antonio and his wife having false NPA names, or non-de plumes in circumstances where Mrs Antonio never claimed any close association with the NPA.
20 As a separate matter the decision-maker considered that, even if the appellants' version of events was accepted, no Convention ground had been satisfied by the claims. This was because Mr Antonio had stated that he was not a member of the NPA and had been opposed to its methods. He also acknowledged at the hearing that he had not been charged by the Police and was not wanted by them. In these circumstances, the decision-maker considered that he held no political opinion which might put him at risk with the authorities and that the Police had not imputed one to him. The RRT, in reaching this conclusion, again took into account the country information, in particular the fact that there was an amnesty in place for NPA members.
21 The RRT considered that the appellants were not in danger because of the claim that Mr Antonio knew NPA secrets. The decision-maker did not find his evidence plausible in this respect. In any event, even if there were a risk of harm it could not arise for any Convention-related ground.
22 In summary, because of internal inconsistencies in the evidence, the decision-maker found that the claims were not credible and considered that the applications must be dismissed. Further, with respect to Mrs Antonio's application, the decision-maker found that she had no difficulties or fears to tie her in with the Convention, in particular that she had no political profile, real or imputed.
23 For these reasons the RRT dismissed the applications.
Decision of the Primary Judge
24 The matter then went before O'Loughlin J, by way of an application for review. The primary Judge referred to the relevant authorities and set out in his judgment the contents of the principal documents relied on by the applicants. His Honour referred to the strong findings on credibility. He found that there was no need for the RRT to make independent inquiries because it was open to the RRT to find that the appellants' case was lacking in credibility. At the time when his Honour gave his decision, the High Court had not given judgment in Minister for Immigration and Multicultural Affairs v Eshetu (1999) 162 ALR 577. His Honour considered it appropriate, having regard to the decision of the Full Court in Eshetu v Minister for Immigration and Multicultural Affairs (1997) 71 FCR 300, to make a positive finding that, on a fair reading of the transcript, the RRT had acted according to substantial justice and the merits of the case. His Honour rejected a submission that no reasons had been given for the decision as required by s 430 of the Act. In addition, his Honour rejected the submission that there was no evidence or other material to justify the making of the decision in respect of a number of identified subject matters. Accordingly, his Honour dismissed the application.
Grounds of appeal
25 In the Amended Notice of Appeal, the grounds raised are as follows:
1. The appellants have been placed in an intolerable jeopardy by the unpardonable breach of confidentiality, which breach is contrary to the Migration Act and the Privacy Act.
2. The primary Judge erred in not finding that:
(a) the RRT reasons were in breach of natural justice and of the purpose and requirements of s 420 of the Act.
(b) the RRT in dismissing the documents without investigation before the RRT hearing created circumstances of actual bias and breached the RRT's practice directions.
(c) the RRT in denying discovery of new evidence to the Antonios prior to the hearing were in breach of their practice direction.
(d) the RRT abused the Convention relating to the Status of Refugees by interpreting the refugee definition in a narrow and false way with regard to the Antonios dismissing the best and clearest evidence of their refugee status without investigation or proof, and adducing the least favourable and most speculative evidence against them.
Further evidence
26 Attached to the submissions of Dr Roman, on behalf of the appellants, is a bundle of material including two affidavits dated 28 May 1999 verifying documents together with other correspondence and some country information. Neither of the affidavits nor any of the country information was before the RRT. It must be borne in mind that this Court is hearing an appeal from a decision of a primary Judge whose function was to decide whether the RRT decisions on the material before that body, up to the date of its decisions on 3 June 1998, had made any reviewable error. That date is the critical time for consideration. The material now sought to be advanced cannot bear on that question because it came into consideration after that date; that is to say, the affidavits and the further country information, although the two letters the subject of those affidavits and the third letter attached to the submissions were in existence and were before the RRT. The material may have some relevance to any application to the Minister that may be made under s 417 of the Act, but it cannot be admitted into evidence on this appeal. I should note that even if this material were admitted into evidence, it does not provide substantive probative material to warrant the finding of an error in the rulings of the RRT.
Reasoning
27 The first ground of appeal, namely that there was jeopardy by the breach of confidentiality, is not an available basis for judicial review under s 476 of the Act. This Court is constrained by the provisions of that section and the restrictive provisions contained therein. There is nothing in the material to indicate that any order was made by the RRT under s 440 of the Act, which confers a discretion to order non-disclosure of evidence given before the RRT or any information given to the RRT. In those circumstances, there could be no breach of any order made by the RRT. Nor is there any indication that any relevant application for suppression of material was ever made to the RRT or the Court. As was pointed out by Counsel, there is a reference in par 34 of his Honour's judgment, to an application to tender an affidavit in relation to the RRT allegedly sending a letter to the Philippines. This affidavit was not admitted nor was any explanation given as to the basis of the allegations. In view of the foregoing, there is no substance in the first ground.
28 The second ground is that the decision of the RRT was made in breach of natural justice. However, under s 476(2)(a) of the Act, this is not an available ground for review of the RRT's decision. Likewise, as a consequence of the High Court decision in Eshetu it is clear that breach of the procedures of s 420, even if they had taken place, would not amount to a ground of review under s 476(1)(a) of the Act.
29 The third ground is that the RRT, in dismissing Mr Antonio's documents without investigation, showed actual bias and breached the RRT's own practice directions concerning investigations of the collection of evidence. In view of the findings by the RRT as to lack of authenticity of the letters from the Mayor and Chief of Police, I do not consider that there was any requirement for the RRT to make further inquiry in relation to the documents. In particular, I consider that the approach taken in par 21 of his Honour's decision was appropriate and correct in principle. That principle is that the RRT is under no general obligation to investigate the correctness or accuracy of documents submitted: see Singh (Heer) v Minister for Immigration and Ethnic Affairs (1987) 15 FCR 4 at 8-9 and Minister for Immigration and Ethnic Affairs v Singh (1997) 74 FCR 533 at 560-1. In any event, even if the RRT was under some obligation to make further investigations, failure to do so could not establish, of itself, that the decision-maker was actually biased.
30 The allegation of actual bias is said essentially to arise from the alleged failure to follow procedures. This allegation has not been made out. Reliance was also placed on the RRT's failure to make a decision most favourable to the applicants under s 424, the RRT's Annual Report dealing with rejection of claims by Philippino applicants (which was not before the RRT) and the RRT's rejection of the authenticity of the two documents, referred to earlier, relied on by the applicants. None of these matters either taken alone or cumulatively lend any support to an allegation of actual bias. Indeed, (in submission 10) Dr Roman falls back on the notion of "apprehended bias" but, of course, this is not an available ground of review. Nor is there any evidence that bias could have been reasonably apprehended.
31 Actual bias calls for a high standard of proof because it is a grave allegation: see Sun Zhan Qui v Minister for Immigration and Ethnic Affairs (1997) 151 ALR 505 at 555, per Burchett J. There must be shown to be an actual prejudgment, hostility, prejudice or predisposition to decide the question in a particular way. There are very few reported cases on actual bias. No doubt this is because of the inherent difficulty in proving an actually bias state of mind in the decision-maker at the relevant time.
32 The expression "actual bias" is often used in contrast to an apprehended bias, where there may, in fact, be no bias but a reasonable perception or apprehension of bias. By reason of the restricted provisions in s 476, the court cannot have regard to apprehended bias in judicial review of a decision of the RRT. In the present case, there is no material to support the existence or operation of actual bias in the decision-maker in this sense.
33 Actual bias cannot be established by reliance upon statistics in an Annual Report that all applications in a one year period from Philippine Nationals for a protection visa had been rejected. There may be many reasons for such rejection. For example, country information may have led the Minister to make the decisions in question. However, each case must be looked at on its own facts and the Court has no information as to the basis, of course, on which any of these rejections occurred.
34 Accordingly, this ground has not been made out.
35 Insofar as it is alleged that the RRT failed to comply with its "practice directions". I am not satisfied that any relevant non-compliance has been established, nor that such a failure would amount in itself to a valid grant of review.
36 The fourth ground of appeal is that the RRT denied discovery of new evidence prior to the hearing. The Court is not satisfied that there has been breach in this respect. The country information referred to in the decision was not specific to the appellants and did not need to be disclosed to them. In any event, the decision-maker in fact put the country information as to the amnesty to the appellants.
37 As to the fifth ground, which is that that the RRT "abused' the Convention and took an incorrect and narrow approach, I do not consider that on a fair reading of the RRT's decision there was any failure to take the correct approach. The RRT referred to the relevant case law and provisions and approached the evidence in an appropriate manner.
38 The detailed written submissions of Dr Roman are largely either a repetition of the above grounds of appeal or they are based on material which was not before the RRT. I consider that the findings as to the documents were open to the RRT on the material before it. With respect to the argument based on s 424, there is no obligation on the RRT to give reasons for not making a finding "on the papers". A decision under s 424 means that the appellants' case should proceed to a hearing at which the appellants would be given a full opportunity to present their case to the RRT. The fact that the papers were found insufficient to dispense with a hearing does not, in any way, indicate any predisposition as to the outcome of the application. The outcome of the application will depend on the material placed before the RRT on the hearing and the submissions made based on that material together with matters raised in the course of the hearing. There is no evidence that the RRT failed to properly consider or apply that provision.
39 For the above reasons I consider that the appeal should be dismissed with costs.
I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin .
Associate:
Dated: 3 September 1999
IN THE FEDERAL COURT OF AUSTRALIA
DARWIN DISTRICT REGISTRY D1 of 1999
BETWEEN: DENRY ANTONIO
First Appellant
LETICIA ANTONIO
Second Appellant
AND: MINISTER FOR IMMIGRATION
AND MULTICULTURAL AFFAIRS
First Respondent
JANET WOOD AND OTHERS
Second Respondent
JUDGE: FRENCH, TAMBERLIN AND SACKVILLE JJ
DATE: 3 SEPTEMBER 1999
PLACE: DARWIN
REASONS FOR JUDGMENT
SACKVILLE J:
40 I agree with each of the judgments that has been delivered and with the orders that have been proposed.
I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice Sackville.
Associate:
Dated: 3 September 1999
Appellants appeared in person with Dr Roman.
Counsel for the Respondent: Mr Sylvester
Solicitor for the Respondent: Australian Government Solicitor
Date of Hearing: 3 September 1999
Date of Judgment: 3 September 1999
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1995-08-24 00:00:00
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Taciak A. v Commissioner of Australian Federal Police [1995] FCA 650
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/1995/1995fca0650
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2024-09-13T22:46:46.183758+10:00
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CATCHWORDS
ADMINISTRATIVE LAW - Error of Law - Whether the Telecommunications (Interception) Act 1979 (Cth) permitted the respondent to use lawfully obtained intercept information in deciding not to reappoint a member of the Australian Federal Police - not a purpose "connected with" an "investigation" or "inquiry" - respondent not permitted to use the intercept information - construction of exceptions to statutory prohibition on infringement of privacy.
WORDS AND PHRASES - Telecommunications (Interception) Act 1979 (Cth), s 5 "Permitted purpose" - "investigation", "inquiry", "connected with".
Administrative Decisions (Judicial Review) Act 1977 (Cth), ss 5, 6.
Judiciary Act 1903 (Cth), s 39B.
Telecommunications (Interception) Act 1979 (Cth), ss 5 "permitted purpose", 67.
Australian Federal Police Act 1979 (Cth), s 26.
Australian Federal Police Regulations (Cth), reg 5(1).
Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280.
Commissioners of Customs and Excise v Top Ten Promotions Ltd [1969] 3 All ER 39; [1969] 1 WLR 1163.
Edelsten v Investigating Committee of New South Wales (1986) 7 NSWLR 222.
R. v Edelsten (1990) 21 NSWLR 542.
Coco v The Queen (1994) 179 CLR 427.
Morris v Beardmore [1981] AC 446.
Malone v Metropolitan Police Commissioner [1979] Ch 344.
Plenty v Dillon (1991) 171 CLR 635.
ALAN TACIAK v COMMISSIONER OF AUSTRALIAN FEDERAL POLICE
NG 476 of 1995
Sackville J.
Sydney
24 August, 1995
IN THE FEDERAL COURT OF AUSTRALIA)
NEW SOUTH WALES DISTRICT REGISTRY) No. NG 476 of 1995
GENERAL DIVISION )
BETWEEN:
ALAN TACIAK
Applicant
AND:
COMMISSIONER OF AUSTRALIAN
FEDERAL POLICE
Respondent
CORAM: SACKVILLE J.
PLACE: SYDNEY
DATE: 24 AUGUST 1995
MINUTES OF ORDER
THE COURT ORDERS THAT:
1. The decision made by the respondent, on or about 20 June 1995, not to reappoint the applicant as a member of the Australian Federal Police, be set aside and that the matter be remitted to the respondent for determination in accordance with these reasons.
2. The respondent pay the applicant's costs of these proceedings.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA)
NEW SOUTH WALES DISTRICT REGISTRY) No. NG 476 of 1995
GENERAL DIVISION )
BETWEEN:
ALAN TACIAK
Applicant
AND:
COMMISSIONER OF AUSTRALIAN
FEDERAL POLICE
Respondent
CORAM: SACKVILLE J.
PLACE: SYDNEY
DATE: 24 AUGUST 1995
REASONS FOR JUDGMENT
The Proceedings
Until 1 July 1995 the applicant held a position as a non-commissioned officer with the Australian Federal Police ("the AFP"). In these proceedings he applies under ss.5 and 6 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) or, alternatively, under s.39B of the Judiciary Act 1903 (Cth), for review of a decision by the respondent ("the Commissioner") not to reappoint the applicant as a member of the AFP upon the expiry of his term of office on 1 July 1995.
The proceedings raise a narrow question of law, namely, whether the Telecommunications (Interception) Act (Cth) 1979 ("the Interception Act") permits the Commissioner to use information lawfully obtained under that Act for the purpose of deciding not
to reappoint the applicant as an officer of the AFP. There is no dispute that the Commissioner did use information of that kind in making his decision not to reappoint the applicant. There is also no dispute between the parties that, if the Commissioner was not entitled to use that information, the appropriate order is that the decision should be set aside and the applicant's request for reappointment should be considered further by the Commissioner in accordance with law.
The Facts
The parties prepared an agreed statement of facts. The following is based on that statement, with some additional material derived from an agreed bundle of documents.
1. The applicant was first appointed as a member of the AFP on 24 June 1980.
2. By virtue of a determination by a delegate of the respondent made pursuant to s.57(1)(a) of the Australian Federal Police Legislation Amendment (No.2) Act 1989 (Cth), the applicant held a position as a non-commissioned police officer for a term commencing on 2 July 1990 and concluding on 1 July 1995. Section 56(3) of that Act provided that the applicant was taken to have been appointed under s.26 of the Australian Federal Police Act 1979 (Cth) ("the AFP Act") to his position.
3. On 17 May 1994 the applicant elected in writing to be considered for reappointment.
4. By letter dated 29 December 1994 from the Deputy Commissioner (Administration), the applicant was advised that consideration was being given to not reappointing him at the expiry of his term of appointment.
5. By letter to the applicant dated 29 March 1995, the Assistant Commissioner (Investigations) provided details of the matters to which he proposed to have regard in any decision as to whether or not the applicant would be reappointed. The details included the following:
"1. Your alleged conduct and actions which are the subject of a summons issued by New South Wales Police on 29 March 1995 in respect of an offence of 'pervert the course of justice' under s.319 of the Crimes Act 1900 (NSW);
2. Your agreement in a telephone conversation with [X (a relative of a registered informant)] on 29 September 1994 to obtain and provide information to him in relation to [Y] (which action you subsequently admitted in a Record of Interview with Detective Acting Superintendent Drennan on 22 March 1995);
3. ...
4. Your action on 29 September 1994 in releasing to [X] information in relation to [Y] (which action you subsequently admitted in a Record of Interview with Detective Acting Superintendent Drennan on 22 March 1995)...".
Each of the matters referred to in paragraphs 1, 2 and 4 was based on telephone conversations which had been intercepted in accordance with the provisions of the Interception Act.
6. On 5 April 1995 the Deputy Commissioner (Operations) notified the applicant that he was suspended from duty, with pay, pursuant to reg.20(1)(c) of the Australian Federal Police (Discipline) Regulations. The ground given was that the applicant may have committed a disciplinary offence in that, in March 1994, he communicated with X with intent to pervert the course of justice, in breach of s.319 of the Crimes Act 1900 (NSW).
7. By letter dated 29 May 1995, Deputy Commissioner (Administration) J.D. Allen, a delegate of the respondent, advised the applicant of his decision not to reappoint the applicant at the expiry of his term on 1 July 1995.
8. In accordance with guidelines adopted by the respondent, the applicant requested a review of the decision not to reappoint him and the matter was referred to the AFP Review Panel. The applicant, through his solicitors, made a written submission to the Review Panel on 6 June 1995.
9. The Review Panel recommended to the Commissioner, by majority, that the applicant not be reappointed.
10. In June 1995 the Commissioner considered whether he should appoint the applicant as a non-commissioned officer of the AFP. For this purpose, the Commissioner had regard to the material considered by Deputy Commissioner Allen, the applicant's submission to the Review Panel and the
recommendation of the Review Panel. The material to which the Commissioner had regard included material communicated to or obtained by the Commissioner under the provisions of the Interception Act ("the subject material").
11. Part of the subject material was obtained by New South Wales authorities under the Interception Act. This part of the subject material was communicated by the New South Wales authorities to the Commissioner pursuant to s.68(c)(ii) and (iii) of the Interception Act. The balance of the subject material was obtained by the Commissioner under the Act.
12. The subject material was lawfully obtained and (to the extent it was communicated) lawfully communicated to the Commissioner.
13. The Commissioner took into account the subject material in determining the applicant's suitability for appointment as a non-commissioned officer of the AFP.
14. The criminal charges against the applicant have not yet been determined.
The AFP Act and Regulations
Section 26 of the AFP Act provides, relevantly, as follows:
"26(1) Subject to this Act, the Commissioner may, by writing signed by him:
(a) appoint a person to be a non-commissioned police officer, being an appointment to a position within a non-commissioned rank that the person is, in accordance with the regulations, competent and qualified to hold."
The Australian Federal Police Regulations, reg.5(1) provides that, for the purposes of s.26(1), a person is competent and qualified to hold a position, if the person, inter alia,
"(d)is of good character and reputation;
(e)possesses the experience, qualifications and training specified in the selection criteria relating to the position as being required for the effective performance of the duties of that position; and
(f)having regard to any other factors that are relevant to the discharge of the duties of the position, is suitable for appointment or promotion to the position, as the case may be."
It was common ground that s.26(1) applied to the reappointment of an officer in the same way as it applied to an initial appointment.
The Interception Act
The Interception Act prohibits a person intercepting, or authorising the interception of, a communication passing over a telecommunications system: s.7(1). This prohibition is subject to a number of exceptions, of which the most significant is the interception of a communication under a warrant: s.7(2)(b). Part VI of the Interception Act sets out in detail the procedure to be followed and the criteria to be applied on an application for a warrant.
The starting point for the issue presented by this case is s.67 of the Interception Act:
"67. An officer of an agency may, for a permitted purpose, or permitted purposes, in relation to the agency, and for no other purpose, communicate to another person, make use of, or make a record of, lawfully obtained information...".
This section is of considerable importance to the scheme of the legislation, since it permits an officer of an agency to use or communicate lawfully obtained information (to which I refer as "intercept information") for a "permitted purpose", but for no other purpose. The key phrase in s.67 is "permitted purpose", which is separately defined. I shall return to the definition shortly.
The authority for a State agency to communicate information to the Commissioner is conferred by s.68:
"68. The chief officer of an agency (in this section called the "originating agency") may, personally, or by an officer of the originating agency authorised by the chief officer, communicate lawfully obtained information that was originally obtained by the originating agency:
...
(c) if the information relates, or appears to relate, to:
(i) ...;
(ii)an act or omission by a member of the Australian Federal Police that may give rise to a proceeding against that member, or to which a proceeding against that member relates, being a police disciplinary proceeding; or
(iii)misbehaviour or improper conduct of an officer of the Commonwealth;
and the originating agency is not the Australian Federal Police - to the Commissioner of Police ...".
The term "lawfully obtained information" is defined in s.6E of the Interception Act. However, there is no need to consider that definition for the purposes of these proceedings since there was no dispute that the subject information in this case was lawfully obtained.
An "agency" for the purposes of Part VII of the Interception Act (which includes ss.67 and 68) means the Australian Federal Police, the National Crime Authority and an "eligible authority of a State": s.5. An "eligible authority of a State" is defined to include the Police Force of a State, the New South Wales Crime Commission and the Independent Commission Against Corruption of New South Wales: s.5.
The term "proceeding", which is used in s.68(c)(ii), is defined in s.5 as follows:
"(a)a proceeding or proposed proceeding in a federal court or in a court of a State or Territory;
(b) a proceeding or proposed proceeding, or a hearing or proposed hearing, before a tribunal in Australia, or before any other body, authority or person in Australia having power to hear or examine evidence; or
(c) an examination or proposed examination by or before such a tribunal, body, authority or person."
"Permitted Purpose"
The definition of permitted purpose is also contained in s.5 of the Act:
"permitted purpose", in relation to an agency, or an eligible authority of a State, means a purpose connected with:
(a) in any case:
(i) an investigation by the agency or eligible authority of a prescribed offence;
(ii)the making by an authority, body or person of a decision whether or not to begin a relevant proceeding in relation to the agency or eligible authority;
(iii)a relevant proceeding in relation to the agency or eligible authority;
(i) the exercise by the chief officer of the agency or eligible authority of the powers conferred by section 68; or
(v) the keeping of records by the agency under Part VIII....
(b) in the case of the Australian Federal Police:
(i) an investigation of, or an inquiry into, alleged misbehaviour, or alleged improper conduct, of an officer of the Commonwealth, being an investigation or inquiry under a law of the Commonwealth or by a person in the person's capacity as an officer of the Commonwealth;
(ii)a report on such an investigation or inquiry;
(iii)the tendering to the Governor-General of advice to terminate, because of misbehaviour or improper conduct, the appointment of an officer of the Commonwealth; or
(iv)deliberations of the Executive Council in connection with advice to the Governor-General to terminate, because of misbehaviour or improper conduct, the appointment of an officer of the Commonwealth;
(c) in the case of the Police Force of a State:
(i) an investigation of, or an inquiry into, alleged misbehaviour, or alleged improper conduct, of an officer of that State, being an investigation or inquiry under a law of that State or by a person in the person's capacity as an officer of that State;
(ii)a report on such an investigation or inquiry;
(iii)the tendering to the Governor of that State of advice to terminate, because of misbehaviour or improper conduct, the appointment of an officer of that State...".
In construing the definition of "permitted purpose" a number of other definitions are relevant. These are the definitions relating to
l "investigation by an agency, or by an eligible authority of a State, of an offence" (s.6A(1));
l "prescribed offence" (s.5);
l "relevant proceeding" (s.6L(1)); and
l "officer" (s.6G(1)).
These definitions are as follows:
"6A(1) A reference in this Act to the investigation by an agency, or by an eligible authority of a State, of an offence is a reference to:
(a) in the case of the Australian Federal Police - an investigation of that offence, in the course of the performance by the Australian Federal Police of its functions, by members of the Australian Federal Police;
(b) in the case of a Police Force of a State - an investigation of that offence, in the course of the performance by that Police Force of its functions, by officers of that Police Force; or
(c) ...".
"prescribed offence" means
"(a)a serious offence;
(b)an offence against subsection 7(1) or section 63 [which relate to unauthorised interceptions or dealings in such interceptions].
(c)an offence against a provision of Part VIIB of the Crimes Act 1914;
(d)any other offence punishable by imprisonment for life or for a period, or maximum period, of at least 3 years; or
(e)an ancillary offence relating to an offence of a kind referred to in paragraph (a), (b), (c) or (d) of this definition."
"6L(1) A reference in this Act, in relation to an agency, or an eligible authority of a State, to a relevant proceeding is, in the case of the Australian Federal Police or a Police Force of a State, a reference to:
(a) a proceeding by way of a prosecution for a prescribed offence that is an offence against a law of the Commonwealth, or of that State, as the case may be;
(b) a proceeding under a law of the Commonwealth, or of that State, as the case may be, for the confiscation or forfeiture of property, or for the imposition of a pecuniary penalty, in connection with the commission of a prescribed offence;
(c) [certain proceedings for the taking of evidence under the Extradition Act 1988];
(d) a proceeding for the extradition of a person...;
(e) a police disciplinary proceeding that is a proceeding against a member of the Australian Federal Police, or of that Police Force, as the case may be; or
(f) any other proceeding (not being a proceeding by way of a prosecution for an offence) in so far as it relates to alleged misbehaviour, or alleged improper conduct, of an officer of the Commonwealth, or of that State, as the case may be."
"6G(1) A reference in this Act to an officer, in relation to the Commonwealth, includes a reference to:
(a) a person holding, or acting in, an office (including a judicial office) or appointment, or employed, under a law of the Commonwealth;
(b) a person who is, or is a member of, an authority or body established for a public purpose by or under a law of the Commonwealth, or is an officer or employee of such an authority or body; and
(c) ...".
Evidence in an Exempt Proceeding
In general, "[w]here a communication passing over a telecommunications system has been intercepted, whether or not in contravention of [the Interception Act], then...neither information, nor a record, obtained by the interception is admissible in evidence in a proceeding...": s.77(1)(a). However, subject to a presently irrelevant exception, a person may give lawfully obtained information in evidence in an "exempt proceeding": s.74. An "exempt proceeding" is defined by s.5B to include
"(a)a proceeding by way of a prosecution for a prescribed offence;
...
(e)a police disciplinary proceeding;
(f)any other proceeding (not being a proceeding by way of a prosecution for an offence) in so far as it relates to alleged misbehaviour, or alleged improper conduct, of an officer of the Commonwealth or of a State...".
"Police disciplinary proceeding" means "a disciplinary proceeding, before a tribunal or body that is responsible for disciplining members of the Australian Federal Police or officers of a Police Force of a State...": s.5. In the case of the AFP, the tribunal responsible for disciplining members is the Federal Police Disciplinary Tribunal established by Part VI of the Complaints (Australian Federal Police) Act 1981 (Cth).
Submissions
Mr Aldridge, who appeared for the applicant, argued that the definition of "permitted purpose" was exhaustive of the circumstances in which the Commissioner could use the subject information. The fundamental policy underlying the prohibition contained in s.67, was that intercept information was to be used for strictly limited purposes, carefully defined in the Intercept Act itself. Otherwise its use was forbidden.
Mr Aldridge submitted that paragraph (b)(i) of the definition of "permitted purpose" was not satisfied in the present case, because a decision not to appoint or reappoint an officer was different from an investigation or inquiry into alleged misbehaviour or alleged misconduct. The use of the subject material in making that decision was not use for "a purpose connected with...an investigation of, or an inquiry into, alleged
misbehaviour, or alleged improper conduct".
Mr Robberds QC, who appeared with Mr Howe for the Commissioner, accepted that the effect of s.67 of the Interception Act was that the Commissioner had to demonstrate that he had made use of the subject material for a "permitted purpose" as defined. As Mr Aldridge had anticipated, Mr Robberds relied principally upon paragraph (b)(i) of the definition of "permitted purpose" to support the submission that the subject material had been used for a permitted purpose. He submitted that, in considering whether the applicant should be appointed (or reappointed) as a non-commissioned officer, the Commissioner had conducted an inquiry into alleged misbehaviour or alleged improper conduct of the applicant. The letter of 29 March 1995 had identified the details of the alleged wrongdoing. This inquiry was undertaken by the Commissioner in his capacity as an officer of the Commonwealth and, accordingly, was within paragraph (b)(i) of the definition of "permitted purpose".
Mr Robberds argued that the Commissioner was required to makeuse of the subject material because the possibility of misbehaviour or alleged improper conduct was a factor relevant to the discharge of his responsibilities under s.26(1)(a) of the AFP Act and under the AFP Regulations. Mr Robberds also contended that a contrary construction of the definition of "permitted purpose" would lead to absurd results. This was because theCommissioner, in deciding whether or not to reappoint an officer, would have to disregard lawfully obtained information of which he was aware.
The Commissioner might therefore be required to make a judgment as to an officer's suitability for reappointment, totally at odds with the opinion he had formed on the basis of information lawfully obtained by him or communicated to him.
"Investigation" and "Inquiry"
The words "investigation" and "inquiry", as employed in paragraph (b)(i) of the definition of "permitted purpose", are not defined in the Interception Act. (Section 6A defines "investigation by an agency...of an offence", but the definition does not assist in the present context.) These words, taken in their context, do not suggest that the legislation was intended to authorise the use of intercept information for the purpose of making a decision to take action against an officer who is, or has been, the subject of an investigation or inquiry.
The dictionary definition of "inquiry" is
"1. an investigation, as to a matter.
2. the act of inquiring, or seeking information by questioning, interrogation." (Macquarie Dictionary.)
"Investigation" means
"1. the act or process of investigating.
2. a searching inquiry in order to ascertain facts; a detailed and careful examination". (Macquarie Dictionary.)
An authorisation or direction to conduct an inquiry or investigation into the conduct of a person would not, without more, ordinarily carry with it the authority or duty to decide whether the person's employment should be terminated, nor whether the person should be offered an appointment or reappointment to a position. A searching inquiry to ascertain the facts is one thing; a decision as to the action to be taken on the basis of the facts so ascertained is another.
Of course, the language employed in legislation must take its meaning from the context. In my view the distinction to which I have referred is reinforced by the definition of "permitted purpose". That definition clearly distinguishes two cases. The first is where information is used for a purpose connected with an investigation or inquiry. The second is where it is used for a purpose connected with a decision affecting the interests of a person who is the subject of the investigation or inquiry. As has been seen, paragraph (b)(i) of the definition, when taken in conjunction with s.67, authorises the AFP to use intercept information for a purpose connected with an investigation of, or an inquiry into, alleged misbehaviour or improper conduct of an officer of the Commonwealth. Likewise, paragraph (a)(i) of the definition authorises the use by an agency or eligible authority (including the AFP) of intercept information for a purpose connected with an investigation by the agency or eligible authority of a "prescribed offence", a term defined by s.5 to mean certain kinds of serious criminal offences.
But paragraph (a)(ii), again read in conjunction with s.67, specifically authorises the use by an agency or eligible authority of intercept information for a purpose connected with the making by an "authority, body or person of a decision whether or not to begin a relevant proceeding in relation to the agency or eligible authority". A "relevant proceeding" includes a police disciplinary proceeding against a member of the AFP, as well as a prosecution for a prescribed offence: s.6L(1)(a),(e).
In other words, the legislation is framed on the basis that authorising the use of intercept information for a purpose connected with an investigation or inquiry into alleged misbehaviour or alleged improper conduct is insufficient, of itself, to authorise the use of that information for a purpose connected with the making of a decision whether or not to begin a police disciplinary proceeding or other "relevant proceeding".
It may be that the distinction drawn by the definition reflects, at least in part, the fact that the agency or eligible authority responsible for an investigation, especially of a criminal offence, is not necessarily the "authority, body or person" responsible for deciding whether or not to begin a relevant proceeding such as a criminal prosecution. If anything, this reinforces the view that the reference to an "investigation" or "inquiry" in the definition of "permitted purpose" is not intended to extend to a decision to take action against a person who is the subject of the investigation or inquiry.
In my opinion, this approach to the construction of the definition is further supported by the relationship between paragraphs (b)(i) and (b)(ii). The definition proceeds on the assumption that it is necessary to authorise specifically the use of intercept information for a purpose connected with a report or an investigation or inquiry of the kind referred to in paragraph (b)(i). Had it been intended to give the terms "investigation" or "inquiry" in paragraph (b)(i) a broad meaning, it is difficult to see why paragraph (b)(ii) was necessary.
"Connected With"
In the course of oral argument, Mr Robberds contended that, even if a decision not to reappoint a member of the AFP is not within the terms "investigation" and "inquiry", as employed in paragraph (b)(i) of the definition, the use of intercept material to support such a decision is a purpose "connected with" the investigation or inquiry.
In Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 (FCA/FC), at 288, the Full Court said this:
"The words 'connected with' are capable of describing a spectrum of relationships ranging from the direct and immediate to the tenuous and remote. As Sheppard and Burchett JJ. observed in Australian National Railways Commission v Collector of Customs (SA) [(1985) 8 FCR 264, at 275] the meaning of the word 'connection' is wide and imprecise, one of its common meanings being 'relation between things one of which is bound up with, or involved in, another': Shorter Oxford English Dictionary."
(In the Australian National Railways Case, Sheppard and Burchett JJ. were quoting the comments of the Court in Collector of Customs v Cliffs Robe River Iron Associates (1985) 7 FCR 271 (FCA/FC), at 275.) The question remains in a particular case
what kind of relationship will suffice to establish the connection contemplated by the statute. This requires, to use the language in Pozzolanic, at 289, a "value judgment about the range of the Act".
The value judgment required is more likely to depend on the statutory context than on dictionary definitions. In Commissioners of Customs and Excise v Top Ten Promotions Ltd [1969] 3 All ER 85; [1969] 1 WLR 1163 (HL), the House of Lords considered the phrase "activities ancillary thereto or connected therewith". Lord Upjohn said this about the use of "simple, non-technical language" of this kind (All ER at 90; WLR at 1171):
"It is highly dangerous, if not impossible, to attempt to place an accurate definition on a word in common use; you can look up examples of its many uses if you want to in the Oxford Dictionary but that does not help on definition; in fact it probably only shows that the word normally defies definition. The task of the court in construing statutory language such as that which is before your Lordships is to look at the mischief at which the Act is directed and then, in that light, to consider whether as a matter of common sense and every day usage the known, proved or admitted or properly inferred facts of the particular case bring the case within the ordinary meaning of the words used by Parliament."
I do not doubt that the opening words of the definition of permitted purpose give the definition a broader scope than otherwise would be the case. To use an example relevant to the present case, the use of intercept information in making a decision to suspend an officer, pending the conduct of a "relevant proceeding", may not be for the purpose of the proceeding itself (paragraph (a)(iii)). However, it is likely
to be for a purpose connected with the proceeding, since the suspension is closely linked to, and dependent upon, the proceeding itself.
But even though the introductory words of the definition of "permitted purpose" expand its scope, I do not think that the use of intercept material in making a decision not to reappoint an officer is "a purpose connected with" an investigation of, or an inquiry into, alleged misbehaviour or improper conduct. The fact remains that the sub-paragraphs of the definition of "permitted purpose" clearly distinguish between an inquiry or investigation and a decision to take proceedings against an individual in consequence of such an inquiry or investigation. The opening words of the definition, in my opinion, cannot expand the scope of individual sub-paragraphs to the point where they render redundant other sub-paragraphs specifically authorising the use of intercept information. A fortiori the words cannot expand paragraph (b)(i) to the point where it authorises the use of intercept material for a purpose quite distinct from the investigation or inquiry. In particular they cannot authorise the use of intercept material for the purpose of deciding to act on the results of an investigation or inquiry by deciding not to reappoint a member of the AFP for a further term.
Mr Robberds did not suggest that any other sub-paragraph of the definition authorised the Commissioner to use the intercept information for the purpose of making a decision not to reappoint an officer of the AFP for a further term. It follows that s.67
of the Interception Act precludes the use of intercept information for this purpose.
Policy Considerations
It seems to me that, contrary to Mr Robberds' submissions, there is nothing absurd in this construction of the legislation. Under the Interception Act, an "originating agency" is entitled to communicate lawfully obtained intercept information to the AFP if (inter alia) the information relates or appears to relate to
l an act or omission of a member of the AFP that may give rise to a "proceeding" (including one before the Federal Police Disciplinary Tribunal) (s.68(c)(ii)); or
l misbehaviour or improper conduct of an officer of the Commonwealth (s.68(c)(iii)).
(An issue may arise as to whether s.68(c)(ii) and s.68(c)(iii) are intended to be mutually exclusive. However, the question was not explored in argument and I say nothing about it.)
Having received the intercept information, the AFP is entitled to use it for a purpose connected with an investigation of, or an inquiry into, alleged misbehaviour or alleged misconduct by a member of the AFP as an officer of the Commonwealth (s.67 and sub-paragraph (b)(i) of the definition of "permitted purpose"). If the inquiry reveals that the misbehaviour or improper conduct has taken place, the Commissioner may use the intercept
information for a purpose connected with making a decision whether or not to begin disciplinary proceedings (s.67 and sub-paragraph (a)(ii)). The intercept information also may be used for a purpose connected with the disciplinary proceeding itself, since it constitutes a "relevant proceeding" for the purpose of sub-paragraph (a)(iii): s.6L(e). As Mr Aldridge pointed out, this ties in with s.74 of the Interception Act, which provides that lawfully obtained information may be given in "exempt proceedings", including a police disciplinary proceeding: s.5B(e).
The policy underlying this statutory scheme is that intercept information can be used against an AFP officer, but only in proceedings (whether criminal, quasi-criminal or disciplinary) in which the officer is afforded the procedural protection of a formal hearing in a court or tribunal. The Commissioner is far from powerless in relation to an AFP officer suspected of misbehaviour or improper conduct by reason of intercept information. It is true that, on the construction I consider to be correct, the Commissioner cannot refuse to reappoint the member on the basis of the intercept information, since that is not a "permitted purpose". But the Commissioner may institute a disciplinary proceeding which, if a serious disciplinary offence is shown to have occurred, may result in the dismissal of the AFP member. Furthermore, as this case shows, the Commissioner has power under the Australian Federal Police (Discipline) Regulations, reg. 20(1) to suspend the member if
"(a)it appears to the Commissioner that a member or staff member may have committed a disciplinary offence; and
(b)the Commissioner considers that the disciplinary offence is of such a nature that the member or staff member should not continue to perform his or her duties until proceedings in relation to the disciplinary offence have been determined".
Neither Mr Robberds nor Mr Aldridge suggested that the suspension was not a purpose connected with the disciplinary proceeding. Thus neither disputed that, if necessary and appropriate, the intercept information could be used in making the judgment required by reg.20(1) (as, indeed, was presumably done in the present case).
It is relevant to note that there is nothing in the definition of "permitted purpose" which authorises the Commissioner to use intercept information for a purpose connected with alleged misbehaviour or alleged improper conduct of an applicant for a position with the AFP (assuming the applicant is not already with the AFP). Clearly, paragraph (b)(1) does not apply to such a case, since the applicant (let it be assumed) is not an officer of the Commonwealth. Thus the position concerning an applicant for reappointment, as far as the use of intercept information is concerned, is the same as that relating to an applicant for a fresh appointment.
Approach to Construction
I have not found it necessary to decide whether a restrictive approach should be adopted to the construction of the definition of "permitted purpose". In my view, the conclusion I have expressed follows, even if such an approach is not adopted. However, if it were necessary to do so, I would apply a restrictive approach to the construction of legislation authorising the use of intercept information for specific purposes.
The fundamental objective of the Interception Act is to protect the privacy of communications passing between users of telecommunications systems: Edelsten v Investigating Committee of New South Wales (1986) 7 NSWLR 222 (NSW SCt/Lee J.), at 229; R. v Edelsten (1990) 21 NSWLR 542 (NSW CCA), at 549. This is achieved, in substantial measure, by the prohibition in s.7(1) on the interception of a communication passing over a telecommunications system. As I have noted, the prohibition is subject to the carefully defined exceptions in s.7(2), of which the most important for present purposes is the interception of a communication under a warrant issued pursuant to the Interception Act itself. The criteria to be applied by an eligible judge, in determining whether to issue a warrant, include, in the case of a warrant in relation to "class 2 offence"
"how much the privacy of any person or persons would be likely to be interfered with by intercepting under a warrant communications made to or from the [telecommunications] service" (s.46(2)(a)).
As has been seen, the Act does not merely restrict the circumstances in which a communication may be intercepted, it also restricts the use that can be made of lawfully obtained intercept information. Section 67 protects individuals against the use of such information, except in the specific circumstances identified in the definition of "permitted purpose", thereby reinforcing the statutory recognition of privacy as a basic community value.
It is well established that the courts should not impute to the legislature an intention to interfere with fundamental rights, freedoms or immunities; such an intention must be clearly manifested by clear and unmistakable language: Coco v The Queen (1994) 179 CLR 427, at 436-437. In that case the High Court held that the Invasion of Privacy Act 1971 (Qld), s.43(2)(c), which authorised the use of listening devices in certain circumstances, did not confer power on a judge to authorise entry on to premises for the purpose of installing and maintaining a listening device, where to do so would otherwise constitute a trespass.
The close link between the fundamental right to be secure against trespass and the right to privacy is illustrated by the observations of Lord Scarman in Morris v Beardmore [1981] AC 446. There the House of Lords refused to read general language in the Road Traffic Act 1972 as sufficient to authorise the police to enter the home of a person involved in an accident and require that person to submit to a breath test. Lord Scarman (at 465) saw the appeal as
"concerned exclusively with the suspect's right to the privacy of his home.... The appeal turns on the respect which Parliament must be understood, even in its desire to stamp out drunken driving, to pay to the fundamental right of privacy in one's own home, which
has for centuries been recognised by the common law."
See also Plenty v Dillon (1991) 171 CLR 635, at 647, where Gaudron and McHugh JJ. referred to "the policy of the law [being] to protect the possession of property and the privacy and security of its occupier". In that case the High Court held that neither the common law nor the general words of a South Australian statute authorised a police officer, without the consent of the person in possession of land, to enter the land in order to serve a summons.
The circumstances of the present case differ from those in Coco v The Queen, Morris v Beardmore and Plenty v Dillon. So far as the evidence reveals, the intercept information was not obtained in consequence of what otherwise would have been a trespass. In any event, the intercept information was lawfully obtained. Moreover, in Malone v Metropolitan Police Commissioner [1979] Ch. 344 (Ch.D/Megarry V-C) at 372-375, Megarry V-C held that the common law does not recognise either a general right to privacy, nor a more limited right to privacy for telephone communications.
Yet in that case, Megarry V-C, while holding that there was no common law remedy for telephone tapping, said (at 381) that he
"would have thought that in any civilised system of law the claims of liberty and justice would require that telephone users should have effective and independent safeguards against possible abuses. The fact that a telephone user is suspected of crime increases rather than diminishes this requirement: suspicions, however reasonably held, may sometimes prove to be wholly unfounded."
The Interception Act (and similar State legislation relating to listening devices) establishes safeguards of the kind referred to by Megarry V-C, by prohibiting the interception of communications, except in defined circumstances, and by prohibiting the use of the intercept information, except for defined permitted purposes. Parliament itself has therefore recognised, in the context of telecommunications, the fundamental importance of protecting individual privacy, although also recognising that the value of privacy can be overridden where it conflicts with other significant community values, provided that detailed safeguards are observed.
The recognition and protection of privacy in the Intercept Act, in my view, justifies a restrictive approach to the construction of the statutory exceptions to the prohibitions on the interception of telecommunications and on the use of lawfully obtained intercept information. There is room for argument as to whether the principle of construction articulated in Coco v The Queen should be applied, with all its rigour, to the definition of "permitted purpose" in the Interception Act. But where there is genuine doubt as to whether the statutory language authorises the use of intercept information for a particular purpose, that doubt should be resolved in favour of a narrow, rather than a broad construction of the statutory authorisation. It is perhaps unnecessary to add that, should a policy judgment be made that the ability to use intercept information for appointments or reappointments to the AFP outweigh the value of privacy, it is open to Parliament to amend the legislation to
give effect to that judgment.
Other Matters
Two further points should be mentioned. First, both Mr Robberds and Mr Aldridge accepted that no assistance could be derived from the successive Second Reading Speeches relating to the Interception Act and its various amendments. Accordingly, I have made no reference to that material.
Secondly, Mr Aldridge advanced an argument that, even if paragraph (b)(i) of the definition is capable of applying to a decision not to reappoint a member of the AFP, the Commissioner or his delegates, in the present case, did not undertake an investigation of, or an inquiry into, alleged misbehaviour or alleged improper conduct of the applicant. This submission was based on the absence of definitive findings in the recommendations made to the Commissioner and on the fact that the options outlined to the Commissioner did not require him to determine whether the applicant had misbehaved or acted improperly. Having regard to the conclusions I have reached I do not need to resolve this argument.
Conclusion
For the reasons I have given, the Commissioner was not entitled, under the Interception Act, to use the intercept information in the present case for the purpose of deciding not to reappoint the applicant as a non-commissioned officer with the AFP. It was agreed that the Commissioner had used the intercept information for this purpose. In these circumstances, the appropriate order is that the Commissioner's decision should be set aside and he should be ordered to consider further the applicant's request for reappointment in accordance with law. The Commissioner should pay the applicant's costs.
I certify that this and the preceding 28 pages are a true copy of the Reasons for Judgment of the Honourable Justice Sackville.
Associate:
Dated: 24 August, 1995
Heard: 14 August, 1995
Place: Sydney
Decision: 24 August, 1995
Appearances: Mr M.R. Aldridge, instructed by Baird & Associates, Solicitors, appeared for the applicant.
Mr L. Robberds QC, with Mr T. Howe, instructed by Australian Government Solicitors, appeared for the respondent.
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SVNB v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 1125
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2004/2004fca1125
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2024-09-13T22:46:50.802826+10:00
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FEDERAL COURT OF AUSTRALIA
SVNB v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 1125
MIGRATION β Protection visa β particular social group β blood feud β applicant claimed membership of family and membership of 'Albanian men' as relevant social group β blood feud began in 1945 β applicant's grandfather persecuted for non-Convention reason β requirement under s 91S that decision maker disregard any fear of persecution held by the applicant as a result of the non-Convention related persecution of his grandfather.
Migration Act 1958 (Cth) s 91S
SDAR v Minister for Immigration & Multicultural & Indigenous Affairs [2002] FCA 1102 cited
SCAL v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCA 548 cited
STXB v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCA 860 cited
SVNB V MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS; PETER KATSAMBANIS, MEMBER, REFUGEE REVIEW TRIBUNAL AND PRINCIPAL MEMBER OF THE REFUGEE REVIEW TRIBUNAL
SAD 75 of 2004
LANDER
2 SEPTEMBER 2004
ADELAIDE
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY SAD 75 OF 2004
BETWEEN: SVNB
APPLICANT
AND: MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
FIRST RESPONDENT
PETER KATSAMBANIS, MEMBER, REFUGEE REVIEW TRIBUNAL
SECOND RESPONDENT
PRINCIPAL MEMBER OF THE REFUGEE REVIEW TRIBUNAL
THIRD RESPONDENT
JUDGE: LANDER J
DATE OF ORDER: 2 SEPTEMBER 2004
WHERE MADE: ADELAIDE
THE COURT ORDERS THAT:
1. The application for judicial review is dismissed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY SAD 75 OF 2004
BETWEEN: SVNB
APPLICANT
AND: MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
FIRST RESPONDENT
PETER KATSAMBANIS, MEMBER, REFUGEE REVIEW TRIBUNAL
SECOND RESPONDENT
PRINCIPAL MEMBER OF THE REFUGEE REVIEW TRIBUNAL
THIRD RESPONDENT
JUDGE: LANDER J
DATE: 2 SEPTEMBER 2004
PLACE: ADELAIDE
REASONS FOR JUDGMENT
1 This is an application for judicial review of a decision of the Refugee Review Tribunal (RRT) made on 27 February 2004 in which the RRT affirmed a decision of a delegate of the Minister for Immigration and Multicultural and Indigenous Affairs (the Minister) made on 26 April 2002 refusing to grant the applicant a Protection visa.
2 This matter was heard at the same time as the applicant's wife's application for judicial review of a decision of the same member of the RRT heard on the same day in connection with her application for a Protection visa.
3 The applicant is an Albanian citizen who was born on 7 November 1971. He is married to SVMB, who has also sought judicial review of a separate decision of the RRT.
4 The applicant arrived in Australia on 29 October 2001. On 6 December 2001 he lodged an application for a Protection (Class XA) visa with the Department of Immigration and Multicultural and Indigenous Affairs (the Department) under the Migration Act 1958 (Cth) (the Act). It is that application which was refused by a delegate of the Minister on 26 April 2002 and which gave rise to the review by the RRT, which affirmed the decision on 27 February 2004.
5 In his application for a Protection visa, the applicant stated:
'I left Albania because of a family feud. My grandfather was killed by our neighbour and my father killed our neighbour and so the feud went on. Our family was very poor and because of this feud we were forced to stay locked inside our house. They were determined to kill one of us and I feared for my life.'
6 The applicant claimed that the blood feud with which his family is involved began in 1945 when the applicant's grandfather struck Brahim Hasani causing his nose to bleed. His grandfather and Brahim Hasani had quarrelled over the boundary of their adjoining properties. The following day, Brahim Hasani shot the applicant's grandfather and killed him.
7 The applicant claimed that his uncle, in revenge for his father's death, killed Brahim Hasani in 1955. The applicant's uncle was arrested but never convicted of the murder.
8 The applicant claimed that in 1986 Ramadan Hasani, the son of Brahim Hasani, shot and killed the applicant's uncle in revenge for Brahim Hasani's murder. The applicant claimed that Ramadan Hasani returned to Albania, after the fall of communism in 1990 when he was shot dead by the applicant's cousin, the son of the applicant's uncle. The applicant's cousin immediately left for Italy and has not been heard of since.
9 The applicant claimed that the blood feud not only arose out of the multiple murders, to which I have referred, but also involved religion. The Hasani family are Muslim and the applicant's family, Catholic. All attempts at reconciliation of the two families have been unsuccessful.
10 The applicant said that he and his brother left Albania for Italy on 31 August 1997 as life in Albania had become intolerable because the applicant and the male members of his family were forced to stay indoors to avoid being killed. The applicant said that he was granted legal resident status in Italy in 1999 and, thereafter, re-established contact with his family whom he visited on five occasions between 1999 and October 2001.
11 In his evidence before the RRT, the applicant said that he had married in Albania on or around the time of his fourth visit to Albania from Italy. He did not take his wife to Italy when he returned. He said that he did not see his wife again until she came to Australia. He said that on his fourth trip he also was baptised.
12 The applicant claimed that he was told in 2001 that a member of the Hasani family was in Italy searching for him. The applicant decided to leave Italy and come to Australia to save his life.
13 The RRT found that the applicant was an Albanian and a Catholic, and that his family was involved in a blood feud with the Hasani family which commenced in the circumstances related by the applicant. The RRT found that the applicant was a member of a particular social group being the applicant's family. Because the RRT identified the particular social group, which consisted of the applicant's family, the RRT was bound to consider the application of s 91S. Section 91S provides:
'91S For the purposes of the application of this Act and the regulations to a particular person (the first person), in determining whether the first person has a well-founded fear of being persecuted for the reason of membership of a particular social group that consists of the first person's family:
(a) disregard any fear of persecution, or any persecution, that any other member or former member (whether alive or dead) of the family has ever experienced, where the reason for the fear or persecution is not a reason mentioned in Article 1A(2) of the Refugees Convention as amended by the Refugees Protocol; and
(b) disregard any fear of persecution, or any persecution, that:
(i) the first person has ever experienced; or
(ii) any other member or former member (whether alive or dead) of the family has ever experienced;
where it is reasonable to conclude that the fear or persecution would not exist if it were assumed that the fear or persecution mentioned in paragraph (a) had never existed.'
14 The RRT found that the blood feud had commenced as a result of a dispute between Brahim Hasani and the applicant's grandfather over the boundaries of their adjoining land. It found that the Hasani family continues to seek to harm the applicant's family in revenge for the killings that have followed that dispute. In particular, the RRT found that the dispute did not arise out of any issue of religion.
15 The RRT found that the dispute over the boundaries of land and the subsequent revenge for a series of killings were not reasons related to the Refugees Convention as amended by the Refugees Protocol.
16 The RRT followed the decisions of Merkel J in SDAR v Minister for Immigration & Multicultural & Indigenous Affairs [2002] FCA 1102 and von Doussa J in SCAL v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCA 548.
17 In SDAR v Minister for Immigration & Multicultural & Indigenous Affairs, Merkel J stated at [24]:
' It is my view that, properly construed, the fear of persecution and persecution referred to in s 91S is a fear and persecution for the reason that the person is a member of the particular family, another member of which fears persecution or has been or may be targeted for persecution for a non-convention reason. As a consequence of that non-convention fear or persecution, the fear or persecution of other family members by reason of their family membership is to be disregarded. Thus, where a family member's fear of persecution has arisen because another family member's criminal debts have not been paid, or because a blood feud has arisen from or been associated with the unlawful act of another family member, that fear of persecution and persecution is to be disregarded.'
18 Having found that the applicant's fear of persecution arose out of the blood feud which was caused by a dispute between the applicant's ancestor and Brahim Hasani, and the subsequent revenge killings, the RRT dismissed the application.
19 The applicant contends, on this application, that the RRT made a jurisdictional error because it failed to consider whether or not the applicant was a member of a broader social group other than his family. In my opinion, that submission must be rejected. It is clear from the RRT's reasons, which have been cited above, that it did consider whether the applicant was a member of a broader social group other than his own family.
20 It said:
'The applicant has alternatively argued that he fears persecution from the Hasani family for religious reasons because he is a Catholic and the Hasani family are Muslims. However I have already found that the motivation for the Hasani family seeking the applicant is because of their desire to seek revenge as part of the blood feud between their family and the applicant's family. I find that the essential and significant reason that the applicant fears persecution from the Hasani family is because of revenge under the blood feud and not for any reason related to the religion of the applicant.'
21 Later, the RRT dealt with the applicant's alternative claims and said:
'The applicant's adviser made a submission arguing that the applicant feared persecution on the basis of his membership of a particular social group being men in Albania or alternatively as a member of a particular social group being his family because of his family's imputed political opinion. However I have already found that the essential and significant reason that the Hasani family are seeking the applicant is because of their desire to seek revenge as part of the blood feud between their family and the applicant's family and not because he is either a man in Albania or because of any political opinion that has been imputed upon him or his family because of their adherence to Kanun Law. I therefore find that if the applicant were to return to Albania now or in the reasonably foreseeable future, there is not a real chance that he would be persecuted because he is a man in Albania or because of any imputed political [sic] of him or of his family.'
22 The applicant has not identified in his further contentions of fact and law what particular social group he claims membership of. At the hearing, his solicitor suggested he was a member of a particular social group, namely, Albanian men.
23 Whether he is a member of a particular social class, being Albanian men, is not relevant in this case as he is not subject to persecution because he is an Albanian man but because he is a member of his own family.
24 In my opinion, the RRT was right to conclude that the relevant particular social group which applied in the applicant's case was his family.
25 Once it found that fact it had to consider the application of s 91S.
26 It had to consider whether any other member of the family had ever experienced a fear of persecution or persecution and, if it concluded that any other member had, then the RRT had to consider whether the reason for that fear of persecution or persecution is a reason mentioned in Article 1A(2) of the Refugees Convention as amended by the Refugees Protocol.
27 Article 1A(2) relevantly provides:
'β¦ owing to a well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion, is outside the country of his nationality and is unable or, owing to such fear, is unwilling to avail himself of the protection of that country; or who, not having a nationality and being outside the country of his former habitual residence as a result of such events, is unable or, owing to such fear, is unwilling to return to it.'
28 In this case, the applicant's grandfather was persecuted. In fact, he was murdered. He was murdered because he had assaulted and had argued with Brahim Hasani about the boundaries of their land. The persecution suffered by the applicant's grandfather did not arise for a Convention reason. In those circumstances, the RRT was bound to disregard any fear of persecution or any persecution suffered by the applicant's grandfather.
29 Once the RRT reached that point, it also had to disregard any fear of persecution that the applicant has experienced, where it is reasonable to conclude that fear would not exist if it were assumed that the fear of persecution suffered by other members of his family had never existed.
30 The applicant's fear of persecution would not exist if the applicant's grandfather had not been persecuted. Section 91S of the Act applies.
31 Because of the finding referred to in [13] of these reasons, I do not have to consider Selway J's remarks in STXB v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCA 860.
32 In my opinion, having regard to the earlier findings made by the RRT, the RRT was bound to reach the conclusion it did and dismiss the applicant's claim.
33 In my opinion, the application for judicial review should be dismissed.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander.
Associate:
Dated: 2 September 2004
Counsel for the Applicant: M Clisby
Solicitor for the Applicant: M Clisby
Counsel for the Respondent: K Tredrea
Solicitor for the Respondent: Sparke Helmore
Date of Hearing: 25 August 2004
Date of Judgment: 2 September 2004
| 3,319 |
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Quy v Commissioner of Taxation [2024] FCA 524
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2024/2024fca0524
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2024-09-13T22:46:50.827701+10:00
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Federal Court of Australia
Quy v Commissioner of Taxation [2024] FCA 524
Appeal from: Quy v Federal Commissioner of Taxation [2024] AATA 245
File number: QUD 162 of 2024
Judgment of: LOGAN J
Date of judgment: 9 May 2024
Catchwords: PRACTICE AND PROCEDURE β where the applicant appeals from a decision from the Administrative Appeals Tribunal (Tribunal) to affirm the decision of the respondent to reject the applicant's objections to the assessment of his taxation liability β where the applicant applies for leave to join his wife as a party to the proceeding β where the applicant's wife was not a party to the Tribunal proceedings and is not subject to any taxation assessments in issue β where substance of interlocutory application is for the applicant's wife to represent him β where wife permitted to act as a McKenzie friend β application dismissed
INCOME TAX β where the applicant appeals from a decision from the Administrative Appeals Tribunal (Tribunal) to affirm the decision of the respondent to reject the applicant's objections to the assessment of his taxation liability β where the applicant applies for leave to join his wife as a party to the proceeding β where the applicant's wife was not a party to the Tribunal proceedings and is not subject to any taxation assessments in issue β where substance of interlocutory application is for the applicant's wife to represent him β where wife permitted to act as a McKenzie friend β application dismissed
Legislation: Administrative Appeals Tribunal Act 1975 (Cth) s 44
Taxation Administration Act 1953 (Cth)
Cases cited: McKenzie v McKenzie [1971] P 33
Division: General Division
Registry: Queensland
National Practice Area: Taxation
Number of paragraphs: 7
Date of hearing: 9 May 2024
Counsel for the Applicant: The Applicant appeared in person
Counsel for the Respondent: Ms E Luck
Solicitor for the Respondent: Australian Taxation Office
ORDERS
QUD 162 of 2024
BETWEEN: TRONG QUY
Applicant
AND: COMMISSIONER OF TAXATION
Respondent
order made by: LOGAN J
DATE OF ORDER: 9 MAY 2024
THE COURT ORDERS THAT:
1. The interlocutory application filed on 3 May 2024 be dismissed.
2. The notice of objection to competency be heard together with the appeal in Perth on 28 June 2024 at 10:15am (Western Australia time).
3. As to that hearing, appearance by a party is, subject to this order, to be in person. As to the applicant, leave be granted to appear via audio-visual link, providing that such link is available and rehearsed in advance with the registry as to its technical feasibility.
4. The respondent prepare, file and serve an indexed and paginated application book on or before 24 May 2024. Any dispute as to the contents of that application book be resolved, in the first instance, by a Registrar.
5. The applicant file and serve on or before 14 June 2024 an outline of submissions not more than 12 pages addressing:
(a) the competency of the appeal; and
(b) any questions of law raised by the appeal.
6. The respondent file and serve on or before 25 June 2024 an outline of submissions not more than 12 pages addressing:
(a) the competency of the appeal; and
(b) any questions of law raised by the appeal, together with a book of authorities.
7. There be liberty to apply.
8. Costs be reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(REVISED FROM TRANSCRIPT)
LOGAN J:
1 By an interlocutory application filed on 3 May 2024, the applicant, Mr Trong Quy, sought the joinder of his wife, Mrs Lexuan Quy (Mrs Quy), as a party to the proceedings. The proceedings are an appeal, or at least purported appeal, under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) against a decision given by the Administrative Appeals Tribunal (Tribunal) on 26 February 2024, upon a review of an objection decision under the Taxation Administration Act 1953 (Cth). The parties to that review were Mr Quy and the Commissioner of Taxation. Mrs Quy was not a party to the proceeding.
2 The relevant objection decision concerns assessments only of Mr Quy. That being so, although, because her husband is the principal income earner in the family, Mrs Quy might be indirectly aggrieved by the Tribunal's decision, she is not a party competent to challenge the Tribunal's decision.
3 Having regard to Mrs Quy's affidavit, and with the benefit of an exchange with Mr Quy concerning his interlocutory application, it is apparent that the purpose of the application is for him to have the benefit of his wife's assistance, perhaps to speak on his behalf on the hearing of the appeal. That course would be truly exceptional.
4 In the ordinary course of events, where a person chooses to act for themselves, as is their perfect right, in a court proceeding, it is for that person, as a party, to make his or her own submissions. What is possible is for a person acting for him or herself to have the benefit of an assistant who can make suggestions to them, without interrupting court proceedings, as to submissions which might be made. That type of assistant has come to be called a McKenzie friend, so called after the root English authority which established or confirmed a right to such assistance: McKenzie v McKenzie [1971] P 33.
5 Mr Quy is also entitled to have his wife's assistance in the preparation of written submissions in this case, although the responsibility for those submissions must be his as a party. He is the person who must, by signing and filing and serving the submissions, adopt them on his behalf.
6 The end result then is that, whilst I will understand the motivation for the application, it is, for the reasons which I have given, misconceived in its form. There is no basis for the joinder of Mrs Quy as a party.
7 For these reasons, I dismiss the interlocutory application.
I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Logan.
Associate:
Dated: 17 May 2024
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Transport Workers Union v Bentley [2001] FCA 671
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2001/2001fca0671
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2024-09-13T22:46:51.520236+10:00
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FEDERAL COURT OF AUSTRALIA
Transport Workers' Union v Bentley [2001] FCA 671
PRACTICE AND PROCEDURE β stay of proceedings β forum non conveniens - contest between two Australian courts exercising jurisdiction under the Workplace Relations Act 1996 (Cth) β amount of claim relatively small - applicable principles
Workplace Relations Act 1996 (Cth) ss 178, 179A
Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 applied
Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197 applied
Muller v Fencott (1981) 53 FLR 184 referred to
Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 referred to
Pegasus Leasing v Balescope P/L (1994) 63 SASR 51 referred to
ZP v PS (1994) 181 CLR 639 referred to
CSR v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 390 referred to
Anglo-Australian Foods Ltd v Von Planta, P.V. & Ors (1988) 20 FCR 32 referred to
Korn v Paisley Robertson Pty Ltd (1995) 59 FCR 251 referred to
Dudinski v Kellow and Ors [1999] FCA 390 referred to
English v Ozbanski [2000] FCA 1479 referred to
Johnson Tiles Pty Ltd v Esso Australia Ltd (2001) ATPR ΒΆ41-794 applied
Down to Earth Springwater Pty Ltd and Ors v State Bank of New South Wales (1991) 31 FCR 81 referred to
Leigh-Mardon Pty Ltd v PRC Inc [1993] FCA 458 referred to
Vision Systems Ltd v Cincom Systems of Australia Pty Ltd [1999] FCA 120 referred to
TRANSPORT WORKERS' UNION OF AUSTRALIA and DESMOND GEORGE MUIR v ARTHUR BENJAMIN BENTLEY and JOAN MARY BENTLEY
V939 of 2000
WEINBERG J
6 JUNE 2001
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY V939 OF 2000
BETWEEN: TRANSPORT WORKERS' UNION OF AUSTRALIA
FIRST APPLICANT
DESMOND GEORGE MUIR
SECOND APPLICANT
AND: ARTHUR BENJAMIN BENTLEY
FIRST RESPONDENT
JOAN MARY BENTLEY
SECOND RESPONDENT
JUDGE: WEINBERG J
DATE OF ORDER: 6 JUNE 2001
WHERE MADE: MELBOURNE
THE COURT ORDERS THAT:
1. The application for a stay of proceedings be refused.
2. The matter be listed for directions on a date to be fixed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY V939 OF 2000
BETWEEN: TRANSPORT WORKERS' UNION OF AUSTRALIA
FIRST APPLICANT
DESMOND GEORGE MUIR
SECOND APPLICANT
AND: ARTHUR BENJAMIN BENTLEY
FIRST RESPONDENT
JOAN MARY BENTLEY
SECOND RESPONDENT
JUDGE: WEINBERG J
DATE: 6 JUNE 2001
PLACE: MELBOURNE
REASONS FOR JUDGMENT
Background
1 This is an application pursuant to ss 178 and 179A of the Workplace Relations Act 1996 (Cth) ("the Act"). It concerns relief claimed by the first applicant, the Transport Workers' Union of Australia ("the TWU") on behalf of the second applicant, Mr Muir, in respect of an alleged underpayment of both overtime rates and meal allowance for the period 1 March 1993 until 27 June 1997. The statement of claim particularises the amounts which are said to be owed by the respondents.
2 The claim is for the recovery of the alleged underpayment in breach of the Transport Workers' (Oil Agents/Contractors) Award 1981.
3 The respondents, who are the proprietors of a business at Warracknabeal (near Horsham), known at different times as Bentley's Fuel and Service and/or Bentley's Fuel and Tyre Service, employed Mr Muir from about 20 June, 1966 onwards. It is unclear in what capacity Mr Muir was first employed. However, it appears from the pleadings that he was at least later employed as the driver of a heavy-load articulated vehicle.
4 The respondents, at the first directions hearing of the matter, foreshadowed, through their counsel, an oral application for a permanent stay of the proceedings
The general principles governing Stay of Proceedings
5 In Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538, the High Court outlined the principles which govern applications for stays of proceedings based upon the doctrine forum non conveniens.
6 The majority (Mason CJ, Deane, Dawson, Toohey and Gaudron JJ) approved the approach earlier taken by Deane J in Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197 where his Honour said (at 247-248):
"β¦the power of a court in this country to order that proceedings which have been regularly instituted within the jurisdiction should be dismissed or stayed on inappropriate forum groundsβ¦is a discretionary one in the sense that its exercise involves a subjective balancing process in which the relevant factors will vary and in which both the question of comparative weight to be given to particular factors in the circumstances of a particular case and the decision whether the power should be exercised are matters for individual judgment and, to a significant extent, matters of impression. The power should only be exercised in a clear case and the onus lies upon the defendant to satisfy the local court in which the particular proceedings have been instituted that it is so inappropriate a forum for their determination that their continuance would be oppressive and vexatious to him."
7 The majority in Voth referred (at 554) to the judgments of the majority in Oceanic Sun (comprised of Brennan, Deane and Gaudron JJ) and stated briefly what they took to be the common ground between them:
"Firstly, a plaintiff who has regularly invoked the jurisdiction of a court has a prima facie right to insist upon its exercise. Secondly, the traditional power to stay proceedings which have been regularly commenced, on inappropriate forum grounds, is to be exercised in accordance with the general principle empowering a court to dismiss or stay proceedings which are oppressive, vexatious or an abuse of process and the rationale for the exercise of the power to stay is the avoidance of injustice between parties in the particular case. Thirdly, the mere fact that the balance of convenience favours another jurisdiction or that some other jurisdiction would provide a more appropriate forum does not justify the dismissal of the action or the grant of a stay. Finally, the jurisdiction to grant a stay or dismiss the action is to be exercised 'with great care' or extreme caution'."
8 Their Honours went on to say (at 557):
"β¦the 'clearly inappropriate forum' test is to be preferred to the traditional testβ¦"
9 The traditional test to which their Honours referred was that adopted by Brennan J in Oceanic Sun, in which his Honour gave a narrow and precise operation to the adjectives "oppressive" and "vexatious", in accordance with the approach taken by Lord Kilbrandon in The Atlantic Star [1974] AC 436 at 477.
10 The majority in Voth said (at 556):
"The content of the "clearly inappropriate forum" test is more expansive than the traditional test applied by Brennan J. The former test, unlike the latter, recognises that in some situations the continuation of an action in the selected forum, though not amounting to vexation or oppression or an abuse of process in the strict sense, will amount to an injustice to the defendant when the bringing of the action in some other available and competent forum will not occasion an injustice to the plaintiffβ¦"
11 The majority then continued (at 559):
"In a context where the relevant test will fall to be applied in accordance with the individual perception of a primary judge, the courts of this country are better adapted to apply a test which focuses upon the inappropriateness of the local court of which the local judge will have both knowledge and experience than to a test which focuses upon the appropriateness or comparative appropriateness of a particular foreign tribunal of which he or she is likely to have little knowledge and no experienceβ¦"
12 Voth was concerned with an action brought in New South Wales for damages for negligent accounting advice given in the United States. The central issue to be determined in the present case is quite different. It arises in the context of an application having been brought in this Court in circumstances where the Victorian Magistrates' Court, pursuant to ss 177A and 178(1) of the Act, also has jurisdiction to entertain the matter. The question is whether the approach taken by the majority in Voth is applicable where there are two Australian courts which have jurisdiction over a matter, or whether the "traditional test" should be applied in such circumstances.
The respondents' submissions
13 It was submitted on behalf of the respondents that the approach taken by the High Court in Voth had no application in the present circumstances and that the correct test to be applied was that laid down in Muller v Fencott (1981) 53 FLR 184 per Toohey J (at 188):
"β¦to justify a stay of proceedings in the Federal Court, the respondents must at least show that the Supreme Court is a forum to whose jurisdiction they are amenable, in which justice can be done at substantially less inconvenience and expense and that a stay will not deprive the applicants of a legitimate personal or juridical advantage available to them in the Federal Courtβ¦"
14 In Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460, the House of Lords adopted what has been described as the "more appropriate forum" test in relation to the doctrine of forum non conveniens. That test remains the law in England and it differs significantly from the "clearly inappropriate forum test" first articulated in this country by Deane J in Oceanic Sun. In Spiliada, Lord Goff (at 474) expressed doubt as to whether the Latin tag forum non conveniens was apt to describe the principle which was not one of convenience, but of the suitability or appropriateness of the relevant jurisdiction.
15 The approach taken by Lord Goff was endorsed by Wilson and Toohey JJ, in their dissenting judgment in Oceanic Sun (at 211):
"β¦He cited with approval, as expressing the principle applicable in Scotland and now England, the classic statement of Lord Kinnear in Sim v Robinow:
"[T]he pleas can never be sustained unless the Court is satisfied that there is some other tribunal, having competent jurisdiction, in which the case may be tried more suitably for the interests of all the parties and for the ends of justice" (our emphasis)β¦
"β¦His Lordship detailed the approach which a court should take in determining whether or not to grant a stay. He did so on the basis that, notwithstanding the Latin, the object is to find, not the convenient but the appropriate forum. The court must first look for the forum with which the action has the most real and substantial connexion. β¦"
16 It was submitted on behalf of the respondents that it was only after Deane J had formulated a different approach to that taken in Spiliada in Oceanic Sun, that the traditional test ceased to be regarded as generally applicable to applications for stays of proceedings.
17 It was also submitted that the approach taken by Deane J in Oceanic Sun had to be viewed in the context of a contest between jurisdiction being exercised by an Australian court and that exercised by a court of another country. It was contended that different considerations should apply where the contest was between two Australian courts.
18 Further support for that submission was said to be derived from a decision of the Full Court of the Supreme Court of South Australia in Pegasus Leasing v Balescope Pty Ltd (1994) 63 SASR 51. Perry J (with whom Bollen and Prior JJ agreed) said (at 56):
"In my opinion, the decision in Voth v Manildra Flour Mills Pty Ltd is of application only to situations where the competing courts are a court within Australia and a court outside of Australia. Although the court did not say so expressly, it does not seem to me that in that case the High Court was propounding principles of application to jurisdictional contests within Australia."
19 Perry J referred to ZP v PS (1994) 181 CLR 639, where (at 649) Mason CJ, Toohey and McHugh JJ said:
"β¦In Voth, this Court decided that, when an issue arises as to whether a foreign forum rather than an Australian court is the forum most convenient to determine a dispute, the Australian court should hear the matter unless it is satisfied that it is a clearly inappropriate forum. [My emphasis]."
20 It was submitted that the most recent consideration by the High Court of this issue in CSR v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 390 provided still further support for the respondents' contention:
"The test which, in this country, governs a stay of proceedings in favour of proceedings in another country is as stated in Voth v Manildra Flour Mills Pty Ltd. In that case, this Court declined to adopt the more appropriate forum test laid down by the House of Lords in Spiliada Maritime Corp v Cansulex Ltd and accepted, instead, the test propounded by Deane J in Oceanic Sun Line Special Shipping Co Inc v Fay, namely, that a stay is only to be granted if the Australian court is a clearly inappropriate forum." (emphasis added)
21 There are several decisions in this Court in which, in a somewhat different legislative context, a distinction has been drawn between the principles governing a stay of proceedings based upon the doctrine of forum non conveniens, and the principles which govern a transfer to a State court under the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth), or other legislation authorising such a transfer.
22 In Anglo-Australian Foods Ltd v Von Planta, P.V. & Ors (1988) 20 FCR 34 Lee J, dealing with the cross-vesting legislation, said (at 43):
"β¦The transfer of proceedings from one court to another, however, is quite different from a stay of proceedings in the denial of exercise of jurisdiction in favour of a foreign courtβ¦"
23 Likewise, in Korn v Paisley Robertson Pty Ltd (1995) 59 FCR 251 an application had been brought in this Court under the Trade Practices Act. Also alleged was a breach of fiduciary duty for which equitable damages were sought. The question was whether the matter should be transferred to either the District Court or the Supreme Court of New South Wales (Equity Division). Beaumont J said (at 252):
"It is now accepted that, as a matter of proper judicial administration, relatively small claims should not be dealt with by this Court unless there is a federal or other special element to warrant use of this Court's jurisdictionβ¦
It is true that, ideally, this Court should endeavour to exercise jurisdiction in every case that is properly before it; but, in terms of consistency of treatment as between litigants, it is essential that the Court have a policy in this area and that that policy be exercised consistently. If this matter were simply a claim under Pt V of the TPA, I would not have hesitated to order that it be transferred to the District Court. Not only would reasons of costs dictate that course, but in the present case, both parties are resident in southern New South Wales, and it is likely that all the witnesses will also reside in that area. Since the District Court offers the facility of a circuit court in the southern regions of New South Wales, there are obvious advantages of cost, and convenience to the witnesses, if the District Court were to assume jurisdiction in this matter. On the other hand, the Federal Court in not usually able to sit outside of Sydneyβ¦"
24 It was submitted that the approach taken by Beaumont J was equally applicable to the respondents' application for a stay in the present case. That submission was pressed even though there is no provision in the Act for an application under s 178 to be transferred from this Court to another court of competent jurisdiction.
25 In Dudinski v Kellow and Ors [1999] FCA 390, Drummond J adopted a similar approach to that taken by Beaumont J in Korn. His Honour emphasised the importance of ensuring that, wherever possible, relatively small claims be litigated in the lower courts in order to save costs.
26 In English v Ozbanski [2000] FCA 1479the applicant sought to recover the sum of $5656.51, being the balance of unpaid wages, overtime, meal allowance, superannuation and termination pay. Carr J referred with approval to what was said by Beaumont J in Korn and, no doubt conscious that there was no power under the Act to transfer a proceeding to a State court, ordered that the proceeding be stayed until further order. His Honour observed that having regard to the small amount of the claim, and as a matter of proper judicial administration, the applicant should have an opportunity to institute proceedings in the Western Australian Industrial Magistrate's Court which was itself a "court of competent jurisdiction" under s 177A.
27 After dealing with the general principles governing the doctrine of forum non conveniens, counsel for the respondents turned to the particular circumstances which he contended warranted a stay in the present case. He submitted that there were several factors which, taken together, made it clear that the Magistrates' court at Horsham was a "more appropriate forum" for the hearing of the present application than this Court. These factors were identified as follows:
Β· The respondents' solicitors are based in Horsham;
Β· Legal costs are likely to be significantly lower in the Magistrates' court than if the matter were to proceed in this Court;
Β· If the matter were to be dealt with in the Magistrates' court, the respondents would, in all likelihood, be represented by solicitors, and there would be no need to engage counsel;
Β· Horsham is much nearer than Melbourne to where the parties and a number of prospective witnesses reside; and
Β· Documents relevant to the issues in dispute are located more closely to Horsham than Melbourne.
28 During the course of argument, the question arose as to whether, if the present application were stayed, and had to be commenced afresh, some of the applicants' claims would be time barred. Section 178(7) of the Act provides that an order under s 178 shall not be made in relation to so much of an underpayment as relates to any period more than six years before the commencement of the proceeding. In order to overcome this difficulty, counsel for the respondents foreshadowed that, if a stay were granted, they would undertake not to plead, or otherwise rely upon, any defence available to them under s 178(7) not otherwise available in this Court in relation to the present proceeding.
The applicant's submissions
29 The applicant referred to the decision of the Full Court in Johnson Tiles Pty Ltd v Esso Australia Ltd (2001) ATPR ΒΆ41-794, where French J (with whom Beaumont and Finkelstein JJ agreed), said (at par 90):
"β¦While Voth and Oceanic Sun Line were concerned with the exercise of jurisdiction by an Australian domestic court in the case where a foreign court would also have jurisdiction, the propositions for which Voth is now authority grow out of the general principle recognised in both cases that a court having jurisdiction has an obligation to exercise it. The circumstances in which it may decline that obligation are exceptionalβ¦"
30 It was submitted that Johnson Tiles established definitively that the approach to the doctrine of forum non conveniens taken by Deane J in Oceanic Sun Line, and favoured also by the majority in Voth, was of general application, and was not confined to cases where an Australian court and a foreign court both had jurisdiction. It was further submitted that the test to be applied in determining a contest between two domestic courts was the "clearly inappropriate forum" test, and not the traditional "more appropriate forum" test.
31 It was submitted that having commenced proceedings in this Court in relation to a purely federal claim, the applicants were entitled to have the Court exercise jurisdiction over the matter. It was contended that given that the Act expressly confers jurisdiction upon the Court in relation to claims under s 178, it could not be said that the Court was a "clearly inappropriate forum".
32 It was submitted that the principles outlined by Beaumont J in Korn were to be understood in the context of the particular facts of that case. In that regard, it was to be noted that the claim for equitable damages for breach of fiduciary duty (which formed a major part of the applicant's case in Korn)was not a federal claim, but rather fell within the accrued jurisdiction of the Court. Moreover, the claim under the Trade Practices Act was not one which fell within the Court's exclusive jurisdiction, but could, pursuant to s 86A, be transferred to a court of a State or Territory.
33 It was further submitted that the approach of the majority in Voth had been followed on several occasions by judges of this Court in the context of applications for transfer under the cross-vesting legislation.
34 In Down to Earth Springwater Pty Ltd and Ors v State Bank of New South Wales (1991) 31 FCR 81, Beaumont J considered an application for transfer from the Federal Court to the Supreme Court of New South Wales, where the substantive claim was for relief under the Fair Trading Act 1987 (NSW). The applicants contended that this Court had jurisdiction to hear the matter by virtue of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW). Beaumont J said (at 82):
"That Court is the natural forum for this dispute, concerned as it is with the construction and application of the State statute and with a claim made against the State Bank. The jurisdiction of the Federal Court is primarily concerned with matters involving the interpretation and application of Commonwealth legislation, including proceedings against officers of the Commonwealthβ¦[t]hat is to say that the Federal Court is not a court of general commercial jurisdiction.
β¦Moreover, this Court is a clearly inappropriate forum for a claim against a State Bank involving the interpretation and application of a State statute β¦"
35 See also Leigh-Mardon Pty Ltd v PRC Inc [1993] FCA 458 per Beazley J and Vision Systems Ltd v Cincom Systems of Australia Pty Ltd [1999] FCA 120 per Sundberg J.
36 It was submitted that the decision of Carr J in English v Ozbanski could be distinguished from the present case. Prior to the application having been instituted in the Federal Court, the matter had already been the subject of a hearing and determination by the Industrial Magistrate in Western Australia. It appeared that the Industrial Magistrate's decision was seriously flawed and liable to be set aside. Moreover, the applicant was plainly dissatisfied with the amount awarded to him. It was also noted that the $5656.61 sought by the applicant in English was much less than the $45,180.76 sought by the applicants in the present case.
37 In response to the factors identified by the respondents as warranting a stay, it was submitted that there were countervailing factors which favoured this matter remaining in this Court. It was noted, for example, that on occasion the Court had sat in regional locations. This had been done in order to save the parties' costs and to avoid unduly inconveniencing a large number of witnesses.
Conclusions
38 In my view, the principles governing the doctrine of forum non conveniens are correctly stated by the Full Court in Johnson Tiles, in the passage to which I have referred. That decision is in any event binding upon me.
39 It follows that the views expressed by Deane J in Oceanic Sun, as endorsed by the majority in Voth, represent the approach which must be taken when dealing with the present application for a stay. That is so notwithstanding the fact that Oceanic Sun and Voth both arose in the context of a contest between Australian courts and foreign courts.
40 The jurisdiction of this Court having been properly invoked, it would require exceptional circumstances for that jurisdiction to be declined.
41 I am not persuaded that this Court is a "clearly inappropriate forum" for the determination of the present application. That of itself is sufficient to refuse the application for a stay. However, even if I am wrong in applying that test, and the "more appropriate forum" test is correct, I would still refuse the application.
42 It must be remembered that the claim brought by the applicants raises issues, both factual and legal, which arise out of the operation of a federal statute. It is likely that questions will arise as to the proper interpretation of the Transport Workers' (Oil Agents/Contractors) Award 1981. This Court routinely deals with such questions and is therefore more suited to resolving them than is a State court, albeit one which is described in the Act as a "court of competent jurisdiction."
43 I am also concerned that the applicants may find some aspects of their claim time barred in the event that I order the present proceeding to be stayed and they are obliged to commence fresh proceedings. It is by no means clear that the limitation period set out in s 178(7) of the Act can be waived, notwithstanding the respondents' willingness to proffer an undertaking not to take the limitation point.
44 I am mindful of the reasoning of Beaumont J in Korn, and of the need to ensure that the time of this Court is not taken up unduly by the hearing of relatively small claims which do not raise any question of principle and turn largely upon their own facts. However, a claim for $45,180.76 is a substantial claim in the context of an alleged underpayment under s 178 of the Act. There is little doubt that it represents a substantial sum to the second applicant. I appreciate that in English Carr J considered that a claim for $5656.61 was so small as to warrant the application being stayed. I have no doubt that his Honour was correct in taking that course. However, I do not regard the present claim as being relevantly comparable.
45 It follows that the respondents' application for a permanent stay must be refused. Although there was some discussion as to whether costs might be ordered in the event that I refused that application, I consider that there is no basis upon which any order as to costs should be made.
I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg.
Associate:
Dated: 6 June 2001
Counsel for the Applicants: Mr S.J. Moore
Solicitor for the Applicants: Transport Workers Union
Counsel for the Respondents: Mr A.P. Young
Solicitor for the Respondents: O'Brien Lawyers
Date of Hearing: 21 March 2001
Date of Judgment: 6 June 2001
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Windus v Director of the Fair Work Building Industry Inspectorate [2013] FCA 1053
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2013/2013fca1053
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2024-09-13T22:46:51.784000+10:00
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FEDERAL COURT OF AUSTRALIA
Windus v Director of the Fair Work Building Industry Inspectorate [2013] FCA 1053
Citation: Windus v Director of the Fair Work Building Industry Inspectorate [2013] FCA 1053
Parties: JOHN ANTHONY WINDUS v DIRECTOR OF THE FAIR WORK BUILDING INDUSTRY INSPECTORATE
File number: WAD 192 OF 2013
Judge: BARKER J
Date of judgment: 16 October 2013
Catchwords: PRACTICE AND PROCEDURE β application for leave to appeal β primary judge ordered applicant to provide information relevant to applicant's entitlement to claim costs β whether Court was functus officio after making initial costs order β factors to be considered in determining application
Legislation: Federal Court of Australia Act 1976 (Cth) s 24(1A)
Federal Court Rules 1979 (Cth) O 35 r 7
Federal Court Rules 2011 (Cth) R 40.28
Cases cited: Adams v London Improved Motor Coach Builders Limited [1920] All ER Rep 340
Annfrank Nominees Pty Ltd v Connell (1991) 6 WAR 271
Caboolture Park Shopping Centre Pty Ltd (In Liq) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224
Coogi Australia Ltd v Hysport International Pty Ltd (unreported, Drummond J, 25 September 1998)
Director of the Fair Work Building Industry Inspectorate v Abbott (No 5) [2013] FCA 522
Inglis v Moore (No 2) (1979) 25 ALR 453
Noye v Robbins [No 6] [2008] WASC 266
Preston Banking Co v William Allsup & Sons [1895] 1 Ch 141
Date of hearing: 5 July 2013
Place: Perth
Division: FAIR WORK DIVISION
Category: Catchwords
Number of paragraphs: 36
Counsel for the Applicant: Mr B Ashdown
Solicitor for the Applicant: Corser & Corser
Counsel for the Respondent: Mr K Pettit SC
Solicitor for the Respondent: Clayton Utz
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
FAIR WORK DIVISION WAD 192 of 2013
BETWEEN: JOHN ANTHONY WINDUS
Applicant
AND: DIRECTOR OF THE FAIR WORK BUILDING INDUSTRY INSPECTORATE
Respondent
JUDGE: BARKER J
DATE OF ORDER: 16 OCTOBER 2013
WHERE MADE: PERTH
THE COURT ORDERS THAT:
1. The application for leave to appeal filed 12 June 2013 be dismissed.
2. The applicant for leave pay the costs of the respondent on the application for leave to appeal, to be taxed if not agreed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
FAIR WORK DIVISION WAD 192 of 2013
BETWEEN: JOHN ANTHONY WINDUS
Applicant
AND: DIRECTOR OF THE FAIR WORK BUILDING INDUSTRY INSPECTORATE
Respondent
JUDGE: BARKER J
DATE: 16 OCTOBER 2013
PLACE: PERTH
REASONS FOR JUDGMENT
1 The applicant (Mr Windus) seeks leave to appeal from the orders and judgment of Gilmour J given on 29 May 2013.
2 By the orders then made Mr Windus as the 221st respondent in WAD230/2008 was required to provide information relevant to his entitlement to claim costs in that proceeding contained in a draft bill of costs dated 6 February 2013.
3 The reasons for the making of the order are to be found in the reasons for judgment of Gilmour J dated 29 May 2013: Director of the Fair Work Building Industry Inspectorate v Abbott (No 5) [2013] FCA 522.
4 The background to the matter is set out in those reasons for judgment and may be summarised as follows:
In WAD230/2008, the Court made orders dated 7 October 2011 requiring the applicant in that proceeding (the current respondent to this leave application (referred to hereafter as the Director)) to pay the costs of Mr Windus to be taxed, if not agreed. That order was made by consent of the parties.
The solicitors for Mr Windus delivered a draft bill of costs for an amount totalling $174,858.12 including the costs of legal services said to have been rendered to Mr Windus by his former solicitors who apparently jointly represented the Australian Manufacturing Workers' Union and a Mr Andrew Holdsworth.
The solicitors for the Director raised queries concerning the draft bill of costs and asked for information including proof that payment of claimed costs had been made by Mr Windus. This was stated to be to ensure that there would be no breach of the principle that costs are payable by way of an indemnity for fees paid or incurred. The Director was concerned that Mr Windus had no actual liability to pay costs to his solicitors.
The solicitors for Mr Windus responded to that request by referring to Adams v London Improved Motor Coach Builders Limited [1920] All ER Rep 340, which was said to be authority for the proposition that the indemnity principle will be displaced only if it is established that under no circumstances does the successful party have any liability to pay costs to their solicitors. The existence of a contract of retainer and the liability of the client for the solicitors' costs was said to be presumed, and the party who challenges the existence of the retainer was said to bear the onus of establishing the absence of it: see Inglis v Moore (No 2) (1979) 25 ALR 453 at 464-465. Thus, Mr Windus said that the Director was not entitled to the information sought.
The Director's solicitors disputed the application in Australia of those cases as authority for that proposition and referred to Noye v Robbins [No 6] [2008] WASC 266 where EM Heenan J ordered in similar circumstances, with one exception, that the party claiming costs should put affidavit material before the Court disclosing all documents comprising the agreement or agreements relating to funding assistance provided to the party that was claiming costs.
The draft bill of costs of Mr Windus eventually came before a Deputy Registrar before whom the solicitors for the Director took up their concerns. The Deputy Registrar declined to deal with those concerns and advised the Director that they should be raised with the Court by way of interlocutory application, which was then made.
5 As noted above, Gilmour J considered that the material requested should be provided.
6 In the course of so doing, his Honour:
Considered that the affidavit of the solicitor for Mr Windus was silent as to the position concerning his client's retainer with his former solicitors.
Rejected a submission that he, the judge, was functus officio and could not make the orders sought by the Director, but that the Deputy Registrar exercising power under R 40.28 of the Federal Court Rules 2011 (Cth) could do so.
Considered that contrary to the submission made by Mr Windus, the present application was not aimed at either varying or setting aside the costs order dated 7 October 2011 made in his favour, but rather went to the efficacy of the orders made β it was a "supplemental order".
Considered that the Director had established that a union had paid the legal costs of Mr Windus and so had done enough to shift an evidentiary onus to Mr Windus to demonstrate what the actual terms of his retainer with his former solicitors were. Knowledge of those matters was said to be self-evidently held by Mr Windus and is not available to the Director.
Considered that the issue for present determination was not whether the retainer agreement with the former solicitors was such as to render Mr Windus liable to them for costs. Rather, the issue was to discern what are the terms, express or implied, of any such agreement with the former solicitors and the current solicitors respectively. That cannot be done by reliance on statements by the current solicitors as to the effect of any such agreement.
7 Mr Windus accepts that the factors to be considered in connection with the application for leave to appeal under s 24(1A) of the Federal Court of Australia Act 1976 (Cth) include:
whether the decision of Gilmour J is attended with sufficient doubt to warrant its being reconsidered;
whether substantial injustice would result if leave were refused, supposing the decision to be wrong;
the effective finality of the order challenged;
whether the decision is a common interlocutory order on a point of practice and procedure or involves a matter of substantive rights; and
the consequences and issues arising from the decision.
8 The primary argument made on behalf of Mr Windus is, as put to the primary judge, that he is entitled to costs unless the Director can prove an express agreement existed between him and his former solicitors that under no circumstances would he be liable to pay legal fees to his solicitors.
9 Thus, it is put that the Director's assertion that no valid retainer exists or that Mr Windus had no liability for costs "challenges matters which go to the foundation for the making of the cost[s] order itself".
10 It is further put that the second basis upon which the indemnity principle of costs has application to a matter is that the quantum of party and party costs recoverable cannot exceed the amount agreed to be paid to the solicitor by way of solicitor and client costs and this only arises in the taxation after the quantum of the bill of costs has been assessed or taxed. It does not arise in the present case as there has been no assessment or taxation of the bill of costs.
11 Thus, it is put that the circumstances of the present case do not give rise to a right to require production of documents on the basis of a "speculative possibility that any such agreement exists". In this regard, Mr Windus relies on Annfrank Nominees Pty Ltd v Connell (1991) 6 WAR 271.
12 Mr Windus submits that in substance the Director is on a fishing expedition, which is impermissible.
13 Accordingly, Mr Windus seeks to agitate the following proposed grounds of appeal:
1. The learned judge erred in law in failing to find that the Court was functus officio, and that the final orders of the Court for costs made on 7 October 2011 gave rise to an issue estoppel or res judicata.
2. The learned judge erred in law in failing to determine, or alternatively in failing to give adequate reasons as to resolving, the difference in the positions of the appellant and the respondent on the issues and application of legal principles identified in the reasons at [5] to [8].
3. The learned judge erred in law in finding that:
(a) there exists a genuine issue as to the existence of a retainer between the appellant and his solicitors;
(b) the appellant bears an evidentiary burden to satisfy the Court as to the existence of a retainer between the appellant and his solicitor (whether prior to the taxation of costs or at all);
(c) the appellant has an obligation to, or can be compelled to, produce evidence as to the terms of the retainer between the appellant and his solicitors.
4. The learned judge erred in law in finding that:
(a) there exists a genuine issue as to the terms of the retainer between the appellant and his solicitors;
(b) the appellant bears an evidentiary burden to satisfy the Court as to the terms of the retainer between the appellant and his solicitors (whether prior to the taxation of costs or at all);
(c) the appellant has an obligation to, or can be compelled to, produce evidence as to the terms of the retainer between the appellant and his solicitors.
5. The learned judge erred in law and in fact in that there was no legal or factual basis, or any proper factual basis, to grant a stay of the assessment of the appellant's bill of costs.
14 The broad principles about the entitlement of a party to receive its costs on an indemnity basis are not in doubt. They do not need to be repeated here.
15 The simple fact is that the primary judge ordered that Mr Windus should be entitled to his costs and made that order.
16 Then, when the matter came before the taxing officer, the Deputy Registrar, the question about the production of materials concerning the retainer with the former solicitors, and the present solicitors, was raised.
17 Thus, this case raises a very practical issue in relation to how the Court or a taxing officer should deal with the question, where it is raised, of the terms of a retainer. One can immediately see that ordinarily, where a party has acted by its solicitor on the record, it will be assumed by all concerned that the solicitor was properly retained and that there was some liability on the part of the client to pay the reasonable costs of the solicitor for so acting.
18 No doubt, a court can also rely on the professional, ethical obligations of a solicitor not to advance a bill of costs in circumstances where the client/party did not incur costs and had no obligation to pay legal costs to that solicitor. The failure of the solicitor to recognise and act upon such a professional or ethical obligation plainly would have professional consequences were it to be ignored and later come to light.
19 There is no suggestion made on behalf of the Director that a party obliged to meet a costs order, as the Director is here, is ordinarily entitled to demand the production of documents and in that sense go on a fishing expedition to find out precisely what the terms of the retainer were.
20 Where, however, some reasonable grounds are put forward to raise the question whether the party entitled to the benefit of the costs order has any liability for costs to the solicitor whose costs are the subject of recovery, obviously the position is different.
21 The primary position, in substance, as I understand it, of Mr Windus here is not that an order may not be made requiring the provision of information about a relevant retainer, but as to whether the matter of the retainer properly arises before the taxing officer or the Court. The first and primary argument is that as the Court was functus officio, it could no longer consider the costs position, after it made the costs order in favour of Mr Windus.
22 The primary judge, as noted above, considered it was entirely appropriate, when the question of material relating to the retainer was raised before the Deputy Registrar, that the Deputy Registrar should have ruled that it was a matter to be raised with the Court by way of an interlocutory application.
23 The primary judge had little doubt that that was an appropriate course of action and in that regard referred to Coogi Australia Ltd v Hysport International Pty Ltd (unreported Drummond J, 25 September 1998) (Coogi). In Coogi, the applicant applied by motion for orders that certain respondents produce for inspection copies of documents evidencing the relevant retainer with the solicitor on the record. The question of the power or efficacy of the Court in making any orders about the retainer was raised.
24 Unlike the present case, however, the trial judge had not made any final orders in the primary proceeding or about costs. At p 2 of the reasons of Drummond J, his Honour noted that he had first published reasons for concluding that the applicant's copyright infringement action should be dismissed but did not go on to make any orders reflecting his conclusions. Instead, he directed the respondents to bring into Court minutes of the orders to which they were entitled once the question of costs had been dealt with. He indicated he would receive written submissions on costs. His Honour therefore noted that he retained "full power to entertain any application that might be made in the action, including that [now] made by the applicant".
25 His Honour added that in any event, even if judgment had been given and perfected, the orders sought by the applicant for materials concerning the retainer would be orders which the Court could, in his opinion, properly make in the exercise of its power to make "supplemental orders". In this his Honour relied on Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224 (White Industries).
26 His Honour in this regard noted that the question whether the respondents were under any liability to pay their solicitors' fees was not one that the applicant was bound to litigate at trial. It only became an issue when the outcome was known and only then if the applicant was exposed to a costs order. His Honour observed that it was an issue entirely appropriate to be left to be determined by the Court in the exercise of the special jurisdiction to make supplemental orders after judgment on the issues raised by the pleadings.
27 It will be appreciated in this regard that the circumstances in Coogi were therefore different from those which currently present themselves. The primary judge in fact made a final order concerning the costs and the question of dealing with the "supplemental" issue as to the terms of the retainer was not raised at any relevant time before that order was made. Plainly if it had been then the circumstances in Coogi would have been replicated and the power of the primary judge to make orders about production of materials concerning the retainer would not have been in any doubt at all.
28 This then raises the question whether the decision in White Industries is applicable. In White Industries Caboolture sued White Industries and White Industries cross-claimed. Caboolture lost both actions and was ordered to pay a substantial sum and costs. After judgment had been entered it came to the attention of White Industries that there was reason to believe that Flower & Hart, the solicitors acting for Caboolture, had commenced the proceeding against it in such a manner as to amount to an abuse of process. White Industries both appealed and commenced a notice of motion in the original proceeding seeking an order that its costs be paid by Flower & Hart on an indemnity basis. Flower & Hart filed a notice of motion disputing the jurisdiction of the Court to make such an order, claiming that the judgment having been entered and an order of costs having been made, there was no jurisdiction in the Court to reopen the case and that none of the exceptions to the general principle prohibiting a court from varying orders once entered had any application to the case.
29 At 234-235, the Full Court (Lee, Hill and Cooper JJ) referred to O 35 r 7 of the Federal Court Rules 1979 (Cth) then applicable, which set out exceptions to the general rule that the Court will not vary or set aside judgments. None was considered relevant in that case. The Court noted, however, that White Industries relied upon what was said to be the power of courts to make supplemental orders where circumstances make it necessary to do so. Their Honours considered that in an appropriate case a supplemental order may be made after judgment is entered and in that regard referred to what was said by Lord Lindley in Preston Banking Co v William Allsup & Sons [1895] 1 Ch 141 (Preston Banking Co) at 143-144. Their Honours made the point that critical to the jurisdiction of the Court is first that the application not be one in any way to vary or alter the initial order. They observed that the application before the Court in White Industries did not seek to do that and was, in the sense used in the cases, a "supplemental order".
30 In Preston Banking Co, Lord Lindley, at 143-144, had observed that the application before the Court in that case was not an application to alter an order on the ground of some slip or oversight. Nor was it a case in which the order had not been drawn up. It had been drawn up and it expressed the real decision of the Court. That being so, the Court had no jurisdiction to alter it. His Lordship observed that if the application had proceeded on the theory that the order made was "right, and that circumstances had since occurred which had rendered a supplemental order necessary, the Court might have entertained the application". His Lordship then observed, however, that the application proceeded on the theory that the earlier order made was wrong.
31 As noted above, the primary judge here proceeded to entertain the interlocutory application of the Director on the basis that he had the power to make a supplemental order. In my view, having regard to the authorities just cited, it is most probable, with respect, that that is so. In this case, by bringing the interlocutory application, the Director did not seek to question the correctness of the costs order. Rather, a supplemental order was sought that was relevant to the taxation of costs that would ensue from the making of the order. Given that it is well understood that a party who has the benefit of a costs order can only recover legal costs for which the party has some liability to meet, and in circumstances where the Director had raised questions as to the existence of any such relevant retainer, it was in my view open to the Court to assume the jurisdiction to make a supplemental order and, on the facts before it, to do so. In any event, in my view, the decision of the primary judge is not attended with sufficient doubt to warrant it being reconsidered and therefore that the order his Honour made should be the subject of appeal.
32 On that basis, the first proposed ground of appeal should not be the subject of leave.
33 Nor do I consider that there is any sufficient basis to suggest that his Honour failed to give adequate reasons, as proposed ground of appeal 2 suggests. Mr Windus in essence is simply wishing to put contentions to the contrary of the findings actually made by his Honour.
34 As to proposed grounds 3, 4 and 5, in my view it was plainly open to his Honour, being possessed of jurisdiction, to have formed a view that there was a genuine issue as to the existence of a retainer and therefore to have made the orders he did.
35 No question of injustice can arise from the refusal of leave as the entire costs entitlement will be considered at taxation in due course.
36 In these circumstances I would refuse to grant leave to appeal.
Order
1. The application for leave to appeal filed 12 June 2013 be dismissed.
2. The applicant for leave pay the costs of the respondent on the application for leave to appeal, to be taxed if not agreed.
I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker.
Associate:
Dated: 16 October 2013
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Minister for Immigration and Citizenship v Islam [2010] FCA 1295
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2010/2010fca1295
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2024-09-13T22:46:52.452774+10:00
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FEDERAL COURT OF AUSTRALIA
Minister for Immigration and Citizenship v Islam [2010] FCA 1295
Citation: Minister for Immigration and Citizenship v Islam [2010] FCA 1295
Parties: MINISTER FOR IMMIGRATION AND CITIZENSHIP v MIZAN UL ISLAM AND ADMINISTRATIVE APPEALS TRIBUNAL
File number: ACD 29 of 2010
Judge: BENNETT J
Date of judgment: 19 November 2010
Date of hearing: 19 November 2010
Place: Canberra
Division: GENERAL DIVISION
Category: No Catchwords
Number of paragraphs: 12
Counsel for the Appellant: Ms A Mitchelmore
Solicitor for the Appellant: Clayton Utz
Counsel for the Respondents: The First and Second Respondents did not appear
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION ACD 29 of 2010
BETWEEN: MINISTER FOR IMMIGRATION AND CITIZENSHIP
Appellant
AND: MIZAN UL ISLAM
First Respondent
ADMINISTRATIVE APPEALS TRIBUNAL
Second Respondent
JUDGE: BENNETT J
DATE OF ORDER: 19 NOVEMBER 2010
WHERE MADE: CANBERRA
THE COURT DIRECTS:
1. The first respondent to file and serve any written submissions by noon on 1 December 2010.
2. The applicant to file and serve any written submissions in reply by 4 p.m. on 6 December 2010.
3. The first respondent to file and serve any application for a further oral hearing by noon on 1 December 2010.
4. That any further oral hearing will take place on 10 December 2010 at a time to be fixed by the Court.
5. The applicant to serve the first respondent with a copy of these directions.
6. The applicant to attempt to make telephone contact with the first respondent:
(a) to notify him that these directions have been made and will be sent to him; and
(b) before 1 December 2010, to find out whether he received the directions and to ask him what his intentions are;
and to inform the Court of the outcome of this.
THE COURT NOTES:
7. The first respondent is not obliged to make any application for any further oral hearing if he wishes either:
(a) not to file and serve written submissions; or
(b) only to file and serve written submissions.
8. The Court will send a copy of these directions to the first respondent's home address.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court's website.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION ACD 29 of 2010
BETWEEN: MINISTER FOR IMMIGRATION AND CITIZENSHIP
Appellant
AND: MIZAN UL ISLAM
First Respondent
ADMINISTRATIVE APPEALS TRIBUNAL
Second Respondent
JUDGE: BENNETT J
DATE: 19 NOVEMBER 2010
PLACE: CANBERRA
REASONS FOR JUDGMENT
1 These proceedings involve an appeal by the Minister for Immigration and Citizenship (the Minister) from a decision by the Administrative Appeals Tribunal (the Tribunal) to set aside the decision to refuse Mr Islam's application for a Temporary Business Entry Class UC Visa pursuant to s 501(2) of the Migration Act 1958 (Cth).
2 When this matter was called this morning there was no appearance for Mr Islam. The matter was called outside the court and there was still no appearance. Attempts were made by the Court to contact Mr Islam on the mobile phone number that he had provided with the notice of appearance that he had filed. On each occasion the phone was not answered. A message was left on the message bank service for that phone.
3 Mr Islam was served with the original application on 18 August 2010. An affidavit of service in support has been filed. Mr Islam's notice of appearance was filed on 25 August 2010. In the notice of appearance the word solicitor has been struck out and substituted with "self-litigant". The notice of appearance is signed, apparently, by Mr Islam.
4 This morning, at the suggestion of the Court, the Minister's solicitor rang the telephone number for Mr Islam's home address. Mr Islam answered the phone. There was a conversation between him and, I assume, a solicitor from Clayton Utz. Mr Islam said to that solicitor, at first, that he did not wish to come to Court without a lawyer. He then spoke with Ms Linacre, the solicitor handling this matter for the Minister, and affirmed that he needed to speak to his lawyer. Ms Linacre asked Mr Islam, 'have you instructed a lawyer?'. He said, 'no' but said that he would immediately call the barrister who appeared for him before the Tribunal.
5 Ms Linacre said in evidence that at first Mr Islam indicated that he would come to the Court immediately. He also informed Ms Linacre that he had only heard about the hearing five minutes earlier. After Ms Linacre informed Mr Islam that I had requested that if he were spoken to and does come to Court he should bring with him all the information that he had received, Mr Islam confirmed that he had received, by express post, the Minister's written submissions and list of authorities which were filed on 15 November 2010 and, I assume, sent to him by express post on or about that date. When asked whether he had received the court book that had been sent to him on a previous occasion by express post, Mr Islam said that he had not received it.
6 I have a copy of the letters that were sent to Mr Islam's home address by express post:
Β· on 12 October 2010 enclosing a copy of the directions made by Jagot J at a directions hearing;
Β· on 28 October 2010 purportedly enclosing a copy of the court book and also stating: 'If you have any queries, please contact our office'. A series of telephone numbers were given; and
Β· on 15 November 2010 enclosing the Minister's submissions and list of authorities.
7 The notice of listing was also sent to Mr Islam's home address. It is dated 26 October and sets out the date and time for hearing.
8 Prior to being informed that Mr Islam would not attend and while it was thought that he was on his way to the Court, I permitted counsel for the Minister to open, to go through the issues in the proceedings and the relevant legislation, with the intention that that could be summarised and repeated for Mr Islam when he attended, having understood that it would take less than half an hour for him to arrive to the Court from his residence.
9 Subsequent conversations with Mr Islam made it clear that he does not intend to come to Court without a lawyer. He is, of course, entitled to have legal representation in this matter and I take into account the fact that it is a matter of great importance to him. However, I do have some difficulty with the proposition that he only heard about this hearing when he was first contacted by telephone today. Even if he had not received the notice of listing and the court book, he did receive the submissions. Mr Islam has engaged in previous legal proceedings, not least before the Tribunal and, as I understand it, there was an earlier set of proceedings that he was involved in that resulted in the matter being referred back to the Tribunal. He would not be a stranger to what happens during the course of litigation and, in particular, the concept of submissions being filed prior to a hearing.
10 In the circumstances, I do not place any weight upon Mr Islam's assertion that he only heard about this application today. Even if he had not understood that there was an imminent hearing, he should have understood that there was a hearing in the immediate future and taken steps to inform himself of the date of that hearing. In the circumstances, as this matter has been set down for half a day and some time has already been spent on dealing with the fact that Mr Islam has not attended, I propose to continue to hear counsel for the Minister. Of course, Mr Islam will be able to obtain a copy of the transcript of what took place today if he or his legal representatives wish to do so.
11 I will make directions that Mr Islam, who has received the submissions, be given some opportunity to file submissions in writing. The Minister will have the opportunity to make any further submissions in reply in writing.
12 If Mr Islam wishes to make an application for a further oral hearing and the opportunity to make oral submissions I will consider that. However the time will not be open-ended. I would hear any further oral submissions on 10 December 2010. I will, of course, take into account the availability of counsel for the Minister as this is a part-heard matter.
I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bennett.
Associate:
Dated: 24 November 2010
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Lindsey v Philip Morris Ltd [2004] FCA 797
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2004/2004fca0797
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2024-09-13T22:46:56.500546+10:00
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FEDERAL COURT OF AUSTRALIA
Lindsey v Philip Morris Ltd [2004] FCA 797
PRACTICE AND PROCEDURE β application for dismissal of proceeding as an abuse of process β applicant bringing substantially the same proceeding in the Federal Court and in Supreme Court of Victoria β respondent seeking order under O 21 r 2 β whether bringing one application in the Federal Court and appealing from an adverse judgment constitutes "habitually and persistently" instituting a proceeding
WORDS AND PHRASES β "habitually and consistently"
Federal Court Rules, O 20 r 2, O 21 r 2
Lindsey v Philip Morris Ltd [2004] FCAFC 40 cited
DAVID JAMES LINDSEY v PHILIP MORRIS LTD
NO V129 OF 2004
HEEREY J
16 JUNE 2004
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY V129 OF 2004
BETWEEN: DAVID JAMES LINDSEY
APPLICANT
AND: PHILIP MORRIS LTD
RESPONDENT
JUDGE: HEEREY J
DATE OF ORDER: 16 JUNE 2004
WHERE MADE: MELBOURNE
THE COURT ORDERS THAT:
1. Pursuant to O 20 r 2 of the Federal Court Rules, the proceeding be dismissed.
2. The motion for security for costs filed on 25 May 2002, be adjourned sine die.
3. There be no order as to the costs of the motion for security for costs.
4. The applicant pay the respondent's costs of the proceeding, including the costs of the motion for summary judgment, notice of which was filed on 25 May 2004.
5. Leave to appeal is refused.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY V129 OF 2004
BETWEEN: DAVID JAMES LINDSEY
APPLICANT
AND: PHILIP MORRIS LTD
RESPONDENT
JUDGE: HEEREY J
DATE: 16 JUNE 2004
PLACE: MELBOURNE
REASONS FOR JUDGMENT
1 The applicant commenced this proceeding on 12 February 2004 and filed a statement of claim on that day. On 15 June 2004 he filed a fresh statement of claim, without leave, as he was entitled to do under the Federal Court Rules.
2 On 25 March 2004 the respondent filed two notices of motion. The first sought orders pursuant to O 20 r 2(1)(a), (b) and (c), or the Court's implied powers, that the proceeding be dismissed or permanently stayed on the grounds that no reasonable cause of action is disclosed, and that it is frivolous or vexatious or an abuse of the process of the court.
3 The motion also sought an order pursuant to O 21 r 2 that the applicant shall not, without leave of the court, institute any proceeding against the respondent in the court and that the proceedings shall not be continued by the applicant without leave of the court.
4 The second notice of motion seeks, pursuant to O 28 r 3, an order that the proceeding be stayed pending the payment into the court by the applicant of the sum of $45,000 as security for payment of the respondent's costs and that in the event the applicant fails to pay that sum by a date and time to be fixed, the proceedings stand dismissed.
5 The applicant complains of injuries caused by smoking the respondent's Marlboro cigarettes. Substantially the same claim was brought in this Court last year and it was the subject of a summary judgment application which was heard by Kenny J. On 21 January 2004 her Honour gave judgment ordered that the proceeding be dismissed: Lindsey v Philip Morris Limited [2004] FCA 9.
6 Her Honour noted that the applicant, having been declared a vexatious litigant in the Supreme Court of Victoria, had on three occasions unsuccessfully applied for leave to bring proceedings against the present respondent in that court. Details of those applications are set out at [44]-[46] of her Honour's judgment. The applicant attempted to appeal against her Honour's judgment. On 26 February 2004 that appeal was dismissed as incompetent: Lindsey v Philip Morris Limited [2004] FCAFC 40. The Full Court held that her Honour's order was interlocutory and no leave had been obtained as required by O 52 r 10(2). Their Honours further said at [22] that there was no material before the Court which
"gives a reason for the granting of leave or sets out the nature of the case and the questions involved in any reasonably intelligent way."
7 The present motions were heard on 31 May and adjourned part-heard until today. Counsel for the respondent addressed the new statement of claim and correctly pointed out that there were manifest defects in it. It proceeds on the assumption that the Trade Practices Act 1974 (Cth) (TPA) creates some general duty of care. Further, there was no pleading in respect of the alleged failure to warn, what warnings the respondent should have given and what the applicant would have done had those warnings been given.
8 Insofar as the statement of claim relies on the allegation of unconscionable conduct contrary to s 51AA of the TPA, as counsel pointed out, that section only came into operation in 1992, which on the applicant's own account was after he had ceased smoking Marlboro cigarettes, the only product apparently of which he complains in this proceeding.
9 However, notwithstanding those defects, I think there is a more fundamental reason why this proceeding should be dismissed as an abuse of process. The applicant has sought remedies for his complaints in courts of competent jurisdiction. He will not accept the decision of those courts. He simply brings proceedings again and again. This is self-evidently an abuse of process of a serious kind and warrants dismissal. As Kenny J said at [47], it did not appear to her that the applicant's case was any better in this Court than in the Supreme Court.
10 Turning to the O 21 r 2 application, the terms of that rule are as follows:
"2. Vexatious proceeding against a person
Where any person (in this rule called the vexatious litigant) habitually and persistently and without any reasonable round institutes a vexatious proceeding against any person (in this rule called the person aggrieved) in the Court, the Court may, on application by the person aggrieved, order that the vexatious litigant shall not, without leave of the Court, institute any proceeding against the person aggrieved in the Court and that any proceeding instituted by the vexatious litigant against the person aggrieved in the Court before the making of the order shall not be continued by him without leave of the Court."
11 It should be noted that, in contrast to O 21 r 1, the vexatious proceedings referred to are proceedings in the Federal Court. While I accept that within the meaning of the rules an appeal is a separate proceeding from a proceeding at first instance, I do not think the bringing of one proceeding in this court and appealing from an adverse judgment would constitute "habitually and persistently" instituting proceedings within the ordinary meaning of those words in the context of O 21 r 2.
12 There remains O 21 r 1, which provides as follows:
"1. Vexatious litigant
(1) If a person institutes a vexatious proceeding and the Court is satisfied that the person has habitually, persistently and without reasonable grounds instituted other vexatious proceedings in the Court or any other Australian Court (whether against the same person or against different persons), the Court may order:
(a) that any proceeding instituted by the person may not be continued without leave of the Court; and
(b) that the person may not institute a proceeding without leave of the Court.
(2) An order under this rule may be made:
(a) on the Court's own motion; or
(b) on the application of the Attorney-General or Solicitor-General of the Commonwealth or of a State or Territory; or
(c) on the application of the Registrar."
13 The respondent does not have standing to bring an application under that rule. I raised with counsel for the respondent the question whether the respondent would invite me to make an order of the Court's own motion. Counsel did extend such an invitation, but on reflection I think it would deny the applicant procedural fairness if I were to invoke this rule today.
14 However, I note that the respondent's solicitors have been in correspondence with the Commonwealth Attorney-General, correspondence which has been of course disclosed to the applicant. The Attorney-General, in a letter dated 5 May 2004 to the respondent's solicitors, referred to the present motions and indicated that in the circumstances he felt it would be inappropriate for him to make an application to the court under O 21 r 1 at the present time.
15 The Attorney-General concluded by saying that he and the Solicitor-General would appreciate being informed of the outcome of the respondent's application under O 21 r 2 and any related developments. I think all I can or should say is that this seems an appropriate matter to be referred to the Attorney-General for his consideration as to whether an application should be made under O 21 r 1.
16 The only other matter is the notice of motion seeking security for costs. That now becomes unnecessary and, as did Kenny J, I will simply adjourn that sine die.
17 So, the orders of the court are that:
1. Pursuant to O 20 r 2 of the Federal Court Rules, the proceeding be dismissed.
2. The motion for security for costs, notice of which was filed on 25 May 2002, be adjourned sine die.
3. There be no order as to the costs of the motion for security for costs.
4. The applicant pay the respondent's costs of the proceeding, including the costs of the motion for summary judgment, notice of which was filed on 25 May 2004.
18 The applicant seeks leave to appeal from the decision I have given today pursuant to the respondent's motion, that the proceeding be dismissed. It is clear that leave is required. As the Full Court said on the purported appeal from KennyJ's judgment already referred to, [2004] FCAFC 40 at [5]:
"Although the primary judge's judgment finally disposed of the proceeding, on the current state of authority it is to be regarded as an interlocutory one (see Re Luck (2003) 203 ALR 1). Consequently, an appeal lies only by leave (see section 24(1A) of the Federal Court of Australia Act 1976 Commonwealth)."
19 The applicant applies orally, pursuant to O 52 r 10(1). In support of his application he said that my decision was "biased, wrong and unconstitutional". He said the decision was not a decision of a judge who maintained judicial independence, because it made mention of the decision of Kenny J and her Honour's words have "influenced" me to some degree. He also said that an appeal would not be an abuse of process because it is "part of the process".
20 I refuse leave. I do not think an appeal would have any reasonable prospects of success. The main complaint β that I improperly had regard to the decision of Kenny J β is self-evidently without merit. It was obviously necessary to consider the judgment of another judge bearing on the same matter, more particularly when the essence of the abuse of process was the applicant's own disregard of that decision. So the application for leave to appeal is refused.
I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey.
Associate:
Dated: 23 June 2004
Counsel for the Applicant: In person
Counsel for the Respondent: S O'Meara
Solicitor for the Respondent: Allens Arthur Robinson
Date of Hearing: 16 June 2004
Date of Judgment: 16 June 2004
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DZABC v Minister for Immigration and Citizenship [2012] FCA 1000
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2012/2012fca1000
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2024-09-13T22:46:56.604130+10:00
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FEDERAL COURT OF AUSTRALIA
DZABC v Minister for Immigration and Citizenship [2012] FCA 1000
Citation: DZABC v Minister for Immigration and Citizenship [2012] FCA 1000
Appeal from: DZABC v Minister for Immigration and Citizenship [2012] FMCA 322
Parties: DZABC v MINISTER FOR IMMIGRATION AND CITIZENSHIP and MARGARET FOWLER IN HER CAPACITY AS INDEPENDENT MERITS REVIEWER
File number: NTD 21 of 2012
Judge: MANSFIELD J
Date of judgment: 13 September 2012
Date of corrigendum: 8 October 2012
Catchwords: MIGRATION β application for protection visa - section 91R(3) βwhether the Reviewer made the necessary finding that the conduct was engaged in for sole purpose of strengthening refugee claim
Legislation: Migration Act 1958 (Cth)
Cases cited: Minister for Immigration and Multicultural and Indigenous Affairs v VOAO [2005] FCAFC 50 cited
Minister for Immigration and Citizenship v SZJGV (2009) 238 CLR 642 cited
Date of hearing: 28 August 2012
Place: Darwin
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 33
Counsel for the Appellant: N. Karapanagiotidis
Solicitor for the Appellant: Northern Territory Legal Aid Commission
Counsel for the Respondents: T. Anderson
Solicitor for the Respondents: Australian Government Solicitor
FEDERAL COURT OF AUSTRALIA
DZABC v Minister for Immigration and Citizenship [2012] FCA 1000
CORRIGENDUM
1. In paragraph 29, line 7 of the Reasons for Judgment, the words "otherwise than" be deleted.
2. In paragraph 30, line 4 of the Reasons for Judgment, the word "serviceable" be amended to "reviewable".
I certify that the preceding two (2) numbered paragraphs are a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justice Mansfield.
Associate:
Dated: 8 October 2012
IN THE FEDERAL COURT OF AUSTRALIA
NORTHERN TERRITORY DISTRICT REGISTRY
GENERAL DIVISION NTD 21 of 2012
BETWEEN: DZABC
Appellant
AND: MINISTER FOR IMMIGRATION AND CITIZENSHIP
First Respondent
MARGARET FOWLER IN HER CAPACITY AS INDEPENDENT MERITS REVIEWER
Second Respondent
JUDGE: MANSFIELD J
DATE OF ORDER: 13 SEPTEMBER 2012
WHERE MADE: DARWIN
THE COURT DETERMINES THAT:
1. The appeal be allowed.
2. The orders of the Federal Magistrates Court of 20 April 2012 be set aside.
3. The first respondent pay to the appellant his costs of the application including in the Federal Magistrates Court.
4. The appellant be granted leave to seek such further orders as are necessary and appropriate by 12 October 2012.
5. The first respondent be granted leave to make submissions in reply by 2 November 2012.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NORTHERN TERRITORY DISTRICT REGISTRY
GENERAL DIVISION NTD 21 of 2012
BETWEEN: DZABC
Appellant
AND: MINISTER FOR IMMIGRATION AND CITIZENSHIP
First Respondent
MARGARET FOWLER IN HER CAPACITY AS INDEPENDENT MERITS REVIEWER
Second Respondent
JUDGE: MANSFIELD J
DATE: 13 SEPTEMBER 2012
PLACE: DARWIN
REASONS FOR JUDGMENT
INTRODUCTION
1 The appellant is a 24 year old Iranian man, who arrived in Australia on 16 April 2010. On 11 July 2010 the appellant requested a Refugee Status Assessment (RSA), which was undertaken on 13 July 2010. The result of the RSA was that the appellant was not entitled to a protection visa under the Migration Act 1958 (Cth) (the Act). The appellant requested an Independent Merits Review of this decision on 25 February 2011. The appellant was interviewed by the Independent Merits Reviewer (the Reviewer) on 7 February 2011 and on 17 June 2011 the Reviewer affirmed the decision of the delegate of the Minister.
2 The appellant applied for judicial review of the Reviewer's decision in the Federal Magistrate's Court on 29 July 2011 based upon jurisdictional error including the denial of natural justice. On 20 April 2012 that Court dismissed the application. The present appeal is an appeal from the decision of the Federal Magistrate.
THE REVIEWER'S REASONS
3 The Reviewer's reasons are summarised at [12]-[17] of the Federal Magistrate's decision. Specifically, the Reviewer made the following findings:
(a) the appellant was an Iranian national;
(b) the appellant participated in two protests following the 2009 elections in Iran, in June and December 2009;
(c) the appellant during the December 2009 protest attacked and injured a Basiji when his safety and more directly the safety of one of his friends was imperilled by another Basiji;
(d) the appellant fled from the protest through fear of arrest and as a result of his treatment, was fearful of being sought by the Basiji and had received advice from his father to leave Tehran until things calmed down;
(e) the appellant was not in fact identified at the demonstration;
(f) the appellant's claim that the Basiji in fact came to his house after he had fled and detained his brother lacked credibility;
(g) it was plausible that if the applicant was targeted because of his assaulting a Basiji or because of his participation in the protests, he may still have been able to get through the airport on his own passport;
(h) the appellant used his own passport to leave Iran; and
(i) the appellant was not in fact on a "black list" and did not leave the country illegally.
4 Consequently, the Reviewer was not satisfied that the harm feared by the appellant for his imputed political opinion was well founded and his claim to a protection visa was rejected.
5 On the claim based on the appellant's conversion to Christianity in Australia, the Reviewer:
(a) found the appellant's interest in religion prior to his arrival in Australia was minimal;
(b) was not satisfied that the appellant's conversion to Christianity was engaged in otherwise than for the purpose of strengthening his claim to be a refugee;
and consequently, having regard to s 91R(3) of the Act, that claim was also rejected.
THE FEDERAL MAGISTRATE'S REASONS
6 There were in effect three grounds of review advanced before the Federal Magistrates Court:
(a) the Reviewer misconstrued and/or misunderstood the Convention ground of imputed political opinion and/or conflated the grounds of actual and imputed political opinion and/or failed to deal with the claim of imputed political opinion as properly understood and/or misunderstood the nature and basis of the appellant's fear on the ground of imputed political opinion;
(b) the Reviewer misconstrued s 91R(3) of the Act in purporting to disregard the appellant's conduct in Australia and did so on the basis of a misunderstanding and/or misconstruction of the case or claim advanced and/or there was no supporting evidence for the finding that there was no evidence that the appellant was interested in religion before coming to Australia and that finding was integral to the determination that the appellant's conduct in Australia was to be disregarded; and
(c) the Reviewer did not afford procedural fairness to the appellant in that she did not bring to the appellant's attention, nor allow him to comment on, information from which the Reviewer drew a conclusion adverse to the appellant's claim, namely the UK Home Office Report 2010.
7 The appellant's contention with respect to Ground 1 was that the Reviewer completely disregarded the possibility and/or probability of him being recognised or identified in the context of a face-to-face confrontation, but focused on any link between his political opinion and pre-existing political profile, and did not therefore consider recognition at the protest as the basis for his imputed political belief.
8 The Federal Magistrate at [23]-[26] did not accept this ground, finding instead that the findings were based on the Reviewer's assessment of the appellant's evidence. The Reviewer did not accept the appellant's evidence that the Basiji came to the appellant's house, or detained the appellant's brother. The only evidence accepted by the Reviewer was that the appellant was at the demonstration and that he intervened when his friend was being attacked, but that he had escaped without arrest. The Reviewer concluded that there was no basis to believe that he was identified on that occasion or any other occasion. The Federal Magistrate considered that there was no error in the approach of the Reviewer, that the findings made by her were open on the evidence and that the findings were not illogical or irrational.
9 With respect to Ground 2, the appellant contended that the Reviewer erred in concluding that the appellant's conversion to Christianity should be disregarded under s 91R(3) because there was no evidence of the appellant's earlier interest in religion; when in fact that was not the evidence at all. The appellant submitted that the Reviewer ignored his evidence that he had been constrained from exploring other religions whilst in Iran. At paragraph [101] of her decision, the Reviewer held:
In this case, there is no evidence of [the appellant] being interested in religion prior to coming to Australia and in fact he was not only a non practising Muslim but told the Reviewer that he was not religious, though he did state that he had attempted to explore religion whilst a teenager in Iran. Given this the Reviewer does not accept that [the appellant] had any real religious conviction prior to coming to Australia and whilst he may have been interested in exploring the tenets of other religions, he did not express any religious interest or indicate any propensity to become religious prior to coming to Australia. [The appellant] has not satisfied me that he engaged in this conduct otherwise than for the purpose of strengthening his refugee claim and therefore this behaviour must be disregarded.
10 Given the Reviewer's earlier observations that he had been interested in other religions since he was about 17 years old, and that since he had come to Australia he had a feeling of freedom that precipitated his move towards Christianity, the Federal Magistrate considered it "most puzzling that the IMR reviewer expressed herself in paragraph [101] as she did in the opening sentence by stating there was no evidence of the applicant being interested in religion prior to coming to Australia" and that the words constituted "unhappy phrasing": at [34]-[35]. The Federal Magistrate was particularly mindful of the second sentence in the above quoted paragraph, considering that it demonstrated that the Reviewer weighed in her deliberations the statement made by the appellant concerning his interest in learning about religions other than Islam before leaving Iran. His Honour added at [36] of his reasons:
It is worthwhile noting that his expressed interest was in respect of "religions other than Islam" and not particularly Christianity. In addition, the IMR noted that from the evidence the applicant did not express "any religious interest or indicate any propensity to become religious prior to coming to Australia." When those two matters are considered against the observation in the first sentence at paragraph [101] that there was "no evidence" of being interested in religion prior to the applicant coming to Australia, it seems self evident that as a matter of reasonable construction what the IMR was observing was a conclusion that despite the matters she was informed of, she did not as a matter of fact accept them. Chronologically, that observation also has to be considered against her remarks at paragraph [85] where she noted that she considered "that the claimant at times gave evidence that was not supported by the country information and that was at times not credible or believable. The Reviewer does not accept all of the matters put by the claimant in the interview in support of his claim and will discuss this below."
11 The Federal Magistrate concluded that the appellant's statements concerning his earlier interest in religion had been subject to an evaluative process and it could not be considered to have been ignored, overlooked or misunderstood.
12 The third ground of appeal concerned the failure to direct the appellant to the information contained in the UK Home Office Report August 2010 which was relied upon by the Reviewer. At paragraph [110] the Reviewer observed:
The Reviewer notes that the country information indicates that bribery and corruption do exist in Iran. However, the UK Home Office Report referred to above, indicates that the prevalence of corruption relates to routine services where the paying of a bribe ensures service. The assessment by at least the UK Home Office is that security checks at Tehran airport are very strict and that it is "highly improbable" that a person using a forged passport would be able to pass through the various checkpoints and leave the country, though the Reviewer notes the information available which indicates that the disorganisation of some authorities in Iran and the possibility that a person may not be detected due to some human error.
13 The appellant submitted that this matter underlay the conclusion formed in paragraph [111] that the appellant had left Iran on his own passport and that his departure was not "orchestrated by his father" by payment of bribes.
14 The Federal Magistrate accepted that the report was not drawn to the appellant's attention, but considered that such omission did not occasion unfairness to the appellant: at [54]-[56]. The Federal Magistrate's finding in respect of Ground 3 has not been appealed against.
GROUNDS OF REVIEW
15 There were two grounds of error asserted against the Federal Magistrate, each founded on the failure to find error on the part of the Reviewer.
16 It is therefore convenient to identify as a starting point the two errors asserted on the part of the Reviewer which, in the light of the Federal Magistrate's decision, are maintained. They are that the Reviewer's decision involved:
(a) error in misunderstanding and/or misconstruing the appellant's claim of imputed political opinion by conflating the grounds of actual and imputed political opinion and/or failing to deal with the claim of imputed political opinion as properly understood; and
(b) error in misunderstanding and/or misconstruing and/or ignoring the claims advanced by the appellant that in Iran had been constrained from exploring other religions.
17 As to the first error, the Reviewer not only accepted that the appellant had been caught up in the two protests, particularly that in December 2009, but that low-profile protestors had been so involved.
18 It was the appellant's case that he had been particularly targeted after that protest because he had attacked one of the Basiji when trying to assist his friend.
19 The Reviewer said at [92] of her reasons:
The Reviewer is unable to determine how [the appellant] would have been recognised at the demonstration. There is no evidence that [the appellant] had a political profile or was actively involved in any political process or activity or that there was any reason for the Iranian authorities to view him as having a political opinion other than his attendance at the demonstration on Ashura day 2009. [The appellant] showed no commitment to the Green Movement and has no evidence of having any knowledge of such a movement. When asked by the Reviewer if and how he identified himself at the demonstrations he was unable to respond. When told about the use of green wrist and head bands worn by members of the Green Movement as outlined in the country information, he said that he wore a green wrist band. The Reviewer does not accept that [the appellant] identified himself as part of the Green Movement at the demonstration on 27 December 2009 in this way and finds that he was not personally recognised at this demonstration.
20 Then the Reviewer rejected the appellant's evidence that the Basiji had come to his house shortly after the December protest, and had arrested and detained his brother for some days. She found it was not credible, partly based on its detail and partly due to the way the appellant presented at interview. She concluded that, because the appellant was not recognised at the protest, the Basiji had not come to his house to find him. The fact that the appellant was not on a blacklist and did not leave the country illegally was also supported, she found, by the means he left the country and the vague and inconsistent detail of his evidence about how he did so. She concluded that the appellant's father had not paid a bribe so the appellant could leave the country, but simply that he had done so lawfully on his own passport.
21 The appellant through counsel contended that that analysis conflated actual and imputed political opinion, or misunderstood the foundation for the appellant's fear of persecution.
22 I do not accept that the Reviewer fell into reviewable error in this respect. In my view, the Reviewer, having accepted that in general terms the appellant was not a person with political profile, addressed the appellant's claims about why he might be identified as a person who was perceived to have a political profile adverse to that of the Iranian authorities. She then correctly understood the claim that such a profile might be attributed to him by reason of what happened at the protest in December 2009. She concluded on the basis of country information that the mere fact of his attendance at the protests would not have attracted the attention of the authorities, because he would have had no earlier political profile. She also concluded that his particular actions at the December protest would or may have led to the Basiji targeting him at that time, but that despite his attacking one of their members, he was not then identified by the Iranian authorities. The overall assessment of the reliability of the appellant's evidence at the hearing supported that conclusion.
23 In my view, the Reviewer's analysis shows that the Reviewer properly understood the appellant's claim, and made findings which were available to her. It may be that other minds may have taken a different view about whether there was a real chance that the appellant might have been identified as the person who attacked one of the Basiji at the December protest β whether by information procured from his friend who he said was arrested at the time or from other informants, or from filming taken at the time β but the Reviewer has positively made a finding that that did not occur. However, the Court's role, both on appeal and before the Federal Magistrate, is not to substitute its view of appropriate factual findings for those which the Reviewer has made on the material.
24 In short, as to the first ground, I agree with the Federal Magistrate that the Reviewer did not misunderstand or misconstrue the appellant's claim of a well-founded fear of persecution by reason of imputed political opinion, and did not fail to address that claim as it was put.
25 As to the second contention, concerning the proper application of s 91R(3) of the Act, the Reviewer recognised that there is a serious risk of harm to the appellant if he were to return to Iran and to be found to be an apostate by having converted from Islam to Christianity: at [97] of the Reviewer's reasons.
26 The heading "Findings and Reasons" in the Reviewer's reasons has been divided into four subheadings: Credibility (in which the Reviewer expresses some caution about accepting all the appellant's claims); Findings of Fact; Conversion to Christianity; and Assessment of Claims. The last of the four headings deals only with the claim based on the imputed political opinion; it does not address the claim based on apostasy. Similarly, the heading "Findings of Fact" relates only to the claim based on the imputed political opinion claim. The "Credibility" section is also general in terms and does not refer to particular evidence or findings pertaining to this topic. In essence, it is specifically dealt with only under the heading "Conversion to Christianity."
27 After referring to the terms of s 91R(3), the Reviewer said at [100]:
However, for s.91R(3) to be enlivened the conduct must have been engaged in for the sole purpose of strengthening the refugee claim (MIAC v SZJGV [2009] HCA 40 (French CJ, Hayne, Crennan, Kiefel and Bell JJ, 30 September 2009), per French CJ and Bell J at [13], per Crennan and Kiefel JJ [59]-[60]) [sic]. Therefore, if the Reviewer is satisfied that the claimant's conduct was engaged in for some other concurrent purpose, then it cannot be disregarded.
28 There is no express finding that the appellant had not genuinely converted to Christianity. Paragraph [101] of the Reviewer's reasons, set out above, purports to be a recital of the appellant's evidence. It is, as the Federal Magistrate pointed out, a "puzzling" description of his evidence. It does not accurately state his evidence, which was that he had never felt able to explore Christianity in Iran due to religious constrictions. It does not refer to his evidence about the reasons why he had adopted Christianity and how he practises it. He said he had been interested in other religions since he was about 17 years old, but that it was not possible to explore other religions in Iran. Those matters were noted earlier in the Reviewer's reasons.
29 Section 91R(3) provided the obstacle to the appellant's claim. In my view, the Reviewer has, however, fallen into error in the application of that provision. That is for two related reasons. Where the evidence is that it was not possible in Iran to express any propensity to become religious (other than through Islam), and the Reviewer has not specifically criticised that evidence, it does not follow that the failure outwardly to demonstrate that propensity of itself supports the conclusion that the conversion was otherwise than for the purpose of strengthening the appellant's claim to a protection visa. The related reason is that, in deciding whether his claimed conversion to Christianity was otherwise than to strengthen his claim for a protection visa, it was necessary for the Reviewer to decide whether the appellant's evidence was or was not reliable about his earlier interest in religion whilst in Iran, and whether he (and presumably others) were constrained by the authorities from exploring such an interest and additionally, whether his claimed conversion to Christianity was a genuine one. The reviewer has not make express findings about those topics.
30 I have not overlooked the contention of the first respondent that the Reviewer is shown to have had regard to the relevant material (cf Minister for Immigration, Multicultural and Indigenous Affairs v VOAO [2005] FCAFC 50 esp at [13]). Consequently, the first respondent contends that no serviceable error on the part of the Reviewer has been demonstrated. However, for the reasons already given, I am persuaded that the Reviewer has not done so as, had she done so, her findings would have been explicit rather than (as is presently necessary to sustain her decision on this topic) to be inferred from a recital of the relevant words of a s 91R(3) in a paragraph of her reasons which are otherwise, as the Federal Magistrate said, somewhat puzzling. Explicitly finding that the appellant's conversion to Christianity was not in fact genuine would have left much more room for her conclusion, even without positively and expressly rejecting each item of the relevant evidence. This is in line with the explanation of the section given by Crennan and Kiefel JJ in Minister for Immigration and Citizenship v SZJGV (2009) 238 CLR 642 where they stated relevantly at [61]:
β¦ Regardless of the conclusion stated, because the person's sole purpose is the point of reference, the decision-maker will necessarily determine whether the person had only one motive, that to which para (b) refers. And if the decision-maker is not satisfied by the explanation given for the conduct, the decision-maker will have determined that the person's only motive was the strengthening of the person's claim.
31 I am persuaded that the absence of such a finding in the circumstances reflects the error on the part of the Reviewer to which I have referred.
32 In my view, allowing for the need to be cautious about applying too keen an eye to the perception of error on the part of the Reviewer, I respectfully disagree with the Federal Magistrate who, on balance, thought that [101] of the Reviewer's reasons reflected no more than unhappy phrasing. I think it is erroneous to have taken from the general cautious observations for concluding that the Reviewer's reasons were no more than unhappy phrasing. I am persuaded that the Reviewer, while apparently understanding the terms of the law in s 91R(3), has failed to properly to apply it to address and make the necessary findings of fact.
33 I will therefore allow the appeal, and set aside the orders of the Federal Magistrate, including as to costs. I will also order that the first respondent pay to the appellant his costs of the application to the Federal Magistrate and of this appeal. I will also give leave to the appellant to seek such further orders as are necessary and appropriate in the light of my findings, such leave to be exercised within 28 days by a written submission and any proposed draft orders. The first respondent will then have 21 days to respond to that material. It may, however, be unnecessary to make any further orders, as the effect of my decision in practical terms is that the appellant should be entitled to a fresh Independent Merits Review of his claim and the first respondent may be prepared to facilitate that occurring.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.
Associate:
Dated: 13 September 2012
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Wood v Prentice [2001] FCA 1050
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2024-09-13T22:46:56.913058+10:00
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FEDERAL COURT OF AUSTRALIA
Wood v Prentice [2001] FCA 1050
BANKRUPTCY β notice of objection to discharge from bankruptcy β whether a notice of objection complied with Bankruptcy Act 1966 (Cth) s 149 β objection to form and substance of notice β requirement to refer to evidence or other material establishing objection β requirement that copy of notice of objection given to bankrupt together with a notice setting out the bankrupt's options for review β formal defect or irregularity β requirement to state reasons for objecting to discharge
Bankruptcy Act 1966 (Cth)ss 149, 149C, 149F, 306
Van Reesema v Official Receiver in Bankruptcy (1983) 50 ALR 253 considered
Re Hall (1994) 14 ASCR 488 distinguished
Re Graeme John Harris [1997] FCA 627 considered
Minister for Immigration and Multicultural Affairs v Gutierrez [1999] FCA 990 cited
Wimalaweera v Minister for Immigration and Multicultural Affairs [1999] FCA 1823 cited
Thirunavukkarasu v Minister for Immigration and Multicultural Affairs [2001] FCA 551 cited
Re Ansett; Ex parte Ansett v Pattison (1995) 56 FCR 526 distinguished
IN THE MATTER OF RICHARD BOYNE WOOD
RE: RICHARD BOYNE WOOD
EX PARTE: RICHARD BOYNE WOOD v MAXWELL WILLIAM PRENTICE
N 7180 OF 2001
TAMBERLIN J
SYDNEY
3 AUGUST 2001
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY 7180 OF 2001
IN THE MATTER OF RICHARD HERBERT BOYNE WOOD
RE: RICHARD HERBERT BOYNE WOOD
BANKRUPT
EX PARTE: RICHARD HERBERT BOYNE WOOD
APPLICANT
MAXWELL WILLIAM PRENTICE
RESPONDENT
JUDGE: TAMBERLIN J
DATE: 3 AUGUST 2001
PLACE: SYDNEY
REASONS FOR JUDGMENT
1 By application filed on 9 April 2001, Mr Wood seeks a declaration that the notice of objection to his discharge from bankruptcy dated 31 August 1999, filed with the Official Receiver is invalid and is of no force and effect and an order that it be set aside.
2 Mr Wood is a barrister practising in New South Wales. He was admitted as a Barrister of the Supreme Court in 1963. He was made bankrupt on 20 August 1996 and he filed a statement of affairs dated 31 August 1996. The statement of affairs shows assets of $7,875.89 and liabilities of $505,607.33. But for the notice of objection he would have been discharged from bankruptcy on 31 August 1999.
3 Mr Wood gave evidence that on or about 31 August 1999 he received a letter from Prentice Parbery Barilla ("PPB") enclosing a notice of objection to discharge from bankruptcy by the trustee, Mr M Prentice. The letter stated that there was also enclosed a notice setting out Mr Wood's options relating to the objection notice in accordance with s 149F(1)(a) of the Bankruptcy Act 1966 (Cth)("the Act"). Mr Wood says that, although he received the options notice at that time, he does not recollect receiving the notice of objection to discharge with the letter. He says that on 2 September 1999, he telephoned Mr D Rose of PPB and informed him of this. He then received a facsimile dated 2 September 1999, which is a copy of the notice of objection. That document, which is the subject of this application, states:
"NOTICE OF OBJECTION TO DISCHARGE
I, Maxwell William Prentice of Level 15, 25 Bligh Street, Sydney, the Trustee, hereby object to the discharge of Richard H Wood of Manorbrier, Cootamundra in the State of New South Wales from bankruptcy by force of Section 149B of the Bankruptcy Act 1966 on the following grounds:
1. Section 149D(1)(f) 'the Bankrupt failed to pay to the Trustee an amount that the Bankrupt was liable to pay under Section 139ZG'.
The Bankrupt has been assessed to pay income contributions that were due and payable on the following dates:
Date Due CAP Year Amount
$
17 May, 1997 1996/97 47,751.86
17 May, 1998 1997/98 40,588.52
On 20 August 1999, I received Mr Wood's Cash Flow Report that discloses his income and expenditure for the 1998/99 CAP Year.
As the two previous assessments remain outstanding, no income assessment has yet been forwarded to Mr Wood for the CAP Year for 1998/99.
However, I estimate that Mr Wood's income assessment for the CAP Year for 1998/99 will be comparable to his two previous years.
In summary, I have not yet received any of the assessed outstanding income contributions totaling [sic] $88,340.38, nor have I received any income from him for the 1998/99 CAP Year
In my opinion, creditors will directly benefit from my Notice of Objection to Discharge since, if Mr Wood continues to practice as he has done in the past, creditors will be entitled to enjoy a further five (5) assessment periods of Mr Wood's income.
Further evidence on all matters is available from my office if required.
This objection has the effect of extending the bankruptcy to the 31st day of August 2004.
DATED this 31 day of August 1999.
M.W. PRENTICE
Trustee"
4 Mr Wood says that he did not receive a copy of the notice of objection until 2 September 1999, when he received the facsimile. He says that he never received a letter enclosing both the notice of objection and a document setting out his options relating to the trustee's objection to discharge. I accept this evidence. It is not in dispute that he received both documents. However, Mr Wood's case on this aspect is that he did not receive the two documents together as required by s 149F of the Act.
5 The notice of objection to the discharge dated 31 August 1999 was filed with the Official Receiver in Bankruptcy on 2 September 1999.
6 Section 149 of the Act provides for automatic discharge of a bankrupt from bankruptcy at the end of a three year period from the date on which the bankrupt files his or her statement of affairs. Under s 149B the trustee is empowered, before a bankrupt is discharged from bankruptcy, to file with the Official Receiver a written notice of objection to the discharge. Section 149C imposes requirements in relation to this notice. It provides:
"149C Form of notice of objection
(1) A notice of objection must:
(a) set out the ground or each of the grounds of objection, being a ground or grounds set out in subsection 149D(1) but not being a ground or grounds of a previous objection to the discharge that was cancelled; and
(b) refer to the evidence or other material that, in the opinion of the trustee or Official Receiver, establishes that ground or each of those grounds; and
(c) state the reasons of the trustee or Official Receiver for objecting to the discharge on that ground or those grounds."
7 Section 149D sets out the grounds of objection. The relevant ground is as follows:
"149D Grounds of objection
(1) The grounds of objection that may be set out in a notice of objection are as follows:
β¦.
(f) the bankrupt failed to pay to the trustee an amount that the bankrupt was liable to pay under section 139ZG;
β¦"
8 Section 149F(1) provides:
"149F Copy of notice of objection to be given to bankrupt
(1) As soon as practicable after a notice of objection is filed by the trustee or Official Receiver:
(a) the trustee or Official Receiver must give a copy of the notice to the bankrupt together with a notice to the effect that the bankrupt may do either or both of the following:
(i) request the Inspector-General to review the decision of the trustee or Official Receiver to file the notice of objection;
(ii) subject to the Administrative Appeals Tribunal Act 1975, make an application to the Administrative Appeals Tribunal for a review of the decision of the trustee or Official Receiver to file the notice of objection; and
β¦
(3) A contravention of this section does not affect the validity of the objection. (Emphasis added)
149G Date of effect of objection
An objection takes effect at the beginning of the day on which details of the notice of objection are entered in the National Personal Insolvency Index.
9 Section 139P(1) of the Act provides that if the income that a bankrupt is likely to derive during a contribution assessment period, as assessed by the trustee under an original assessment, exceeds the actual income threshold amount applicable in relation to the bankrupt at the time the assessment is made, the bankrupt is liable to pay the trustee a contribution in respect of that period. Section 139ZG provides that the contribution that a person is liable to pay under section 139P(1) is payable at such time as the trustee determines.
10 The case for Mr Wood is essentially that the notice does not comply with the requirements of s 149C(1)(b) and (c). It is also submitted that the requirements of s 149F(1)(a) have not been satisfied because Mr Wood was not given a copy of the notice of objection together with a notice setting out the bankrupt's options as required by that provision and that, as a consequence, the notice in invalid.
Reference to evIdence β s 149C(1)(b)
11 It is contended that the reference to the evidence or other material in the notice of objection ought to be sufficient to enable the bankrupt to identify, for the purpose of review, what was relied on, in the opinion of the trustee, to make out the ground. It is said that the notice did not do this and is therefore invalid.
12 It should be taken into account, when considering the question of what is meant by a requirement that there should be a reference to evidence or other material, that the section allowing for automatic discharge confers a substantial advantage on a bankrupt and that, therefore, some care should be taken in making an objection. In Van Reesema v Official Receiver in Bankruptcy (1983) 50 ALR 253 at 264, Sheppard J said that there was cast on:
" β¦ the trustee β¦ an obligation to apply his mind carefully to the question of whether there is sufficient reason or basis for the entry of an objection upon one or more of the available grounds. By that I do not mean that the objector must be satisfied that the ground exists upon the basis of any absolute standard. But, in my opinion, he must turn his mind to the problem and ought not to enter the objection unless reasonably satisfied of the correctness of what the ground implies.
β¦
This means that from the point of view of bankrupts the section [providing for automatic discharge] confers a substantial advantage. A bankrupt knows that at the end of a period of three years after his bankruptcy he will be discharged and thus freed from a number of obligations and disabilities which arise upon bankruptcy."
13 In that case, his Honour found that the ground stated in the notice to objection was not a ground provided for in the Act and that, therefore, the defect was not a mere irregularity. He considered (at 268) that the defect went to "the very substance of the matter". Accordingly, he held that there was no valid objection.
14 The second case referred to by Counsel for Mr Wood is the decision of Branson J in Re Hall (1994) 14 ACSR 488. In that case, the bankrupt applied for a declaration that the notice of objection by the trustee was invalid for failure to comply with s 149C(1)(b) and (c). The ground relied on by the trustee under s 149D(1) was that:
"(b) after the date of the bankruptcy the bankrupt continued to manage a corporation as mentioned in section 91A of the Corporations Law without having been given leave to do so under section 229 of that Law;"
15 The relevant part of the notice in that case stated:
"The bankrupt has, since the date of bankruptcy continued to manage Yandall Pty Ltd, a company of which he was a director and of which his spouse is a director and which is his employer. From information provided by the bankrupt and his accountant it appears that the financial affairs of the bankrupt and the company are intermingled."
16 Her Honour said, at 492:
"The notice of objection should put the bankrupt in a position where he or she can identify, and if necessary search out, the evidence or other material relied upon for the purpose of the objection. Only if the bankrupt is in a position to do this can he or she sensibly determine [what course of action to adopt, namely; whether to make representations, seek a review, question the weight accorded to such evidence, or provide answering material] β¦"
17 Her Honour went on to say (at 493) that she did not intend to suggest that the above alternatives, which I have summarised in brackets, are exhaustive of the purposes served by the reference in the notice of objection to the evidence or other material that, in the opinion of the trustee, establishes the grounds of objection. Her Honour considered that the notice of objection in that case did not refer to the evidence or other material because it did not provide the bankrupt with sufficient information to enable him to make a sensible and informed decision as to whether the objection could or should be challenged and what course of action to adopt in doing so.
18 When considering the operation of s 149C(1)(b), it must be borne in mind that the evidence in question need only "be referred to" and that there is no requirement that it be set out. The words "refer to" do not require any listing of all the evidence relied on, nor do they require any discussion or consideration of that material in the notice.
19 The approach taken by her Honour was applied by Einfeld J in Re Graeme John Harris [1997] FCA 627. More recently, a number of refugee decisions have taken a similar approach. These decisions considered the wording of s 430(1)(d) of the Migration Act 1958 (Cth) which requires the Refugee Review Tribunal to prepare a written statement that "refers to the evidence or any other material on which the findings of fact were based". Although relating to a different subject matter, the observations in those cases are apposite to this case: see, for example, Minister for Immigration and Multicultural Affairs v Gutierrez [1999] FCA 990 at [12]-[13]; Wimalaweera v Minister for Immigration and Multicultural Affairs [1999] FCA 1823 at [23]β[24]; and Thirunavukkarasu v Minister for Immigration and Multicultural Affairs [2001] FCA 551 at [40]-[41].
20 In the present case, the notice refers to two assessments of income contributions payable on 17 May 1997 and 17 May 1998. There is a reference to two amounts and it is common ground that both these amounts are erroneous. Although they are less than the amounts actually assessed, they bear no relationship to any relevant calculation which can be made from the material in the evidence. There is reference to a "Cash Flow Report" received by the trustee on 20 August 1999 that discloses Mr Wood's income and expenditure for the 1998/99 CAP Year. There is reference to the fact that two previous assessments remain outstanding. There is an estimate that Mr Wood's income assessment for the CAP Year for 1998/99 would be comparable to the two previous years. There is then a summary statement that none of the assessed outstanding income contributions totalling $88,340.38 (the total of the two erroneous amounts) had been received nor had any income been received from Mr Wood for the 1998/99 CAP Year.
21 The notice does not specify the amount that the bankrupt was liable to pay but instead provides some other figures which the trustee appears to have relied on. The provenance of these figures is unknown. They are agreed to be erroneous but no explanation is proffered as to how these figures were determined.
22 In my view, the notice is deficient in not referring to the amount of the assessments which had been made. On its face, the notice is misleading in that there are substantial differences between the amounts specified in the actual assessments and the amounts referred to in the notice of objection. It is incorrect to say that the assessed outstanding income contributions totalled $88,340.38 and the figure is confusing. In my view, the notice is deficient both in form and substance. This is not a mere defect or irregularity in the notice. It is no answer to suggest that Mr Wood as an experienced barrister must have been aware of the correct amounts and therefore that it does not matter if the notice was erroneous.
23 In my opinion, the notice fails to satisfy the requirement that there must be a reference in the notice to the evidence or other material that, in the opinion of the trustee, established the ground relied on. The notice therefore is invalid.
Notice of available Options
24 A further submission is that the notice of objection is invalid because Mr Wood did not receive a copy of the notice of objection together with a notice of available options for review. The evidence shows that Mr Wood received the notice of bankrupt's options relating to the trustee's objections on about 31 August 1999. There is no reason to doubt that he was then aware of his options to dispute the grounds on which the objection was lodged. It is also clear that the objection in the present case, by reason of s 149G, took effect on 2 September 1999 and that Mr Wood on 2 September 1999 had received a copy of the notice of objection. It is also important to note that a contravention of s 149F does not affect the validity of the objection: s 149(3). The introductory words of s 149F(1) show that the notice of objection need not itself contain a notice of the bankrupt's options to dispute the notice. The words "together with" contemplate that there may be two distinct notices, although, in principle, there is no reason why the notice of objection could not also contain the notice of the bankrupt's options.
25 The intent of the section is clearly that, when the bankrupt receives the notice of objection, he or she is aware of the options to review the objection and can exercise them, if so decided, in a timely way. In the present case, I am satisfied that, at the time when the facsimile was received by Mr Wood of the notice of objection on 2 September 1999, he had been made aware in writing of his options for review. It is sufficient to satisfy s 149F(1), in my view, if there has been substantial compliance. I am satisfied in the present case that there was such compliance. I consider that support for this conclusion as to substantial compliance being sufficient is provided by s 149(3) which provides that failure to satisfy the requirements of the section does not affect the validity of the objection.
26 Independently of the above conclusions, I consider that this is a situation where s 306 of the Act applies. That section provides:
"306 Formal defect not to invalidate proceedings
(1) Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court."
27 I am also satisfied that the fact that the two notices were received at different times was a formal defect or irregularity and that this section applies. I am not satisfied that any substantial injustice has been caused to Mr Wood by reason of this defect or irregularity. His evidence was that he had not taken any steps to seek review of the grounds in the notice of objection.
failure to give Reasons
28 The final submission for Mr Wood is that the reasons of the trustee for objecting to the discharge on the ground raised have not been stated. Reference is made to the decisions in Re Hall; Re Ansett; Ex parte Ansett v Pattison (1995) 56 FCR 526 and Re Graeme John Harris. In Re Hall, Branson J decided that the notice of objection complained of did not state the reasons for objecting to the discharge on the grounds identified: at 493. Mere recitation of a ground of objection was not sufficient. The provision requires an exercise of some discretionary judgment by the trustee: ibid.
29 In the Ansett case, the only reason set out in the notice of objection was a statement that an amount of money had not been paid. Olney J considered that this was not a statement of "reasons" but was properly regarded as part of the evidence which established the ground on which the respondent relied. Therefore, the notice of objection did no more than repeat the ground of objection and refer to evidence that established that ground, without giving reasons as required.
30 Both these cases are distinguishable on their facts from the present.
31 Reliance was also placed on the judgment of Einfeld J in Harris. After referring to the decision of Olney J in Ansett his Honour said, at 11-12:
"The distinction being made is between a mere restatement of the grounds of objection (a statement that the amount of money was not paid) and the disclosure of the reason for the lodging of the objection (a statement that the money was not paid and that the notice has been lodged in order to ensure its repayment).
I am of the opinion that taking the extra step to specify the trustee's purpose would have constituted an adequate reason for the purposes of section 149C(1) (c). A statement of reasons in that form would allay the concerns of Justice Branson that a bankrupt should be 'fully informed by a notice of objection β¦ as to the bases on which such a notice has been filed'."
32 In the present case the reason relied on in the notice of objection is that:
"[C]reditors will directly benefit from my Notice of Objection to Discharge since, if Mr Wood continues to practice as he has done in the past, creditors will be entitled to enjoy a further five (5) assessment periods of Mr Wood's income."
33 This statement, in my opinion, satisfies the requirement to state reasons set out in s 149C(1)(c). It is apparent that the trustee formed the view that there will be a benefit to the creditors in the event that Mr Wood continues to practice for a further five assessment periods and that this was the basis for the objection to discharge. In my view, this is a sufficient statement of his reasons for making the objection. It is submitted for the bankrupt that, in order to satisfy the subsection, it is necessary that the reasons should support the discharge on the ground relied on. It is said that the reasons in the present case relate to future possibilities whereas the ground relied upon concerns past conduct in failing to pay an amount in respect of which the bankrupt was liable. I do not accept this. The substance of the reason disclosed does relate to the failure to pay the amount because the trustee anticipates that if there is no discharge then further income will become available to satisfy the outstanding liabilities of the bankrupt, which include those assessed for the two CAP Years relied on.
CONCLUSION
34 Having regard to the foregoing, I am satisfied that the notice of objection is invalid and I am prepared to make appropriate declarations. I will make no order at this stage but direct the bankrupt to provide Short Minutes to give effect to these reasons at a time to be arranged with my Associate. I will hear the parties on costs and on any question as to the appropriate date of discharge.
I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.
Associate:
Dated: 3 August 2001
Counsel for the Applicant: Mr M J Stevens
Solicitor for the Applicant: Abbott Tout
Counsel for the Respondent: Mr J T Johnson
Solicitor for the Respondent: Sally Nash & Co
Date of Hearing: 23 July 2001
Date of Judgment: 3 August 2001
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VUAN v Minister for Immigration & Multicultural & Indigenous Affairs [2005] FCA 1638
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2005/2005fca1638
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2024-09-13T22:46:57.746865+10:00
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FEDERAL COURT OF AUSTRALIA
VUAN v Minister for Immigration & Multicultural & Indigenous Affairs
[2005] FCA 1638
MIGRATION β appeal β whether procedural fairness accorded to appellant in relation to internal relocation
Randhawa v Minister for Immigration, Local Government and Ethnic Affairs (1994) 52 FCR 437 - applied
Kioa v West (1985) 159 CLR 550 - applied
VAAC v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 129 FCR 168 - applied
Pilbara Aboriginal Land Council Aboriginal Corporation Inc v Minister for Aboriginal & Torres Strait Islander Affairs (2000) 103 FCR 539 β applied
Minister for Immigration and Multicultural Affairs v Respondents S152/2003 (2004) 205 ALR 487 - applied
Stead v State Government Insurance Commission (1986) 161 CLR 141 β applied
Dagli v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 133 FCR 541 β cited
SYLB v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCA 942 - cited
VUAN v MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS AND REFUGEE REVIEW TRIBUNAL
VID 255 of 2005
MERKEL J
11 NOVEMBER 2005
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY VID 255 OF 2005
BETWEEN: VUAN
APPELLANT
AND: MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
FIRST RESPONDENT
REFUGEE REVIEW TRIBUNAL
SECOND RESPONDENT
JUDGE: MERKEL J
DATE OF ORDER: 11 NOVEMBER 2005
WHERE MADE: MELBOURNE
THE COURT ORDERS THAT:
1. The Refugee Review Tribunal be added as the second respondent and the title to the proceeding be amended accordingly.
2. The appeal be allowed.
3. The orders made by the Federal Magistrates Court on 16 March 2005 be set aside and, in lieu thereof, the following orders be made:
(a) a writ of certiorari issue calling up and quashing the decision of the Refugee Review Tribunal made on 18 September 2003;
(b) a writ of mandamus issue directing the Refugee Review Tribunal to hear and determine the appellant's application for a protection visa according to law.
4. The first respondent pay the appellant's costs of and incidental to the appeal and of the application to the Federal Magistrates Court.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY VID 255 OF 2005
BETWEEN: VUAN
APPELLANT
AND: MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
FIRST RESPONDENT
REFUGEE REVIEW TRIBUNAL
SECOND RESPONDENT
JUDGE: MERKEL J
DATE: 11 NOVEMBER 2005
PLACE: MELBOURNE
REASONS FOR JUDGMENT
1 The appellant, who is a citizen of Russia, applied for a protection visa claiming that he is a refugee to whom Australia owes protection obligations under the Refugee Convention because he has a well-founded fear of persecution by reason of his Jewish ethnicity. A delegate of the respondent refused the application and the Refugee Review Tribunal ('RRT') affirmed that refusal. The appellant made an unsuccessful application for review to the Federal Magistrates Court ('FMC') and has appealed to the Court against the orders of the FMC dismissing his application with costs.
2 In its decision the RRT, after considering the evidence in relation to the appellant's claim that he had a well-founded fear of persecution on the basis of his Jewish ethnicity, expressed certain doubts about the appellant's claim of past persecution in Krasnodar, his home town in Russia. Nonetheless, the RRT stated:
'[h]aving weighed this evidence, the Tribunal gives the applicant the benefit of the doubt and accepts that the harm which befell him was for a Convention reason (namely ethnicity) and that he had a well founded fear of persecution in Krasnodar where he is apparently well known.'
3 However, the RRT concluded that, because 'the applicant could reasonably relocate to another area' (see Randhawa v Minister for Immigration, Local Government and Ethnic Affairs (1994) 52 FCR 437 ('Randhawa')), he was not a person to whom Australia has protection obligations under the Refugees Convention.
4 The main ground of appeal is that the RRT failed to accord procedural fairness to the appellant by failing to put him on notice that relocation in Russia was an issue on which the outcome of his case might turn. It was common ground that, at the date of its decision, a failure by the RRT to accord procedural fairness to the appellant could found a claim of jurisdictional error on its part.
5 Procedural fairness requires that a decision-maker bring to a party's attention the critical factor on which the decision is likely to turn so that the party may have the opportunity of dealing with it: see Kioa v West (1985) 159 CLR 550 at 587, 629 and 634 and VAAC v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 129 FCR 168 at 177-178 ([27]).
6 In Pilbara Aboriginal Land Council Aboriginal Corporation Inc v Minister for Aboriginal & Torres Strait Islander Affairs (2000) 103 FCR 539 at 557 [70] I stated:
'The overriding principle is that the decision-maker must bring to the applicant's attention the critical issue or factor on which the decision is likely to turn so that he or she may have an opportunity of dealing with it: see Kioa at 587 per Mason J; Broussard v Minister for Immigration and Ethnic Affairs (1989) 21 FCR 472 at 481. It is sufficient that the gravamen or substance of the issue or factor is brought to the applicant's attention, or that the applicant is on notice of its "essential features": see Mocan v Refugee Review Tribunal (1996) 42 ALD 241 at 247; Ozmanian v Minister for Immigration, Local Government and Ethnic Affairs (1996) 137 ALR 103 at 123; Telstra Corporation Ltd v Kendall (1995) 55 FCR 221 at 230; McVeigh v Willarra Pty Ltd (1984) 6 FCR 587 at 600-601; Chu v Minister for Immigration, Local Government and Ethnic Affairs (1993) 45 FCR 540 at 548.'
7 It is common ground that the question of internal relocation was not raised as an issue in the appellant's application or by the delegate of the first respondent ('the Minister') when the delegate refused the application. It was also not expressly raised as an issue by the RRT or by the appellant in the course of the application to the RRT to review the decision of the delegate. However, the Minister relies upon the following passage from the transcript of the hearing before the RRT as having sufficiently raised the issue of internal relocation:
'Member: What I don't understand is from these papers of yours you'd obviously lived next to them for a while, why did they pick a particular day in September 1999 to bash you up?
Appellant: Well, I don't know exactly why it happened at that time of year, but it used to happen all the time. They used to pick on me and my mother. We used to have all this anti-semitic writing on the walls and on the door of our flat as well. They wouldn't leave us alone, if my mother was in the lift with one of them they would push her into a corner, push on her back. They would put the shit at the entry of our flat. We had all this writing saying like, "Oh you Jews just get out of here." I think one of the reasons was that one of the relatives of these people wanted to move to our flat because they kept saying to us, "Oh, you better sell your flat and get out of here you nasty Jews." We couldn't move anywhere because we had no opportunities. We had nowhere else. Even if we went to another region of the country the attitude would be the same to us as Jews and besides, we didn't have money to go. For Jews in Russia it was the same everywhere.'
8 No question was asked, nor was any issue raised, by the RRT at the hearing about the possibility or reasonableness of the appellant relocating to another part of Russia so as to avoid the persecution he claimed to have suffered. Also, the appellant was not challenged or queried about the above answer, which merely sought to explain why the appellant thought a particular day in 1999 had been chosen to 'bash him'.
9 Although the FMC concluded that the RRT had accorded procedural fairness to the appellant, I do not consider that the above passage establishes that the appellant was aware of the factor on which his case was likely to turn, and upon which it did in fact turn, or that the factor was brought to the appellant's attention. It is relevant that that factor was not whether the appellant could or couldn't relocate. Rather, it was whether, at the date of the decision of the RRT (18 September 2003), the appellant could reasonably be expected to locate to another area in Russia where he would be expected to have effective state protection from the persecution in respect of which he had a well-founded fear: see Randhawa at 442 and Minister for Immigration and Multicultural Affairs v Respondents S152/12003 (2004) 205 ALR 487 ('S152') at 494-496 ([25]-[29]). Nothing in the material before the Court indicates that that factor was drawn to the appellant's attention by the RRT or that he was otherwise aware that it was a factor of significance in relation to his application, let alone a factor on which the outcome of his case may turn. A matter that lends further support to that conclusion is that the evidence relied upon by the Minister relates to an event in September 1999 but the relevant period for the consideration of relocation was September 2003.
10 The Minister accepted that, if there has been a failure to accord procedural fairness in the present case, the issue is whether, had the appellant had been accorded procedural fairness, that could not possibly have produced a different result: see Stead v State Government Insurance Commission (1986) 161 CLR 141 at 147 and Dagli v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 133 FCR 541 at 557-558 ([91]-[95]). The issue of the reasonableness of any relocation will involve humanitarian considerations relevant to a particular applicant: see SYLB v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCA 942 at [22]. The applicant was not afforded the opportunity to deal with those considerations and the other issues that are relevant to relocation. Accordingly, the present case is not one in which it can be said that the failure to accord natural justice could not possibly result in a different outcome.
11 However, the Minister also contended that the appeal should fail in any event because the RRT made an alternative finding of effective state protection for the appellant. As the appellant's claim was one of persecution by non-state actors, S152 is authority for the contention that such a finding could have resulted in his claim failing in any event. However, as was explained in S152 at 494-496 ([25]-[29]), the relevant issues concern:
(a) whether the state is unwilling or unable to protect a person in the position of the claimant from the harm the claimant has suffered; and
(b) if that question is answered in the affirmative, whether that justifies a conclusion that the claimant is a victim of persecution for a Convention reason and that it is owing to a well-founded fear of such persecution that the claimant is unwilling to avail himself or herself of the protection of the claimant's country.
12 In my view, although the RRT's reasons referred to a legal requirement that 'it may be enough that the government has failed or is unable to protect the [appellant] from persecution', the RRT did not make any finding on that issue or on the matters discussed in the passages I have cited in S152. The RRT made certain observations about the police not disregarding, and even investigating, the appellant's complaints but those observations, in context, fall well short of a finding that the appellant would have effective state protection as that concept has been explained in S152. Also, the observations relate to 1999 rather than the period relevant to relocation, September 2003.
13 Finally, as explained above, the relevant issue in a relocation case relates to effective state protection in the place where the appellant may be relocated, that is, elsewhere in Russia,. That issue was not considered by the RRT in its decision.
Conclusion
14 For the foregoing reasons, I am satisfied that the FMC erred in rejecting the appellant's claim that the RRT failed to accord procedural fairness in relation to the issue of internal relocation and that the FMC was in error in dismissing the application for review. The appellant is entitled to orders allowing his appeal, setting aside the orders of the FMC and the decision of the RRT and to a further order that the matter be remitted to the RRT to be determined according to law.
I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel J.
Associate:
Dated: 11 November 2005
Counsel for the Appellant: N Karapanagiotidis
Counsel for the Respondents: C J Horan
Solicitor for the Respondents: Australian Government Solicitor
Date of Hearing: 11 November 2005
Date of Judgment: 11 November 2005
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Crescent Funds Management (Aust) Ltd v Crescent Capital Partners Management Pty Limited [2017] FCAFC 2
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/full/2017/2017fcafc0002
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2024-09-13T22:46:59.095566+10:00
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FEDERAL COURT OF AUSTRALIA
Crescent Funds Management (Aust) Ltd v Crescent Capital Partners Management Pty Limited [2017] FCAFC 2
Appeal from: Crescent Capital Partners Management Pty Limited v Crescent Funds Management (Aust) Limited [2016] FCA 229
File numbers: NSD 517 of 2016
NSD 567 of 2016
Judges: GREENWOOD, EDELMAN AND MARKOVIC JJ
Date of judgment: 12 January 2017
Catchwords: TRADE PRACTICES β misleading and deceptive conduct claims under the Australian Securities and Investments Commission Act 2001 (Cth) β companies engaged in financial services industry β whether business names, domain names and business activities sufficiently similar to be confusing and causative of contravening conduct β distinction between classes of consumer β distinction between sophisticated investors and other investors β occupation of a common field of activity β appeal dismissed
TRADE PRACTICES β orders for injunction with disclaimer β appropriateness of unqualified, permanent injunction β appropriate exercise of discretion β appeal dismissed
Legislation: Australian Consumer Law (Schedule 2 of the Competition and Consumer Act 2010 (Cth)) ss 18, 29
Australian Securities and Investments Commission Act 2001 (Cth) ss 12DA, 12DB, 12GF
Cases cited: Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd [2015] FCA 882; (2015) 115 IPR 67
Bridge Stockbrokers Ltd v Bridges (1984) 4 FCR 460
Campomar Sociedad, Limitada v Nike International Limited [2000] HCA 12; (2000) 202 CLR 45
Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380
Christian v SociΓ©tΓ© Des Produits NestlΓ© SA (No 2) [2015] FCAFC 153; (2015) 115 IPR 421
Crescent Capital Partners Management Pty Limited v Crescent Funds Management (Aust) Limited [2016] FCA 229
Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd [1978] HCA 11; (1978) 140 CLR 216
Melway Publishing Pty Limited v Robert Hicks Pty Limited [2001] HCA 13; (2001) 205 CLR 1
Osgaig Pty Ltd v Ajisen (Melbourne) Pty Ltd [2004] FCA 1394; (2004) 213 ALR 153
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
Robinson Helicopter Company Incorporated v McDermott [2016] HCA 22; (2016) 331 ALR 550
Sterling Winthrop v R & C Products (1994) ATPR 41-308
Turner v General Motors (Australia) Pty Ltd [1929] HCA 22; (1929) 42 CLR 352
Date of hearing: 17 November 2016
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Regulator and Consumer Protection
Category: Catchwords
Number of paragraphs: 174
Counsel for the Appellants and Cross-Respondents: Mr MJ Darke SC and Ms C Bembrick
Solicitor for the Appellants and Cross-Respondents: Corrs Chambers Westgarth
Counsel for the Respondents and Cross-Appellants: Mr R Cobden SC and Ms E Whitby
Solicitor for the Respondents and Cross-Appellants: Gilbert & Tobin Lawyers
ORDERS
NSD 517 of 2016
BETWEEN: CRESCENT FUNDS MANAGEMENT (AUST) LTD (ACN 144 560 172)
First Appellant
CRESCENT INVESTMENTS AUSTRALASIA PTY LTD (ACN 141 570 952)
Second Appellant
CRESCENT CONSOLIDATED GROUP HOLDINGS PTY LTD (ACN 154 527 296) (and others named in the Schedule)
Third Appellant
AND: CRESCENT CAPITAL PARTNERS MANAGEMENT PTY LIMITED (ACN 108 571 820)
First Respondent
CRESCENT CAPITAL PARTNERS LTD (ACN 094 040 874)
Second Respondent
JUDGES: GREENWOOD, EDELMAN AND MARKOVIC JJ
DATE OF ORDER: 12 January 2017
THE COURT ORDERS THAT:
1. The appeal in NSD 517 of 2016 be dismissed.
2. The appellants in NSD 517 of 2016 pay the respondents' costs of and incidental to that appeal to be taxed if not agreed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
NSD 567 of 2016
BETWEEN: CRESCENT CAPITAL PARTNERS MANAGEMENT PTY LIMITED (ACN 108 571 820)
First Cross-Appellant
CRESCENT CAPITAL PARTNERS LTD (ACN 094 040 874)
Second Cross-Appellant
AND: CRESCENT FUNDS MANAGEMENT (AUST) LTD (ACN 144 560 172)
First Cross-Respondent
CRESCENT INVESTMENTS AUSTRALASIA PTY LTD (ACN 141 570 952)
Second Cross-Respondent
TALAL YASSINE
Third Cross-Respondent
JUDGES: GREENWOOD, EDELMAN AND MARKOVIC JJ
DATE OF ORDER: 12 january 2017
THE COURT ORDERS THAT:
1. The orders of the primary judge made on 23 March 2016 be varied to add an additional order, order 4(h), that by 10 February 2017 the parties have liberty to apply to a single judge of the Federal Court for orders by consent to vary the terms of orders 4(f) and 4(g).
2. The appeal in NSD 567 of 2016 otherwise be dismissed.
3. The appellants in NSD 567 of 2016 pay the respondents' costs of and incidental to that appeal to be taxed if not agreed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
GREENWOOD J:
Introduction
1 In these proceedings the nine appellant entities and the tenth appellant, Mr Talal Yassine (as to Appeal NSD 517 of 2016), were the respondents in proceedings before the primary judge (Bennett J) in which the present respondents, Crescent Capital Partners Management Pty Limited ("CCPM") and Crescent Capital Partners Ltd ("CCPL") (described, together, by the primary judge as "Crescent Capital"), contended that the appellant entities engaged in misleading or deceptive conduct by using names, as part of their corporate titles, such as Crescent Funds Management, Crescent Investments, Crescent Consolidated, Crescent Financial, Crescent Foundation, Crescent Holdings and Crescent Super (described, together, by the primary judge as "Crescent Wealth") in the provision of financial services and products with the result that the appellants had made representations, in trade or commerce, that they or their services and products were in some way connected with Crescent Capital and the services and products offered by Crescent Capital.
2 Crescent Capital also contended before the primary judge that the first and second appellants had engaged in misleading or deceptive conduct by using the mark "CRESCENT WEALTH" and "Crescent" and "Fund" names Crescent Wealth Superannuation Fund, Crescent Australian Equity Fund, Crescent Wealth International Equity Fund, Crescent Diversified Property Fund and Crescent Islamic Cash Management Fund as badges of identification and by using particular domain names.
3 The conduct was said to engage contraventions of ss 18 and 29 of the Australian Consumer Law (the "ACL") contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth) and ss 12DA and 12DB of the Australian Securities and Investments Commission Act 2001 (Cth) (the "ASIC Act").
4 The primary judge notes that Crescent Capital abandoned its primary claims against Crescent Institute Limited (which is now the eighth appellant and was the eighth respondent before Bennett J): primary judge ("PJ") at [2]; Crescent Capital Partners Management Pty Limited v Crescent Funds Management (Aust) Limited [2016] FCA 229.
5 In the principal proceedings, Crescent Capital contended that all of the (then) respondents and, in particular, Yassine Corporation Pty Ltd and Mr Yassine were accessories in the conduct contraventions of each of the other respondents (as persons involved in the contraventions for the purposes of s 12GF of the ASIC Act) and thus liable to remedial orders in favour of Crescent Capital.
6 The Crescent Wealth entities contended that upon proper analysis the scope, focus and character of their activities were so differentiated from those of Crescent Capital that no likelihood arose of anyone being led into error by Crescent Wealth's use of the company titles incorporating the words or names described at [1] of these reasons or the titles for Crescent Wealth's four funds ([2] of these reasons) or by use of the mark "CRESCENT WEALTH" or "Crescent".
7 All of the respondents before the primary judge are appellants in the present proceedings. It is necessary to say something, contextually, about the structure of the Crescent Wealth group of companies and their relationship one to the other. The primary judge described that matter at [73], [74] and [77] of her Honour's reasons. In the diagram at [73] of her Honour's reasons, the reference to "first respondent" and "second respondent" and so on, corresponds to first appellant and second appellant and so on in these proceedings (apart from Mr Yassine who is the tenth appellant in these proceedings). At [73], the primary judge set out the following diagram:
8 At [74] and [77], the primary judge notes these matters:
[74] It is agreed that there is no relevant distinction, for present purposes, between the first and second respondents. The parties were agreed that the first and second respondents could be treated as a single entity. The second respondent is the operating company of the Crescent Wealth business, while the first respondent is the responsible entity for that business. The business of Crescent Wealth was established in about 2010 by Mr Yassine, together with Mr Dandan and Mr Eid, although it only began trading under that name in around August 2011.
[emphasis added]
β¦
[77] The following facts seem to be agreed:
β’ The first respondent (CFMA) is the responsible entity that makes offers in Crescent Wealth funds to investors.
β’ The second respondent (CIA) is the operating company.
β’ The third and sixth respondents are holding companies and are, in effect, dormant. They do not engage in offers or supplies to investors. They are non-operating holding entities through which the founders of Crescent Wealth invested in Crescent Wealth. The third respondent has not been used to make any subsequent investments; does not offer, and has not offered, investment products or services to the public; and has not marketed itself to investors or potential investors. Accordingly, the third respondent has not engaged in any conduct directed at relevant members of the class of consumers, nor has it made any representations that could mislead or deceive such consumers.
β’ The fourth and seventh respondents are wholly owned by CIA. They are dormant and do not engage in any conduct, let alone the relevant conduct. They do not undertake any activities or hold any assets.
β’ The fifth respondent is a wholly owned, not-for-profit entity which makes charitable donations that serve to "cleanse" investments made through CFMA and CIA that do not comply with Sharia law, so as to ensure ongoing Sharia compliance; moneys are given through the Foundation to charity. The Foundation does not offer investment products or services to the public and plays no role in determining which funds are provided to it, nor does it have any control over the amount of funds distributed to it.
β’ The eighth respondent, the Crescent Institute, is, in effect, a networking group. It is the corporate incarnation of a networking group founded in the 1990s by Mr Yassine under the name "The Crescent Club", while he was at University. It holds thought leadership and networking events on topics of interest to those of the Muslim faith and others in business and the wider community. Crescent Capital does not now seek any orders in respect of this party.
β’ The ninth respondent is a corporate vehicle for investments by the Yassine family.
β’ Mr Yassine is the tenth respondent. He is the co-founder and managing director of Crescent Wealth and the founder and now patron of the Crescent Institute.
The Declarations
9 In the result, the primary judge made the following declarations:
1. The First and Second Respondents [Crescent Funds Management (Aust) Limited and Crescent Investments Australasia Pty Ltd] have, by offering to provide, providing, advertising and marketing investment services and products, in Australia, in trade or commerce under and by reference to:
(a) the name and mark "CRESCENT WEALTH";
(b) the corporate names Crescent Funds Management (Aust) Limited and Crescent Investments Australasia Pty Ltd;
(c) the fund names Crescent Wealth Superannuation Fund, Crescent Australian Equity Fund, Crescent International Equity Fund, Crescent Diversified Property Fund and Crescent Islamic Cash Management Fund; and
(d) the domain names crescentinvestments.com.au, crescentwealth.com.au, crescentfunds.com.au and crescentfunds.net.
engaged in conduct that was misleading or likely to mislead or deceive in contravention of s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).
2. The Tenth Respondent was knowingly involved in the conduct of each of the First and Second Respondents in contravention of s 12DA of the ASIC Act, identified in Order 1.
The Orders
10 The primary judge made the following order in relation to Crescent Wealth's use of the titles of the first and second appellants, use of the names for the Funds using the word Crescent and use of the domain names:
3. The First and Second Respondents, by themselves, their servants or agents, be restrained from, in trade or commerce, offering to provide, providing, advertising or marketing in Australia any investment services or products under and by reference to:
(a) Crescent Funds Management (Aust) Limited;
(b) Crescent Investments Australasia Pty Ltd;
(c) any of the following names:
(i) Crescent Australian Equity Fund;
(ii) Crescent Diversified Property Fund;
(iii) Crescent Islamic Cash Management Fund;
(d) any of the following domain names:
(i) crescentinvestments.com.au;
(ii) crescentfunds.com.au; and
(iii) crescentfunds.net;
or any name substantially identical with the names in (a)-(d).
11 The primary judge made the following order concerning use of the term or mark "CRESCENT WEALTH", qualified in the way set out at sub-paras (f) and (g) of Order 4:
4. The First and Second Respondents, by themselves, their servants or agents, be restrained from, in trade or commerce, offering to provide, providing, advertising or marketing in Australia any investment services or products under and by reference to:
(a) CRESCENT WEALTH;
(b) Crescent Wealth Superannuation Fund;
(c) Crescent Wealth International Equity Fund;
(d) the CRESCENT WEALTH business name;
(d) the domain name crescentwealth.com.au;
or any name substantially identical with the names in (a)-(e) without:
(f) including the Respondents' logo and stating clearly and prominently, and reasonably proximately (eg not by way of footnoted text) to where any such name appears, including in any webpage, product disclosure statement, or advertising or promotional materials:
"Neither [CRESCENT WEALTH] nor any of its products is associated or affiliated with Crescent Capital Partners",
and, in the case of a radio commercial, television, video advertisement, or promotional appearance also stating the same by way of a clear and prominent spoken statement of at least 6 seconds; or
(g) otherwise clearly distinguishing its business from the business carried on by the Applicants under the name Crescent Capital Partners.
The respondents' challenge to Orders 3 and 4
12 The present respondents contend that the primary judge fell into error in framing Orders 3 and 4 because, first, having found that use of the mark "CRESCENT WEALTH" and the name "Crescent" in conjunction with words such as "investments" and "funds" was misleading or likely to mislead or deceive (the relevant cohort of consumers), the injunctions ought to have restrained any use of the terms "CRESCENT WEALTH" and/or "Crescent" in connection with investment services or products of Crescent Wealth (or any name "substantially identical" or "deceptively similar" to either of those names), not just the particular titles, fund names or domain names and second, the restraint in Order 4 ought to have been unqualified rather than, in effect, enabling use in conjunction with the notice or disclaimer, as framed.
13 The primary judge also made a series of consequential orders. It is not necessary to set out those orders in these reasons.
The findings of the primary judge and related documents and evidence
14 It is now necessary to address the findings of the primary judge before turning to the grounds of appeal. In doing so, I will also make reference to some of the documents in the Appeal Book ("AB") to which the Court was taken in the context of the primary judge's findings which are said to be explanatory of those findings.
15 CCPM, the present first respondent, has held a licence to provide financial advice, products and services since 24 November 2000 and CCPL, the present second respondent, has since 27 July 2004 been an authorised representative of CCPM. CCPM has, since November 2000, operated a business of managing "private equity funds". CCPM selected the word "Crescent" because it derives from the Latin word "Cresco" which means to grow, expand or increase: PJ at [7]. Until September 2010, the Crescent Capital entities used a logo featuring a crescent shape and the words "CRESCENT CAPITAL PARTNERS". Since then, the badge of identification has consisted of simply those words with bold emphasis given to "Crescent" as follows: PJ at [30]:
CrescentCapitalPartners
16 These words, in this form, have been used on invoices, stationery, promotional and marketing material: PJ at [7]. Since 28 November 2000, Crescent Capital has operated a website with the domain name crescentcap.com.au.
17 At [9], the primary judge said this as to Crescent Capital's reputation:
Crescent Capital has established, and there is no real dispute, that as at and since the commencement of Crescent Wealth's activities in 2010, it had and has a reputation and goodwill in the financial services and financial management industry in the name Crescent Capital, and is often referred to as Crescent. That reputation derives from its own activities, from its approaches to investors and financial advisors, as the recipient of awards and from its activities in raising money for investment in its funds (which include the use of promotional and marketing materials), as well as from media reports.
[emphasis added]
18 As the above words in italics emphasise, Crescent Capital's reputation in the name "Crescent Capital" (often referred to simply as "Crescent Capital") subsists "in the financial services and financial management industry" and is a reputation found "among the financial community" (PJ at [11]) as a "successful private equity fund manager" (PJ at [11]), for which it has won awards from the Australian Private Equity and Venture Capital Association Limited (for management buyouts in 2003 and 2014): PJ at [10]. The primary judge notes at [12] that Crescent Capital describes itself in the following way:
Crescent Capital operates a private equity funds management business. It raises money from investors and uses these funds either to invest directly into a business or to acquire the business and typically holds its investment for three to six years with the aim of improving and growing the underlying business, before selling it and returning the proceeds to investors (after Crescent Capital's fees are paid). Crescent Capital raises money in a series of pools, called "funds", and approaches new and existing investors and offers the opportunity to invest in (also called "subscribe to") the new fund.
[emphasis added]
19 Crescent Capital raises money from investors to establish or constitute "funds". Its first fund was raised from both "retail clients" and "wholesale clients". The appellants say, as they did before the primary judge, that this distinction is significant in determining whether there is any likelihood of confusion (amongst the relevant consumer cohort) between the products or services provided by Crescent Capital and those of Crescent Wealth or confusion as to any relationship or association between the Crescent Capital entities and, particularly, the first and second appellants. The parties seem to agree that the formulation adopted by the primary judge of the factors that determine whether a person is a retail client or a wholesale client is correct for the purposes of these proceedings.
20 That being so, a client (investor) is a "wholesale client (investor)" where: the price of the financial product, or the value of the financial product to which the financial service relates equals or is greater than $500,000; or the financial product or service is acquired by a person who has previously provided a certificate from a qualified accountant stating that the acquirer has net assets of at least $2.5 million or a gross income for each of the last two financial years of at least $250,000; or the person is a professional investor. A "retail client (investor)" is a person who is not a wholesale client (investor): PJ at [14] and [15].
21 The primary judge at [16] identifies the following features of Crescent Capital's business and particularly the business of raising money to constitute funds:
Other matters relevant to the description of Crescent Capital's business are, put shortly:
β’ A fund is closed once the monetary target is reached or when some pre-determined period of time elapses.
β’ There is then a call on committed funds from investors, as Crescent Capital identifies suitable investments over a ten year life of the fund, being a business identified as capable of generating the required rate of return on investment.
β’ Crescent Capital specialises in acquiring or investing in small to medium sized, privately owned businesses.
β’ The businesses which Crescent Capital targets are usually located in Australia and New Zealand, with enterprise values between AUD$50 and $300 million.
β’ Crescent Capital has also acquired smaller Australian and New Zealand based businesses to integrate into an existing larger business. Sometimes smaller businesses are acquired as part of a 'roll-up' or aggregation strategy; for example, there was evidence that Crescent Capital had engaged in such activity in respect of dental practices with individual values of as little as $1 million.
β’ The businesses are operated with a view to sale or listing on the stock exchange.
β’ The business model requires Crescent Capital to take control of a company or group in which it invests and to offer value-added services to companies in which it invests, such as providing strategic advice and introducing alliance networks.
22 As to the Crescent Capital funds raised over time the primary judge said this at [16]:
β’ The first fund (Crescent I) raised $25 million in 2001, the second (Crescent II) $100 million in 2004, the third (Crescent III) $400 million in 2007 and the fourth (Crescent IV) $490 million in 2012. There is a further fund, Crescent V, the amount raised is confidential, but it is substantial.
β’ Since 2004, funds have been raised exclusively from wholesale investors.
β’ Returns are through long term capital appreciation rather than through immediate and regular payments of principal and interest. Investors' money, once committed, is tied up for the life of the fund, viz. ten years.
β’ It engages in fund raising every three to four years, approaching both new and existing investors.
β’ Crescent Capital does not advertise to the general public. It does operate a website, of which only part is publicly accessible.
β’ Crescent Capital is frequently referred to in the financial media by reference to its name, Crescent Capital Partners, or simply as Crescent.
[emphasis added]
23 As to the Crescent Capital funds, the position then, based on the findings at [16] is this:
Fund Year Fund Raised Amount Ten Year Horizon Source of Funds
Crescent I 2001 $25 million 2011 Retail and wholesale clients
Crescent II 2004 $100 million 2014 Wholesale clients only
Crescent III 2007 $400 million 2017 Wholesale clients only
Crescent IV 2012 $490 million 2022 Wholesale clients only
Crescent V 2015 Confidential 2025 Wholesale clients only
24 The majority of the investors in these Crescent Capital Funds are superannuation funds or institutional investors: PJ at [17].
25 The minimum investment amount for the 2004 Crescent II Fund was $250,000: PJ at [17]. The minimum investment amount for the Crescent IV Fund is described by the primary judge at [17] as "substantially higher than $250,000". The average amount invested by each investor in the Crescent IV Fund was "extremely high": PJ at [17]. These matters of the prevailing minimum investment threshold for each Crescent Capital Fund are put in this elliptical way by the primary judge due to the confidential nature of the private placement prospectus issued to clients. Participation in each Crescent Capital Fund after the 2001 Fund "has, in effect, been by invitation": PJ at [17].
26 The appellants contend that in determining the "hypothetical representative" of the relevant consumer cohort so as to determine whether relevant consumers are being, or are likely to be, misled by Crescent Wealth's use of "CRESCENT WEALTH" and "Crescent" (in combination with other words or not), the very substantial minimum investment threshold for participation in Crescent Capital's private equity investment funds (and particularly the Crescent IV and Crescent V Funds with their corresponding institutional and highly sophisticated investors), means that such an investor is not properly regarded as a hypothetical representative of the relevant consumer class due to Crescent Wealth's focus of concentrating on "investors seeking to invest in low risk/low return Sharia-compliant superannuation and related investment products in traditional assets classes (not including private equity)".
27 The appellants say that the primary judge's reference at [16] (the second dot point) to the "rate of return" for funds invested with Crescent Capital is a reference to: "High returns are targeted: 25% per annum (pre tax, pre fees) over the medium term": Growth Fund Prospectus, 28 November 2000; "18% per annum (pre tax, post fees)": Prospectus 27 June 2001; "Target IRR [Internal Rate of Return] 25% per annum (pre fees)": Private Placement Memorandum, AB, Part C, Tab 9.2, pp 259 and 426. Mr Lyon-Mercado, Crescent Capital's Chief Financial Officer and Finance Director, describes Crescent Capital's rate of return as about "20% per annum after fees": para 29, affidavit 17 October 2014.
28 The appellants emphasise that at [16] (the third dot point), the primary judge observes that Crescent Capital specialises in acquiring or investing in small to medium-sized privately owned businesses. The private equity business investment method is described by Mr Lyon-Mercado in these terms in his affidavit:
14 Once a fund is closed, Crescent begins to seek out suitable businesses to buy or in which to invest. A suitable business is a business that Crescent identifies as being capable of generating the required rate of return on investment. Crescent usually targets businesses located in Australia and New Zealand with enterprise values of between A$50 million and A$300 million. Crescent also often acquires smaller businesses to integrate into one of its existing larger businesses, or acquires them as part of a "roll-up" strategy whereby it aggregates a number of smaller businesses to corporatise into a larger business. These smaller businesses may have values of significantly less than A$50 million. For example, Crescent is at present buying and aggregating dental practices, some of which have a value of as little as A$1 million.
β¦
16 Crescent continues to buy and invest in businesses until the fund is approximately 80% spent. Crescent will then operate the businesses in which it has invested, sometimes for several years, and attempt to increase their profitability by measures such as providing additional capital for expansion, enhancing management expertise, improving business operations, and, in some cases, growing the business through acquisitions.
17 Eventually, Crescent aims to sell the businesses to trade or financial buyers or to list them on a stock exchange. If businesses are listed on a stock exchange, the stock is sold by investment banks to their institutional and retail clients. Crescent often retains a small interest in the listed entity. The money from the sale or listing of the businesses is then returned to the investors in the relevant fund, after management and performance fees are paid to Crescent.
[emphasis added]
29 At [18], the primary judge characterised investment in Crescent Capital's funds in this way:
Investment in Crescent Capital's funds can be characterised as high risk, high return investment and requires long term commitment of funds with no certainty of returns. Investors, including prospective investors, can be characterised as highly sophisticated investors who consider investments carefully before proceeding. Many of those investors use expert advisers and many are large institutions or high net worth individuals.
[emphasis added]
30 Crescent Capital's Private Placement Memorandum of October 2010 explains the risks in these terms: AB, Part C, Tab 9.2, pp 157 and 213:
RISK
An investment in the Fund should be regarded as speculative and will involve significant risks, due to the nature of the investments the Fund intends to make.
The Fund is not a suitable investment for persons unable to sustain a loss of all or part of the sum invested or who require certain or predictable income flows. Investors should have the financial ability and willingness to accept the risks and lack of liquidity which are characteristic of the investments described in this Private Placement Memorandum, for the entire term of the Fund.
In particular, the attention of prospective investors is drawn to the risk factors set out in Section 10 of this Private Placement Memorandum.
10. RISK FACTORS AND CONFLICTS
RISK FACTORS
Investment in the Fund entails a high degree of risk and is suitable only for Wholesale Investors who understand fully, and are capable of assessing, the risks of a private equity fund of this nature.
The Manager does not guarantee any level of return to investors and the historic performance of investments managed by the Manager or associate companies cannot be taken as an indication of the future performance of Crescent IV.
Prospective investors should consider carefully the factors below (amongst others) in making their investment decision. These risk factors do not purport to be a complete explanation of the risks involved in investing in the Fund. Prospective investors must read the entire Private Placement Memorandum and Constituent Documents, and must consult their own professional advisors, before deciding to invest in the Fund.
[emphasis added]
31 In a report dated June 2001, van Eyk Research (engaged by Crescent Capital) reviewed the first of Crescent Capital's Growth Funds. As to the risk profile and diversification benefits of investing in Crescent Capital's Fund, the report says this at pp 4 and 10 (pp 690 and 696 of the AB respectively):
At p 4
β’ Because private equity is less liquid and offers less information it has higher total risk than publicly traded equity. At the same time, due to the appraisal based valuation method, private equity has lower market-related risk. Due to its diversification benefits private equity deserves a place in a balanced portfolio. The tax advantaged structure of the Fund makes Crescent Capital Partners Growth Fund an attractive investment for a range of investors such as: DIY, master funds or pooled superannuation investors, institutional funds and high net worth individuals.
β’ The Crescent Capital Growth Fund is a suitable investment for a sophisticated investor who is comfortable with the risks involved and constraints of this investment. If an investor decides to invest in this vehicle we would recommend an allocation of up to 5% for a balanced fund investor and up to 10% for a high growth investor.
At p 10
Role of Private Equity in diversified Portfolios
Due to the low market risk, it follows [that] the correlation between private equity and other asset classes over the longer term periods is relatively low too. This points to considerable diversification benefits of investing in private equity as the overall portfolio risk can be reduced substantially.
The chart below illustrates the relative positioning of private equity and venture capital using 10 years annualised figures for equities and bonds. For private equity and venture capital we assumed a long term return of 20% and 25% and a volatility of 20% and 25% respectively. These numbers are generally in line with historical figures and in our opinion reflects the inherent risks of this asset class. As can be seen from the chart private equity/venture capital is expected to provide higher returns relative to listed markets accompanied with slightly highly volatility (for private equity) and a significantly higher volatility for venture capital.
32 The chart referred to by van Eyk Research at p 10 is a graph showing the "Risk Return Spectrum" as between private equity and venture capital on the one hand and traditional asset classes on the other hand. The conclusions emerging from the graph are set out in the quote from the report above at p 10. As to the graph which shows that private equity/venture capital is expected to provide higher returns relative to listed markets (and slightly higher volatility for private equity), Mr Lyon-Mercado accepted in cross-examination, that it was common "in the financial services industry" to distinguish between private equity and venture capital investments on the one hand and traditional asset classes on the other hand and that private equity and venture capital investments are distinguished from traditional asset classes by reason of their "high risks and high return profile". Mr Lyon-Mercado also accepted that those differences mean that a "rational investor" seeking high returns through investing in private equity would not see listed securities, for example (as one traditional asset class), as a substitute for a private equity investment: T, p 99, lns 5-18.
33 At p 20, the van Eyk Research report concludes in these terms:
Overall, we believe that exposure to the Crescent Capital Partners Growth Fund is suitable for a sophisticated investor who is comfortable with the risks involved and the constraints of this investment. Should an investor decide to invest in this fund we recommend an allocation up to 5% for a balanced fund investor and 10% for a high growth investor.
34 In the questions put to Mr Lyon-Mercado about the differentiation between private equity investments and investments in traditional asset classes, Mr Lyon-Mercado was asked about distinctions drawn by members of the "financial services industry" and distinctions drawn by a "rational investor". The appellants contend that when Mr Lyon-Mercado drew or accepted these distinctions, he was speaking of distinctions drawn by persons who would be likely to be interested in investing in private equity. The appellants contend that the findings of the primary judge at [18] that Crescent Capital's Funds can be characterised as high risk/high return private equity investments requiring long term commitment with no certainty of returns means that this class of investments is not substitutable for investments in traditional asset classes and that, as a class of investment, Crescent Capital's sequence of Funds represent private equity investments made by "highly sophisticated investors" who "consider investments carefully" before making an investment (as the primary judge found at [18]). Moreover, they say that many of these highly sophisticated investors who are thinking carefully about their investments before making an investment (and whether they will invest in a Crescent Capital Growth Fund), call in aid "expert advisers". Many of these investors are "large institutions" or "high net worth individuals": PJ at [18].
35 As to the use of advisers, the appellants emphasise the evidence given before the primary judge by Mr Michael Lukin, the Managing Partner of ROC Partners Pty Ltd ("ROC"), an organisation engaged by private equity investors to provide advice about investments in private equity funds. Mr Lukin gave evidence before the primary judge that private equity investments made by clients of ROC (as one class of investors) made "substantial" private equity investments and the investments were "relatively risky" compared to other asset classes. Partly, no doubt, for that reason, private equity investors, he says, seek advice from private equity investment advisers before making such investments. Mr Lukin says that about half of the investors making private equity investments use such an adviser and where the investment falls into other asset classes such as listed securities or property, ROC's clients consult other advisers: T, p 162, lns 22-45. As to the other 50% making private equity investments, Mr Lukin said this in evidence at T, p 163, lns 1-10:
Q: And the balance tend to be larger investors with resources to analyse potential private equity investments in-house before making them?
A: Yes, although there are cases of smaller investors that will kind of β you know, high net worth groups and family offices that will kind of make investments on their own behalf.
Q: And they, too, will tend to have in-house experts who advise them on those investments; correct?
A: Yes, or they will rely on their own expertise.
Q: Yes. And in your experience, as a rule, private equity investors take considerable care before making their investments; correct?
A: Yes.
36 As to Crescent Wealth's business, it too is "concerned with the making of investments": PJ at [19]. It offers "Sharia compliant superannuation" through the Crescent Wealth Superannuation Fund and "additional managed investment products to the public". It is a "wealth management business": PJ at [19] and [20]. Crescent Wealth ensures that its Sharia compliant financial products accord with the "highest international standards of Sharia compliance" and it promotes itself as investing in, and providing financial services in connection with, Sharia compliant services and products: PJ at [20] and [21]. However, its Australian Financial Services Licence is not limited to those services and products. The primary judge put it this way at [21]:
β¦ [Crescent Wealth] is authorised to provide financial services to retail and wholesale clients of any, or no, faith, including high net worth individuals and financial planners. Crescent Wealth's marketing is directed toward the public at large, with a particular emphasis on retail investors of the Islamic faith. It does have a significant institutional investment, of $1.5 million, from Aon Hewitt, an Australian superannuation fund.
[emphasis added]
37 By the end of 2014, Crescent Wealth had funds under management of $70 million and 3,000 members. The primary judge notes that by the end of 2015 funds under management were expected to be between $150 million and $200 million: PJ at [22]. Crescent Wealth offers investments in four managed funds: Crescent Australian Equity Fund, Crescent Wealth International Equity Fund, Crescent Diversified Property Fund and Crescent Islamic Cash Fund. These funds are managed by third party managers such as the "Bank of London and Middle East" and "HSBC Amanah": PJ at [23].
38 At [23], the primary judge describes (and finds) the investment method bears these characteristics:
β¦ The proportion of an investor's superannuation contributions invested in each Crescent Wealth product depends on the investor's choice between "growth", "balanced" and "conservative" investment options. The products are designed for, and available to, retail investors. They are low risk and low return, especially when compared to the returns expected from Crescent Capital's funds. Returns are distributed regularly and the superannuation product has no minimum investment requirement; the other managed investment products each have a minimum requirement for direct investment of $5,000, subject to a discretion to accept lower investment amounts. Funds can be withdrawn by an investor at any time.
[emphasis added]
39 As to the emphasis that Crescent Wealth places upon the Sharia compliant financial products (and services) it offers, the primary judge observes at [24] that funds controlled by Crescent Wealth are not invested in entities that engage in "non-permissible" activities according to the Islamic faith. Crescent Wealth's Investment Choice Guide for superannuation investments, for example, describes non-permissible investments as gambling, sale or manufacture of weaponry and the sale and manufacture of alcohol, tobacco and adult material. Depending upon the asset class, certain assets might be regarded as suitable investments even though a "small proportion" of the entity's revenue is derived from non-permissible investments provided that the proportion falls within the limits set by the Accounting and Auditing Organisation for Islamic Financial Institutions ("AAOIFI"). The Crescent Foundation Fund Pty Limited (the fifth appellant) plays a role of "cleansing" any income derived from receipts of "interest" (by receipting those payments and making corresponding donations to Australian charities) so as to ensure that Crescent Wealth remains Sharia compliant: PJ at [25]. Crescent Wealth's efforts to ensure that its products remain Sharia compliant "are, indeed, extensive": PJ at [26]. Crescent Wealth has adopted a number of "distinctive procedures" to ensure ongoing compliance with Islamic financial principles. They include a review of investments by the Shariah Supervisory Board (the "SSB") comprised of Islamic experts and scholars and ensuring that investments comply with the rulings of SSB.
40 As to these matters, the primary judge at [27] and [28] finds:
27. I accept that adherence to Islamic investment principles is a core component of Crescent Wealth's business and investment strategy. Moreover, it is apparent, and I accept, that Crescent Wealth has established a reputation in relation to Sharia compliant financial products.
28. Crescent Wealth's superannuation offering is its primary product, with 80% to 90% of the funds under management by Crescent Wealth attributable to superannuation. Nevertheless, Crescent Wealth also accepts investments into the managed investment products directly. Such investment accounts for the remaining 10% to 20% of the funds it manages.
[emphasis added]
41 As to these matters, the appellants emphasise that 80% to 90% of Crescent Wealth's business is Sharia compliant superannuation and that the superannuation funds are invested in the four funds according to the options exercised by the investor. The superannuation monies might be invested in Australian ASX listed securities (the Crescent Australian Equity Fund); securities listed on international stock exchanges (the Crescent Wealth International Equity Fund); real property (the Crescent Diversified Property Fund); and, cash instruments such as bonds (the Crescent Islamic Cash Fund). The remaining 10% to 20% of Crescent Wealth's business is made up of direct investments into one or more of those four funds.
42 Crescent Wealth uses the following logo:
43 Crescent Wealth operates a series of domain names incorporating either "Crescent" or "Crescent Wealth".
44 At [56] and [57], the primary judge notes (and finds) the following differentiating factors and similarities between Crescent Capital and Crescent Wealth:
56 As at the present, there are a number of matters that differentiate the two parties, including:
The products provided.
The logos associated with the respective businesses.
The class of consumers to whom the products are provided.
The nature of the investments offered.
The persons or institutions to which the products are marketed.
The emphasis by Crescent Wealth on Sharia compliant products.
57 There are also a number of similarities, including:
The use of "Crescent" with respect to offerings.
Domain names.
45 The findings of the primary judge, not surprisingly, emerge out of the way in which the contentions of the parties were framed having regard to the state of the evidence. The primary judge notes that the "concern" of Crescent Capital was "largely directed" to the "future conduct" of Crescent Wealth in expanding beyond "its existing consumer base" which "already includes institutional investors". Crescent Capital contended that Crescent Wealth operated through fund managers and was diversifying into higher risk property investments and might diversify into private equity investments: PJ at [58]. As to the core points of differentiation, Crescent Wealth contended that there was no evidence before the primary judge of "any realistic prospect" of Crescent Wealth entering the "private equity field" and no evidence that Crescent Capital intends to commence Sharia compliant lending. As to these matters of differentiation, the primary judge at [60] finds that Crescent Capital has agreed with some specific investors to limit investments from its funds to "ethical investing" including some limitations consistent with "aspects of Sharia law" and "other limitations" sought by "an investor" that do not fall within the description of either Sharia law compliant or ethical investing.
46 The primary judge observes at [60] that notwithstanding that Crescent Capital has not engaged in "fully Sharia compliant investing" (although it has engaged in ethical investing and on occasions ethical investments consistent with Sharia law), "it cannot be said that Crescent Capital has decided to remove itself from offering Sharia compliant investments". Notwithstanding the retention of the possibility of offering Sharia compliant lending, the primary judge concludes (finds), also at [60], that "there is no evidence to suggest that Crescent Capital intends to offer superannuation products or any products other than private equity investments" [emphasis added]. The primary judge also concludes at [60] that Crescent Capital's retention of the possibility of "offerings to retail investors" of products and financial services (whether Sharia law compliant or otherwise) does not suggest any intention to do so especially having regard to the "nature and amounts of investment progressively [made into] the Crescent Funds since Crescent I" [emphasis added].
47 At [61], the primary judge finds:
There is no evidence that Crescent Capital, as a private equity firm, will offer superannuation products or that Crescent Wealth will set up a private equity business.
[emphasis added]
48 That finding is subject to an immediate qualification by the primary judge drawing upon Crescent Wealth's apparent recognition or acceptance that as Crescent Wealth grows, "it may attract wholesale investors" and "it is likely that any separation that can be said to presently exist in the class of investors in the respective funds will diminish" [emphasis added]. At [63], the primary judge concludes that the "neat division" between "classes of consumers" within the financial services industry and in the fields of funds or investment management into "retail investors" and "wholesale investors", between "unsophisticated" and "sophisticated" investors and between those who invest in "private equity" investments and those who do not, is "artificial" and fails to recognise that "fund managers and investors may make investments across many different asset classes and in order to balance their portfolio and to maximise returns" [emphasis added].
49 Consistent with that view of commercial engagement across many different asset classes, the primary judge at [63] notes that Crescent Wealth "already" operates across four of the five identified asset classes: cash, fixed interest, property and shares.
50 The primary judge at [63] accepts Crescent Capital's contention that "investors", as "consumers in this industry" do not "necessarily or practically" restrict themselves to one class of investment or to one offeror of investment opportunities, whether within an asset class or across asset classes.
51 The primary judge also finds that consumers/investors would experience "difficulty of obvious separation" between the funds of Crescent Capital and those of Crescent Wealth having regard to the use of "Crescent" in the various fund titles: PJ at [65]. The Crescent Capital Funds are described as Crescent Growth Fund (or Crescent I) and Crescent II, III, IV and V. Crescent Wealth uses the term "Crescent Wealth" in the title of the Superannuation Fund and the International Equity Fund. It uses the term "Crescent" in three of the other funds.
52 At [69], the primary judge concludes that "Funds management", as a term, is not confined, in the minds of investors (consumers), to any particular class of asset investment and both Crescent Capital and Crescent Wealth operate funds by reference to the term "Crescent".
53 At [69], the primary judge makes this finding:
I accept that persons making investments, in particular investments of the quantum invested in Crescent Capital's funds, would take care in the object of that investment and, at present, there is a difference in the nature of the investments that [the] parties offer.
[emphasis added]
54 The primary judge finds that that difference, however, is not decisive because investors do not necessarily "restrict themselves to a single asset class" and Crescent Wealth has (and is) diversifying "within and across asset classes" and has (and is) expanding the amount of funds under management, which has the effect of attracting investors "beyond the 'mum and dad' category that presently provides much of its superannuation investment": PJ at [69]. It followed, for the primary judge, at [69] that:
There is sufficient likelihood of investors and those advising them being misled or deceived or confused by Crescent Wealth's offerings into believing that Crescent Wealth's funds are those of Crescent Capital or are part of, or associated with, or managed by, or connected to Crescent Capital.
[emphasis added]
55 The primary judge concluded at [70] that the point of distinction between the circumstances prevailing in Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd (2015) 115 IPR 67 (a case involving large, highly sophisticated, discerning institutional investors) and the circumstances relevant to the activities of Crescent Capital and Crescent Wealth, is that Crescent Wealth "is not aiming its activities at highly sophisticated investors, such that less sophisticated consumers might well be misled" [emphasis added].
56 The primary judge at [70] accepted that the relevant consumer is not, in all the circumstances, "necessarily a sophisticated one".
57 In the result, the primary judge concluded that the first and second appellants had engaged in conduct that was misleading or deceptive or likely to mislead or deceive by reason of their use of "Crescent Wealth"; the names of the funds; the use of the domain names and the use of the name "Crescent" together with generic words such as "investments" and "funds" and similar such words. That followed for the primary judge because such use is likely to lead investors to believe, wrongly, that such funds, products or services of Crescent Wealth are those of, or associated with, Crescent Capital: PJ at [89]. However, the primary judge also concluded that the contravening conduct, as found, did not mean that all use of the word "Crescent" either alone or in association with other words or in conjunction with a disclaimer, would result in investors/consumers being misled. The primary judge found that Mr Yassine was involved in the contraventions of the first and second appellants. The present respondents failed to make good their case against the present third to ninth appellants.
The grounds of appeal
58 The appellants contend that the primary judge fell into error in finding that the first and second appellants had engaged in misleading or deceptive conduct (or conduct likely to mislead and deceive), principally having regard to the following four considerations. First, the relevant class of consumers, they say, is made up of investors seeking to invest in low risk/low return Sharia compliant superannuation and related investment products in traditional asset classes which do not include private equity investments. Second, Crescent Capital has no reputation in the names and marks "Crescent", "Crescent Capital" and "Crescent Capital Partners" other than a reputation amongst the Australian financial community as a successful private equity fund manager. Third, Crescent Wealth (by the first two appellants) and Crescent Capital were not, and were not likely to be, engaged in a common field of activity because: (a) Crescent Wealth did not conduct and had no intention of conducting a private equity business; and, (b) Crescent Capital only conducts a private equity business and has no intention of conducting any other business. Fourth, persons considering investments offered by Crescent Wealth and investments offered by Crescent Capital would take care in "the object of their investment" and would view online information or receive documentation showing the logo of Crescent Wealth (if their offering) or the logo of Crescent Capital (if their offering): Ground 1.
59 The appellants say that the primary judge fell into error in finding that there was a likelihood of investors (not being "mum and dad" investors), and those advising them, being misled or deceived or confused by the conduct of Crescent Wealth into believing that Crescent Wealth's funds were those of Crescent Capital or associated with or managed by or connected to Crescent Capital: Ground 2.
60 The appellants say that the primary judge erred by concluding that there was a likelihood that "less sophisticated" consumers might be misled by the conduct of Crescent Wealth (Ground 3) and erred by failing to find that the relevant class of consumers comprised investors seeking to invest in low risk/low return Sharia compliant superannuation and related investment products in traditional asset classes not including private equity: Ground 4.
Considerations
61 The appellants emphasise a number of features of the Crescent Wealth Funds which, they say, differentiate the activities of Crescent Wealth from the investment activities of Crescent Capital.
62 First, 80% to 90% of Crescent Wealth's business activity is concerned with the investment of superannuation monies in and across the four Sharia compliant managed investment funds. The remaining 10% to 20% of its activities are concerned with direct investments into and across those funds. Thus, 100% of its business activities for investors are concerned with Sharia compliant investing.
63 Second, investments in the funds are designed for and available to retail investors and the superannuation product has no minimum investment requirement. The minimum investment threshold for direct investment into any one of the Funds is $5,000: PJ at [23].
64 Third, the investments are low risk/low return investments: the superannuation investments target 2% to 4% above the inflation rate; the Australian Equity Fund targets a return of 6.8%; the International Equity Fund targets "capital growth over the long term with total return [after fees] above the MSCI World Islamic [ex-Australia] Index expressed in AUD [unhedged]"; the Diversified Property Fund targets a return 3% above the Reserve Bank of Australia ("RBA") cash rate; and the Islamic Cash Fund (a cash management fund) targets a return "above" the RBA cash rate.
65 Fourth, the funds distribute returns regularly.
66 Fifth, investments can be withdrawn at any time.
67 Sixth, the Crescent Wealth Funds are managed by third party professional managers rather than Crescent Wealth as it says that it does not have the expertise to manage investment funds.
68 Seventh, all of the funds are Sharia compliant funds.
69 The appellants contrast these seven features with those that, they say, characterise the Crescent Capital investments and thus the focus of Crescent Capital's activities (and those investors with whom it engages).
70 First, Crescent Capital opens funds (every three to five years) and raises from investors a target fund amount or keeps the fund open for investment for a set time and then closes the fund.
71 Second, by this method, it offers highly sophisticated investors an opportunity, through the Funds, to make private equity investments: a fundamentally different class of investments, they say, to that offered through the Crescent Wealth Funds.
72 Third, funds are invested for the 10 year life of the particular Fund.
73 Fourth, the business model involves investing fund monies in small to medium enterprises by taking equity, engaging directly in the conduct of the undertaking to lift proper performance and then securing a trade sale or a listing of relevant securities on an exchange.
74 Fifth, the required rate of return is significant.
75 Sixth, the required rate of return is high because the investments are high risk.
76 Seventh, private equity investments are a way in which highly sophisticated investors diversify their investments across a portfolio of investments and private equity investments are only suitable as a small percentage of a sophisticated investor's total portfolio.
77 Eighth, the traditional or main asset classes for investment are said to be cash, fixed interest, property and shares whereas private equity investments in non-listed entities are regarded as investments in "alternative" assets with returns which differ from investments in traditional asset classes and which "provide diversification". The appellants say that this characterisation of traditional asset classes on the one hand and alternative assets (including private equity investments) on the other hand, and, diversification advantages for an investor's total investment portfolio can be seen in the text of the AON Master Trust document (AB, Tab 9.1, p 1141) and the van Eyk Research Report. As to the Trust document, it recognises that: "Alternative assets would be expected to have a pattern of returns that differs from traditional assets and thus they are expected to provide diversification".
78 The appellants' emphasis on this feature of private equity investments as compared with traditional asset classes is inherently difficult. Although the point is advanced to seek to demonstrate differentiation in the focus and investment activities of Crescent Capital (and its dedication to serving and offering private equity opportunities to investors) from the focus and investment activities of Crescent Wealth, the point necessarily recognises (supported by the material) that those investors looking to invest in funds enabling of private equity investments (with the possibility of high returns counter-balanced against corresponding high risks) are likely to be doing so as part of a diversification strategy to balance a portfolio of investments where the private equity investment might make up a small proportion of an investor's portfolio of asset classes comprising a mixture of the "main asset classes" and "alternative assets" including private equity investments and other alternative assets: market mutual funds, hedge funds, commodities and infrastructure.
79 If the underlying investment methodology of those persons who invest in private equity is to secure balance and diversification across a portfolio of investments (including the main asset classes), those investors who engage with Crescent Capital on the discrete and singular issue of the merits of investing in one of its private equity focused funds, are likely to see, engage with or otherwise deal with other financial service and product providers focused upon the main asset classes. Those other providers might well include Crescent Wealth and its four Funds (even though such an investor may not be looking for Sharia compliant investments).
80 The appellants contend that investors who engage with Crescent Capital are highly sophisticated, careful, inquiring and discerning investors who would not be misled, or be likely to be misled, should they engage with Crescent Wealth because the investment offerings of Crescent Wealth (which do not include any aspect of private equity investment) are so fundamentally different from the private equity investment offerings of Crescent Capital that any such investor would not fall into a false view that the service and product offerings of Crescent Wealth were those of Crescent Capital or that Crescent Wealth was associated in some way, shape or form with Crescent Capital. That follows, it is said, also because private equity investments are distinguished from other types of investments and not substitutable for them.
81 Finally, the appellants say that an important point of differentiation is that none of the investments Crescent Capital has offered in its various funds are Sharia compliant and although in its fourth fund, Crescent Capital adopted a "responsible investment policy" (avoiding investments in entities producing, for example, tobacco products), the policy did not compel Sharia compliant investments by its funds: banking, insurance and other financial services remained available investments. The appellants says that although a responsible lending policy might be regarded as a policy of making "ethical investments" there is "a world of difference" between ethical investments on the one hand and Sharia compliant investments on the other hand.
82 In fact, the appellants say that the private equity character of Crescent Capital's sequence of funds (and particularly, relevantly, its most recent two funds), coupled with the notion that an investor in those funds needs to be "a very large institution or an ultra-wealthy individual to participate" (as counsel for Crescent Wealth puts it), renders Crescent Capital's investors, as a cohort, a very narrow silo of investors "entirely differentiated" from the things Crescent Wealth does: never the consumer twain shall meet.
83 It is now necessary to examine aspects of the material in a little detail. I do so by means of a confidential schedule to these reasons which will be published to the parties but not otherwise.
84 Crescent Capital's monthly report for July 2006 to investors for its second fund sets out a list of investors in that fund and the magnitude of their investments. There are 12 identified investors (apart from the last two lines on the list), 11 of which are institutions. On any view, their "Committed Capital" and drawn-down or "Contributed Value" is very substantial: see Confidential Schedule, Box 1. The last two lines on the list are described as "Other Crescent Related Investors" and "Other Crescent Fund I Investors/Friends of Crescent". These last two categories on the list represent persons connected with Crescent Capital and investors who had invested in the first fund and continue to participate in later funds due to their participation at the outset. The appellants say that as to these last two groups of investors, there is simply no prospect of anyone being misled by Crescent Wealth's use of the name "Crescent Wealth" or "Crescent" because these investors are "utterly aware" that Crescent Wealth is not Crescent Capital and are similarly aware of how Crescent Capital differs from Crescent Wealth.
85 In March 2012 the "Monument Group", engaged by Crescent Capital to seek out investors, published a report in relation to the fourth fund. The total number of "Limited Partners" is set out at Confidential Schedule, Box 2. The total investment commitments are set out at Confidential Schedule, Box 3. The investing group is relatively small and the commitments are very substantial. Page 15 of that document sets out a list of investors in Crescent Fund IV which identifies the institutional investors and a group described as "individuals" and another group called "General Partner". These two groups are persons associated with Crescent Capital or partners in Crescent Capital. As before, the appellants say that no investor in either of these two groups could possibly be misled by reason of Crescent Wealth's use of "Crescent Wealth" or "Crescent".
86 As to Crescent Fund V, the minimum investment is very substantial: see Confidential Schedule, Box 4. The minimum investment for Crescent Fund IV was the same amount and expressed in the same way. The minimum investment for Crescent Fund III was also significant: see Confidential Schedule, Box 5. Contextually, the minimum investment in Crescent Fund II was $250,000: PJ at [17]. The appellants say that if it is correct to say that a prudent investor places about 5% to 10% of their investments in private equity high return/high risk investments (as a portfolio balancing exercise) then the total portfolio of each investor making the minimum investment in Crescent Fund IV and Crescent Fund V would, theoretically, be in the range set out in Confidential Schedule, Box 6 which means that the numbers in Confidential Schedule, Box 7 would be invested in other assets. The appellants say that the true character of Crescent Capital's private equity investment activity is reflected in the circumstance that the minimum investment threshold for Crescent Funds IV and V and the likely magnitude of particular investments made into those funds made it necessary for Crescent Capital to establish (for Crescent Fund IV, for example) an electronic data room of documents to enable investors to conduct a due diligence process much along the lines of an acquisition.
87 The appellants say that none of this characterises Crescent Wealth's investment services or products.
88 As to Crescent Wealth's presentation of itself to investors, the appellants say that its Facebook pages use the logo at [42] of these reasons very extensively and extensive emphasis is given to the Islamic compliant character of its investments. For example, the screen shot at AB Tab 5.1, p 50 uses the logo, next to the words:
Professional Development
New Course
Islamic Wealth for Professionals
89 Also at AB Tab 5.1, p 50 the following text occurs next to the logo:
Join us for our next
ISLAMIC SUPER
INFO SESSION
90 Similar references occur in the Facebook screenshots at AB Tab 5.1, pp 49, 52, 54 and 56.
91 All of the Facebook screenshots at Tab 5.1 make extensive use of the logo and extensive reference to the relationship between Crescent Wealth Investments and conformity with Halal or Islamic principles. So too does the website. The screenshots at AB Tab 22 show extensive use of the logo throughout; prominent references to "Australia's First Islamic Wealth Manager"; a description "About Us" in these terms: "Crescent Wealth is Australia's first ultra-ethical wealth manager, offering a superannuation fund as well as a series of managed funds that invest into socially responsible assets based on Islamic investment principles"; details about each of the Board members of The Crescent Wealth Australian Advisory Board, under the heading (and logo): "Australia's First Islamic Wealth Manager"; details about the members of The Crescent Wealth Global Advisory Board under the same heading (and logo); and details about the members of The Crescent Wealth Shariah Supervisory Board (under and by reference to the same heading and logo).
92 The advertising and brochure material relating to the superannuation product emphasises the logo, prominently describes the product as "Islamic Superannuation" and describes Crescent Wealth much in the same terms as the Facebook and website screenshots.
93 Large APN Billboards prominently display the logo, the words "Islamic Superannuation" and the question: "Is your Super Halal? Ours is."
94 The Product Disclosure Statement ("PDS") for the Crescent Wealth Superannuation Fund displays the logo and tells the reader, apart from a range of required information, the following:
1. About Crescent Wealth Super
Crescent Wealth is Australia's first dedicated Ultra Ethical wealth manager offering an innovative suite of investment products. As a pioneer with specialist expertise in a dynamic new sector, we offer all Australians and attractive alternative in socially responsible investing.
β¦
3. Benefits of investing with Crescent Wealth Super
The Fund is designed to allow you to save and accumulate your superannuation based on Islamic investment principles.
5. How we invest your money
Under Ultra Ethical investing, certain social and moral considerations, which are in accordance with Islamic investment principles, are taken into account in determining the investment objectives of the underlying funds in which the Fund invests. For example, investment and assets which may give exposure to income from gambling, adult material, alcohol or weaponry is avoided. These principles are highly relevant to the acquisition of assets in the underlying funds.
95 The asset classes making up the Crescent Balanced Investment Option, as described in the PDS, are: Australian Shares, International Shares, Property and Cash and Fixed Income. The appellants say that none of the marketing material conveys any suggestion of an association with a private equity firm named Crescent Capital.
96 In these proceedings, the appellants, plainly enough, must demonstrate error on the part of the primary judge. In the principal proceeding, the respondents claimed damages under s 12GF of the ASIC Act (apart from claims under the ACL) for loss suffered by reason of contended contraventions of s 12DA and s 12DB of the ASIC Act. Although those provisions are well known, it should be noted that s 12DA contains a statutory prohibition upon a person, in trade or commerce, engaging in conduct, in relation to financial services, that is misleading or deceptive or likely to mislead or deceive. Section 12DB contains a statutory prohibition upon a person, in trade or commerce, in connection with the supply or possible supply of financial services, or in connection with the promotion, by any means, of the supply or use of financial services; making a false or misleading representation that services are of a particular standard, quality, value or grade; or making a false or misleading representation that services have sponsorship, approval, performance characteristics, uses or benefits; or making a false or misleading representation that the person making the representation has a sponsorship approval or affiliation.
97 The trial was confined to the question of whether the appellants had engaged in contravening conduct.
98 As already noted, the primary judge found contraventions by the first and second respondents by conduct consisting of use of "CRESCENT WEALTH", the names of Crescent Wealth's Funds, use of domain names and use of "Crescent" coupled with words such as "investments" and "funds": PJ at [71] and [89].
99 Declaration 1, explanatory of the conduct, is framed in terms of contraventions of s 12DA of the ASIC Act. Orders 3 and 4 are restraining injunctions which give remedial expression to the contraventions. Orders 5 and 7 are mandatory corrective orders. Order 6 restrains Mr Yassine from aiding the first and second appellants from engaging in any conduct which would not comply with Orders 3 and 4.
100 Crescent Wealth's conduct is directed to "the public at large" with a particular emphasis on retail investors of the Islamic faith: PJ at [21].
101 In Campomar v Nike International (2000) 202 CLR 45 ("Campomar"), the Court (all seven Justices: Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ) observed that the question that arose in that case (as it does in this case) was whether there was a "sufficient nexus" between the conduct and the "contended misconceptions" (or contended deceptions) in the mind of others: Campomar, [98].
102 The appellants here contend that there is no nexus sufficient to support the contraventions or the relief granted against the appellants (and particularly the first and second appellants) by the primary judge.
103 The question cannot be considered "in the abstract": Campomar, [99]. Regard must be had to the particular circumstances of the case: Campomar, [99]. Whether the conduct amounts to a representation is a question of fact to be decided against the background of "all the surrounding circumstances": Campomar, [100]. Where, as in this case, the conduct consists of contended representations to the "public at large or to a section thereof", the issue of the "sufficiency of the nexus" between the conduct (or apprehended conduct) and the misleading, or likely misleading, of persons acquiring (purchasing) the service (or products) is to be approached at a "level of abstraction" (Campomar, [101]) not present in the case of an express untrue representation made to a specific identified individual: a direct linear representation.
104 The "level of abstraction" finds expression in the "entry" into the inquiry of the "ordinary" (Mason J, Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 210 ("Puxu") or "reasonable" (Gibbs CJ, Puxu at 199) members of a cohort or class of prospective users of the service (Campomar, [102]) to which particular "characteristics" can properly be "objectively" attributed having regard to the "circumstances of the case" including all the surrounding circumstances: Campomar, [102], [99], [100].
105 Where the persons in question are members of a cohort or class to which the conduct in question was directed "in a general sense" (Campomar, [103]), it is necessary to "isolate", by some "criterion", a "representative member" of that cohort (Campomar, [103]) and the "inquiry" (as to the sufficiency of the nexus), is to be undertaken with respect to "this hypothetical individual" so as to determine "why the misconception has arisen" (or is likely to arise if no remedy is granted): Campomar, [103].
106 The "heavy burden" imposed by the statutory norm reflected in s 52 of the Trade Practices Act 1974 (Cth) (which is the statutory norm reflected in s 12DA of the ASIC Act and s 18 of the ACL) suggests that where the effect of the conduct on a cohort or class of persons is in issue, the statutory prohibition "must be" regarded as contemplating the effect of the conduct on "reasonable members of the class": Campomar, [103].
107 In the case of mass-marketed products for general use such as sportswear and perfumery products, the Court in assessing the "likely reactions" of ordinary or reasonable members of the class of prospective purchasers may well give little weight to "assumptions" by persons whose reactions are "extreme" or "fanciful": Campomar, [105]. These proceedings do not involve mass-marketed consumer products such as athletic footwear or perfumery. The proceedings do involve, however, financial products and services extensively marketed by Crescent Wealth by brochures, billboards, Facebook pages and webpages to persons seeking or likely to be seeking investment services especially in relation to prudent superannuation investments in respect of a number of asset classes.
108 The proper analysis required of the primary judge in this case involved isolating, by some criterion supported by the evidence in all the circumstances, a hypothetical representative member of the class to whom the conduct was (and is) directed and then testing why the contended misconceptions arose or were likely to arise by reason of the use of "Crescent Wealth", "Crescent", the domain names, the Fund names and the company titles.
109 In assessing the reactions or likely reactions of ordinary or reasonable members of the relevant class of persons, the Court would be likely to give little weight to assumptions by persons whose reactions were extreme or fanciful. Reasonable or ordinary members of the class would be likely to bring an inquiring mind to the assessment of the investment products and services of Crescent Wealth promoted to the class. The sufficiency of the nexus between conduct and the misleading (or deception) of the class, tested against the hypothetical reasonable or ordinary member, is not made good simply because the conduct causes such a person to be confused or caused to wonder about issues of connection, source or origin between the products of Crescent Wealth and those of Crescent Capital. The question for the Full Court is whether the primary judge applied the correct method or test (that is, whether error is demonstrated) and whether, in undertaking the assessment according to that test (if correctly identified) the primary judge reached a conclusion open on the evidence notwithstanding that minds might legitimately differ about the application of the correct test in all the circumstances of the case.
110 In Campomar, their Honours put it this way at [107]:
In [the relevant circumstances of the case], looking at the matter objectively, there was nothing capricious or unreasonable or unpredictable in [the primary judge's] conclusion that the [relevant conduct] was likely to mislead or deceive members of the public into thinking [erroneously that the relevant product was in some way promoted, distributed or sponsored by Nike International].
[emphasis added]
111 There are a number of difficulties with the contentions of the appellants.
112 First, having regard to the principles identified by the primary judge at [38] and [39] and the primary judge's observations at [63] to the effect that investors do not necessarily or practically restrict themselves to one class of investment, or to one offeror of investment opportunities (whether within an asset class or across asset classes), and the observations at [70] that the relevant consumer is not, in the circumstances, necessarily a sophisticated one, it seems clear enough that the primary judge fully appreciated the test to be applied and, in all the circumstances of the case, identified a hypothetical representative of a class of investors against which the sufficiency of the nexus was to be tested.
113 Second, Mr Yassine explains in his affidavit of 16 February 2015 and in his oral evidence that AON Hewitt (a wholesale investor) invested $1.5 million with Crescent Wealth (for management rather than a capital investment in any of the companies) shortly after Crescent Wealth commenced business and before Crescent Wealth Superannuation Fund was established. He explained that the investment was a matter of "sheer serendipity" (T, p 218, ln 16) arising out of the good relationship subsisting between Ms Sengupta for AON Hewitt and Mr Omran for Crescent Wealth. Mr Yassine gave evidence that the investment at February 2015 had a current value of $1.57 million: T, p 218, lns 4-10. Notwithstanding those circumstances, Mr Yassine accepted that Crescent Wealth "would welcome another investment now into Crescent Wealth's funds if it came along": T, p 218, lns 18-19. Moreover, Mr Yassine accepted that he would have welcomed such an investment "any time in between 2011 and now" (T, p 218, lns 21-22) and that, from the time of setting up Crescent Wealth's funds, he (and therefore Crescent Wealth) "[was] happy to receive investments from high net worth individuals into the funds as long as they [investors] agreed to invest in [the] Sharia compliant investments we offered": T, p 218, lns 24-31. Mr Yassine also accepted that it remained an aim of the Crescent Wealth Superannuation Fund to "target higher net worth clients, through superannuation" and Crescent Wealth aimed, "absolutely", to "target financial planners and professional groups": T, p 218, lns 37-41.
114 Third, AB, Tab 10.21, is a document which bears the title "Crescent Wealth Superannuation Fund Investment Committee β 12 November 2014". Page 7 of that document (p 246 of the AB) contains a page marked "Direct marketing". It sets out amended sales targets for 2014 and a series of bullet points related to "marketing efforts for the quarter". As to direct marketing, the document says this:
β’ Amended sales targets for 2014 of $65m+. Discussions still advancing with Investment Platforms and Financial Planner groups eg. AMP, Yellow Brick Road and AON
β’ Increase in Average member balance every quarter; currently at approximately $27,500 an increase from $23,000 the quarter before.
β¦
[emphasis added]
115 As to the marketing efforts for the quarter, the document says this:
β’ Marketing efforts have been targeting higher net worth clients. This has meant targeting financial planners and professional groups.
β¦
[emphasis added]
116 Apart from these matters, the marketing document identifies that Crescent Wealth is continuing to "leverage" its existing partnerships with community groups; engage in event sponsorships in tandem with Islamic groups; continue its digital media advertising through Facebook and Youtube; continue with "regular Mosque drops around Sydney"; and adopt targeted efforts to "cover Islamic schools in NSW and VOC via school visits".
117 As to the matters at [114] and [115] of these reasons, it seems clear enough that Crescent Wealth's marketing efforts have been targeting higher net worth clients, financial planners and professional groups and the likelihood is that some of the individuals within that group would be wholesale investors.
118 Fourth, Mr Yassine accepted that on 17 August 2015, Crescent Wealth issued a press release indicating that it has surpassed the $100 million benchmark in funds invested which represented a 245% growth in funds under management in the financial year 2015: T, p 220, lns 15-17; lns 28-31. As to the returns on investment, Mr Yassine accepted that since its February 2013 launch, the Crescent Wealth International Equity Fund had achieved a total return of 60.7% to 30 June 2015: T, p 221, lns 10-15.
119 Fifth, it follows from the circumstances at [112] to [118] (apart from [116]) of these reasons that the appellants' singular or silo point of differentiation between highly sophisticated wholesale investors seeking out high return/high risk private equity "alternative" investments (through Crescent Capital) on the one hand and unsophisticated retail investors seeking out low risk/low return investments in "traditional" asset classes on the other hand, in all the circumstances of the case, does not provide a "criterion" for isolating a "representative member" of the relevant cohort or class for the purpose of undertaking the "inquiry" as to the sufficiency of the nexus so as to determine whether and why the contended "misconception" has arisen: see [105] of these reasons.
120 This is precisely why the primary judge identified, as a relevant criterion, the circumstance that "investors do not necessarily restrict themselves to a single asset class" and that, in the circumstances of the case, "Crescent Wealth is diversifying within and across asset classes and expanding the amounts of funds under management": PJ at [69]. It also explains why the primary judge accepted the submissions of Crescent Capital that "the relevant consumer is not, in the circumstances, necessarily a sophisticated one": PJ at [70].
121 Sixth, the appellants recognise that investors in private equity are likely to do so as part of a diversification strategy to achieve balance in a portfolio of investments. In doing so, such investors familiar with Crescent Capital's reputation, as found, might well engage with Crescent Wealth in relation to the main or traditional asset classes in which it provides investment services and products and bring to that engagement consciousness of the names Crescent Capital and Crescent. Such investors are likely to balance a portfolio of investments by considering investments in funds targeting high net worth individuals; wholesale investors (such as AON Hewitt and high net worth individuals who would be regarded as wholesale investors); financial planners; those persons interested in returns through participation in funds invested in securities listed on International Securities Exchanges; securities listed on the Australian Securities Exchange; and those persons interested in participating in profits derived from diversified property investments.
122 Thus it can be seen that the strict differentiation critical to the appellants' case falls away.
123 Seventh, although the primary judge placed no particular emphasis on the issue of actual confusion, there was evidence before the primary judge of actual confusion.
124 Mr Yassine, in an email dated 1 October 2012 to Mr David Mortimer, the Chairperson of the Crescent Capital entities, said that "it would be great to meet the Crescent Team (your Crescent Team)" [emphasis added] and on 10 December 2012, Mr Yassine sent Mr Mortimer an email asking him whether he would be willing to join the Crescent Wealth Advisory Board. Mr Mortimer responded by saying that it would be better that he not do so as he and his colleagues felt that to do so would simply confuse people "with the names so close". Mr Peter Scrine, Crescent Capital's Business Development Director, gave evidence in an affidavit of 25 September 2014 that in 2012 Crescent Capital was in the early stages of identifying dental surgeries that might be acquired as part of a national dental care undertaking. He says that on 17 December 2012 he had a conversation with Mr Ian Donnelly, an employee of Collins Acquisitions (a company that facilitates the sale of dental and child-care businesses). Mr Scrine sought to arrange a meeting with Mr Donnelly to "potentially develop a deal flow from [Mr Donnelly's] firm". Mr Donnelly said: "Sure. Are you the Islamic equity fund?" Mr Scrine said that that was Crescent Wealth and that he was from Crescent Capital. Mr Mortimer also gave evidence that on or about 7 August 2013 at a fundraising dinner hosted by Deutsche Bank in Sydney, the Australian Treasurer, Mr Hockey, had a conversation with him in which Mr Hockey said that he had met someone from "Crescent last week" whose name was "something like Yassine" and Mr Mortimer responded that Mr Yassine was not "connected to us" and that he "runs another company with the same name". There are similar examples of conversations. More importantly, there is also an email addressed to employees of Crescent Capital from the "Unlisted Unit Trust Team" at BNP Paribas bank by which information is sought about one of Crescent Wealth's funds as well as information about Crescent Capital's funds. Plainly enough, the author of the email regarded Crescent Wealth's funds as part of the funds administered by Crescent Capital.
125 Having regard to all of these matters at [112] to [124] of these reasons, I am satisfied that the primary judge did not fall into error in framing the representative member of the class in the way her Honour did. I am also satisfied that although an investor in private equity funds would likely bring an inquiring mind to investments in other funds focused upon traditional asset classes, there is a real likelihood that such an investor, within the class of investors, would likely be misled by Crescent Wealth's use of the term "Crescent" and "Crescent Wealth", in the description of its funds and in its presentation of itself to those with whom it deals.
126 I am satisfied that the primary judge in applying the test, properly identified by her Honour, did not reach conclusions which could be described as capricious, unreasonable or unpredictable: see [110] of these reasons. I am satisfied that the primary judge did not otherwise fall into error. For these reasons, the appeal by the Crescent Wealth appellants ought to be dismissed.
127 As to the appeal by Crescent Capital in relation to Orders 3 and 4 (and related orders), I have had the benefit of reading the draft reasons for judgment of Edelman J and I agree with those reasons in support of the orders his Honour proposes.
I certify that the preceding one hundred and twenty-seven (127) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.
Associate:
Dated: 12 January 2017
REASONS FOR JUDGMENT
EDELMAN J:
Introduction
128 Since preparing a draft of these reasons I have had the considerable advantage of reading the reasons for decision of Greenwood J. I agree with the reasons of his Honour and the orders proposed on the first appeal (NSD 517 of 2016), with the addition of the reasons below which his Honour's reasons has permitted me to abbreviate.
129 The relationship between the first eight appellants and both respondents in the first appeal is described in detail in the reasons of Greenwood J. All are companies which bear, as the key part of their trading name, the word "Crescent". The eight appellant entities were incorporated between July 2009 and February 2012. The Crescent Capital entities, the respondents in this appeal, have operated since November 2010.
130 As Greenwood J has explained, the core of the primary judge's findings was a conclusion that the first and second appellants on this appeal, Crescent Funds Management and Crescent Investments (two Crescent Wealth entities), by their fund names, corporate names, domain names, name and mark, engaged in conduct that was misleading or likely to mislead or deceive in contravention of s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth). For convenience and clarity, I will follow the approach taken by the counsel on this appeal of describing the appellants as Crescent Wealth and the respondents as Crescent Capital as though they were each a single entity.
131 The essence of Crescent Wealth's appeal to this Court was a submission that its conduct was not misleading or likely to mislead because its activities and reputation were so separate from that of Crescent Capital. Crescent Wealth essentially reran the case that it had run at trial, although focusing only on a selection of the most favourable evidence, to emphasise the differences between the two businesses. Much of this involved reiterating the evidence and findings of the primary judge concerning the differences including: (i) the products provided; (ii) the logos associated with the respective businesses; (iii) the class of consumers to whom the products are provided; (iv) the nature of the investments offered; (v) the persons or institutions to which the products are marketed; and (vi) the emphasis by Crescent Wealth on Sharia compliant products. The primary judge accepted these differences. However, her Honour concluded that any separation that can be said presently to exist in the class of investors in the respective funds will diminish as Crescent Wealth grows ([61]).
132 The primary judge rejected Crescent Wealth's case for essentially two reasons in combination. The first was that the case depended upon a neat, but artificial, division between (i) classes of consumers within the financial services industry and in the fields of funds or investment management (retail and wholesale), and (ii) those who invest in private equity (Crescent Capital) and those who invest in other products including superannuation (which was the focus of Crescent Wealth's activities although not limited to superannuation). That division does not accord with commercial reality because fund managers and investors invest across different asset classes and do not restrict themselves to one class of investment ([63]). The second reason why the primary judge rejected Crescent Wealth's case was that the occupation of a common field of activity is not essential for a successful misleading and deceptive conduct claim ([64]). In this case, the characterisation by the primary judge was that Crescent Wealth's conduct was in the financial services industry generally. Crescent Capital had a reputation within the financial services industry generally and persons to whom Crescent Wealth directed its conduct were likely to be misled or deceived.
133 The primary judge's characterisation focuses upon the particular circumstances of the case and the persons to whom Crescent Wealth's conduct was generally directed. Even with only the snapshots of evidence that we were provided with on this appeal, the primary judge's characterisation was supported by the evidence, including evidence that some consumers were actually misled. The appeal must be dismissed.
134 A second appeal was heard concurrently with the appeal by Crescent Wealth. Crescent Capital separately appealed from the terms of the injunctions granted by the primary judge (NSD 567 of 2016). With one exception, that appeal must also be dismissed. The exception concerns the grant of liberty for the parties to apply to vary one part of the primary judge's orders by consent. That potential variation allows the parties to confer and, if possible, agree to the wording of the disclaimer ordered by the primary judge. That wording was not the subject of argument on this appeal and leaves some discretion to Crescent Wealth. I consider the order to have been within the scope of her Honour's discretion. However, if the parties are able to agree the appropriate form of words of disclaimer, which could avoid any potential for further dispute, then the agreed form would be the preferable order.
THE APPEAL BY CRESCENT WEALTH
The primary judge's characterisation of the relevant consumer
135 In Campomar Sociedad, Limitada v Nike International Limited [2000] HCA 12; (2000) 202 CLR 45, 83-84 [98], the High Court referred to remarks of Stephen J in Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd [1978] HCA 11; (1978) 140 CLR 216, 228, that although persons had been misled it was necessary "to inquire why this misconception has arisen in the minds of others". In Campomar, the High Court concluded that the primary judge's conclusion about misleading or deceptive conduct was not "capricious or unreasonable or unpredictable" (88 [107]). The primary judge's conclusion was that placing the "NIKE SPORT FRAGRANCE" product with other sports fragrances in pharmacies was likely to mislead or deceive members of the public into thinking that the "NIKE SPORT FRAGRANCE" product was in some way promoted or distributed by Nike International itself or with its consent and approval.
136 The reference by the High Court to the primary judge's conclusion not being "capricious or unreasonable or unpredictable" involves a recognition of the advantages of the primary judge in relation to issues of credibility, the "feeling" of the case, and the consideration of the entirety of the evidence over a longer hearing period: Fox v Percy [2003] HCA 22; (2003) 214 CLR 118, 125-126 [23] (Gleeson CJ, Gummow and Kirby JJ). See also Robinson Helicopter Company Incorporated v McDermott [2016] HCA 22; (2016) 331 ALR 550, 558-559 [43] (the Court).
137 Senior counsel for Crescent Wealth accepted that some "deference" should be accorded to the primary judge (ts 6). A better label, without the connotations of servility, might be "judicial restraint", the extent of which will vary depending upon the advantages of the primary judge. In this case, the primary judge had some advantages but they should not be overstated, especially as credibility issues were not involved. Crescent Wealth submitted that even with recognition of some restraint, the primary judge should have concluded that no person in the relevant group of consumers would be likely to be misled or deceived.
138 As the High Court explained in Campomar, where the consumers are not identified individuals, but are members of a class to which the conduct in question was directed in a general sense, it is necessary to isolate by some criterion a representative member of that class (85 [103]). The submissions by Crescent Wealth were an attempt to characterise that representative member with such a degree of specificity that the representative member could not be misled or deceived into assuming any association with Crescent Capital.
139 Crescent Wealth submitted that the relevant class of consumers was "investors seeking to invest in low-risk, low-return Sharia compliant superannuation and related investment products in traditional asset classes (such as listed securities, property and cash)". During oral submissions, senior counsel for Crescent Wealth submitted that the class to whom Crescent Wealth's conduct was directed must be narrowed even further to be investors, who are not large institutions, seeking to invest in low risk, low return, Sharia compliant superannuation and related investment products in traditional asset classes (such as listed securities, property and cash) (ts 43). In contrast, he submitted, the primary judge had concluded that Crescent Capital's customers were highly sophisticated investors, such as large institutions and very high net worth individuals, and their expert advisers (ts 25).
140 The primary judge accepted that there were numerous differences between various aspects of Crescent Wealth and Crescent Capital including the nature of the investments offered. Her Honour also accepted that persons making investments of the quantum invested in Crescent Capital's funds, would take care in the object of their investment. Although those differences were reiterated at length in this appeal, it is sufficient to say that I agree with the comments of Greenwood J at [61]-[77] and [81]. Despite the differences there were also commonalities. In particular:
(1) As the primary judge observed at [58], Crescent Capital's concerns were largely directed to the future conduct of Crescent Wealth in the light of its rapid growth and likely expansion beyond its existing consumer base, which already includes institutional investors.
(2) As the primary judge also observed at [58], Crescent Capital and Crescent Wealth both operate through fund managers and diversification into the higher risk category of property investment.
(3) At [60], the primary judge concluded that Crescent Capital had agreed, in side letters with specific investors, to limit the nature of investments in accordance with what it termed "ethical investing", including some limitations that accord with aspects of Sharia law. Although Crescent Capital had not engaged in any Sharia compliant investing, it could not be said that Crescent Capital had decided to remove itself from offering Sharia compliant investments.
(4) The evidence suggested that there may not be a clear line in terms of marketing and reputation between Sharia and non-Sharia funds. Crescent Wealth had described its Sharia funds as "ultra-ethical" to distinguish them from "ethical" funds (trial ts 230-231). This creates the impression of a continuum which fits neatly with Crescent Wealth's marketing of its Sharia superannuation involving statements that "Money and Morals do mix", "Socially Responsible Investing", "investments that benefit society", and a statement from a Private Equity CEO that "Islamic Finance is attractive to consumers of all faiths".
141 However, the primary judge did not accept a characterisation at the extreme level of specificity asserted by Crescent Wealth. The finding of the primary judge was effectively that the representative members of the class to whom Crescent Wealth's conduct was generally directed were consumers seeking to invest funds in the financial services industry in the fields of funds or investment management, or persons advising those consumers.
142 Questions of characterisation, including the level of specificity of the characterisation, are matters which are closely affected by the facts of the case. Analogies will not often assist. For instance, Crescent Wealth attempted to give an analogy of conduct by a bicycle manufacturer not being misleading or deceptive to consumers of motorcycles even though bicycles and motorcycles might both be within the same genus of two wheeled cycles. But, as senior counsel for Crescent Capital observed, a reasonable consumer might easily assume that the maker of a Harley Davidson bicycle did so under licence from the motorcycle manufacturer (ts 59).
143 With respect to the primary judge, in the circumstances of this case it was accurate for her Honour to characterise the representative consumer and financial adviser to whom Crescent Wealth directed its representations as persons seeking to invest, or to advise investors, within the financial services industry and the field of funds and investment management. As the primary judge found, Crescent Wealth's consumers did not restrict themselves to a single asset class, and Crescent Wealth itself was diversifying within and across asset classes and expanding the amounts of funds under its management. An example of the evidence before her Honour was a newsletter from Crescent Wealth in May 2015 for potential investors which was not confined to superannuation. It contained a market overview, and described the performance of Crescent Wealth's international equity fund, property fund, Islamic cash management fund, and Australian equity fund. The newsletter also referred to Crescent Capital as a private equity firm that had acquired a 19% stake in Cardno Limited, which supports an inference that Crescent Capital would have come to the attention of Crescent Wealth's prospective customers, even if the precise nature and scope of all its activities had not.
144 It is far too narrow, and specific, to describe Crescent Wealth's representative consumer to whom its conduct was directed as "investors, who are not large institutions, seeking to invest in low risk, low return Sharia compliant superannuation and related investment products in traditional asset classes (such as listed securities, property and cash)".
The reputation of Crescent Capital within the relevant class
145 The second aspect to Crescent Wealth's submissions was that Crescent Capital had no reputation within the relevant class of consumer to which Crescent Wealth's conduct was directed. Crescent Wealth submitted that the reputation of Crescent Capital was confined to a reputation as a successful private equity fund manager amongst "highly sophisticated investors, such as large institutions and very high net worth individuals, and their expert advisers". Crescent Wealth submitted that the primary judge had made such a finding. Therefore, Crescent Wealth submitted, its conduct could not be misleading or deceptive.
146 I do not accept this submission. The primary judge made no such finding. At [9] to [11], the primary judge described how Crescent Capital had, and has, a reputation "in the financial services and financial management industry". Her Honour explained that Crescent Capital's reputation derives from:
(1) its own activities;
(2) its approaches to investors and financial advisers;
(3) awards conferred on it including from the Australian Private Equity and Venture Capital Association Limited;
(4) its activities in raising money for investment in its funds (which included the use of promotional and marketing materials); and
(5) media reports including in the Australian Financial Review and Sydney Morning Herald.
147 The submission by Crescent Wealth about the allegedly limited reputation of Crescent Capital involved equating the primary judge's description of (1) (ie Crescent Capital's own activities) with the entire extent of Crescent Capital's reputation. Senior counsel for Crescent Wealth submitted that the entire reputation of Crescent Capital was described by the primary judge when she said (at [18]) that Crescent Capital offers high risk, high return investments with long term commitment of funds with no certainty of returns, and that investors and prospective investors are highly sophisticated investors who consider investments carefully before proceeding. But Crescent Capital's reputation also derived from (2), (3), (4), and (5) above.
148 As for the reputation of Crescent Wealth, her Honour concluded at [69] that the class of Crescent Wealth's consumers are investors generally, not merely those within the "mum and dad" category. The investors who are interested in Crescent Wealth "do not necessarily restrict themselves to a single asset class" ([69]). At [70], her Honour distinguished Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd [2015] FCA 882; (2015) 115 IPR 67 which was a case where the relevant consumers were large institutional investors who would not have been misled. She distinguished that case on the basis that Crescent Wealth did not aim its activities at highly sophisticated investors. In other words, and consistently with her Honour's conclusion at [69], Crescent Wealth was, and is, concerned with investors generally, not necessarily mum and dad investors. In this respect, the reasons of Greenwood J at [113]-[115] refer to evidence on this appeal. Her Honour concluded that less sophisticated consumers might well be misled.
149 The primary judge's findings concerning reputation and the misleading effect of Crescent Wealth's conduct were amply supported by the evidence. Several examples can be given:
(1) Crescent Capital's reputation derived in part from references to it in the media including 227 articles published before June 2011 including articles in the Sydney Morning Herald, AAP News via Financial News, and the Australian Financial Review. Although these articles sometimes referred to Crescent Capital at the outset, the rest of the article often referred to the business simply as "Crescent".
(2) There was evidence that around half of private equity investors (including investors in Crescent Capital) used an adviser (trial ts 162). The evidence did not support the assertion by Crescent Wealth that advisers concerning private equity did not advise on other investments. There was also evidence from Mr Lukin, a partner from ROC Partners, of a degree of integration between superannuation and private equity. His firm invested in private equity but the firm's clients were typically superannuation funds.
(3) As the primary judge explained, and as Greenwood J explains at [124], there was evidence of confusion between Crescent Capital and Crescent Wealth among consumers. This evidence supports the inference that Crescent Capital's reputation extended to investors who knew of Crescent Wealth. The primary judge referred to the evidence of:
(a) conversations such as one in which a person involved in the sale of dental and child-care businesses asking an employee of Crescent Capital "are you the Islamic Equity Fund?";
(b) a telephone enquiry to Crescent Capital asking to speak to Mr Yassine of Crescent Wealth;
(c) a comment of the then Federal Treasurer to the chairperson of Crescent Capital at a dinner indicating that he had met someone from "Crescent", being Mr Yassine;
(d) other comments to the chairperson of Crescent Capital from business associates connecting Mr Yassine to Crescent Capital; and
(e) an email addressed to employees of Crescent Capital from the Unlisted Unit Trust team at BNP Paribas seeking information about a Crescent Wealth fund as well as about Crescent Capital's funds.
150 When Crescent Wealth's conduct is assessed by reference to the representative investors to whom its conduct was directed, the reputation of Crescent Capital had the effect that Crescent Wealth's conduct was misleading or likely to have misled or deceived. There was a real likelihood that less sophisticated investors, sophisticated investors, and advisers would be misled.
Conclusions on the appeal by Crescent Wealth
151 Many of the arguments on this appeal were, essentially, reruns of the same (well presented) arguments which Crescent Wealth made before the primary judge. She heard the evidence and submissions over five days. She saw the context of the evidence and the demeanour of the witnesses. Her conclusion was based upon an evaluative assessment which was dependent upon characterising the degree of association between the operations of Crescent Capital and Crescent Wealth in the marketplace. That characterisation was made with an eye to commercial reality rather than by focusing upon fine, artificial distinctions between classes of consumer and types of product in a diverse industry.
152 This Court reheard the matter in a one day appeal. We were referred to a small subset of the evidence. However, even without the advantages of the primary judge I consider her conclusion to be correct. That conclusion was that there was sufficient likelihood of those investors (ie the representative investors) and those advising them being misled or deceived into believing that Crescent Wealth's funds were those of Crescent Capital or were part of, or associated with, or managed by, or connected to Crescent Capital by:
(1) the name and mark "CRESCENT WEALTH";
(2) the corporate names "Crescent Funds Management (Aust) Limited" and "Crescent Investments Australasia Pty Ltd";
(3) the names of Crescent Wealth's funds (when compared with the Crescent Capital funds called Crescent Growth Fund (or Crescent I) and Crescent II, III, IV and V), being:
(a) Crescent Wealth Superannuation Fund;
(b) Crescent Australia Equity Fund;
(c) Crescent Wealth International Equity Fund;
(d) Crescent Diversified Property Fund; and
(e) Crescent Islamic Cash Fund;
(4) Crescent Wealth's domain names (when compared with crescentcap.com.au for Crescent Capital), being:
(a) crescentinvestments.com.au;
(b) crescentwealth.com.au;
(c) crescentfunds.com.au;
(d) crescentfunds.net; and
(e) crescentinstitute.com.au.
THE APPEAL BY CRESCENT CAPITAL
153 A second appeal (NSD 567 of 2016) was brought by Crescent Capital. Crescent Capital submitted that the primary judge's orders were too narrow. The four respects in which the primary judge's orders were said to be too narrow, and the four grounds of appeal, were as follows:
(1) the injunctions in orders 3 and 4 should have been unqualified, permanently restraining the first and second respondents, in trade or commerce, from offering to provide, providing, advertising or marketing in Australia any investment services or products under and by reference to the name "Crescent" or "Crescent Wealth", or any name substantially identical with or deceptively similar to the name "Crescent" or "Crescent Wealth";
(2) the disclaimer in order 4 should not have been included;
(3) orders requiring deregistration of the offending domain names and fund names should have been made in light of the primary judge's reasons at [90]; and
(4) an order should have been made requiring the second respondent to deregister the name "Crescent Wealth" in light of the primary judge's finding at [89]-[90].
154 The injunctions ordered by the primary judge in orders 3 and 4, and the orders for name changes and deregistration in order 5, were as follows:
3. The First and Second Respondents, by themselves, their servants or agents, be restrained from, in trade or commerce, offering to provide, providing, advertising or marketing in Australia any investment services or products under and by reference to:
(a) Crescent Funds Management (Aust) Limited;
(b) Crescent Investments Australasia Pty Ltd;
(c) any of the following names:
(i) Crescent Australian Equity Fund;
(ii) Crescent Diversified Property Fund;
(iii) Crescent Islamic Cash Management Fund;
(d) any of the following domain names:
(i) crescentinvestments.com.au;
(ii) crescentfunds.com.au; and
(iii) crescentfunds.net;
or any name substantially identical with the names in (a)-(d).
4. The First and Second Respondents, by themselves, their servants or agents, be restrained from, in trade or commerce, offering to provide, providing, advertising or marketing in Australia any investment services or products under and by reference to:
(a) CRESCENT WEALTH;
(b) Crescent Wealth Superannuation Fund;
(c) Crescent Wealth International Equity Fund;
(d) the CRESCENT WEALTH business name;
(e) the domain name crescentwealth.com.au;
or any name substantially identical with the names in (a)-(e) without:
(f) including the Respondents' logo and stating clearly and prominently, and reasonably proximately (eg not by way of footnoted text) to where any such name appears, including in any webpage, product disclosure statement, or advertising or promotional materials:
"Neither [CRESCENT WEALTH] nor any of its products is associated or affiliated with Crescent Capital Partners",
and, in the case of a radio commercial, television, video advertisement, or promotional appearance also stating the same by way of a clear and prominent spoken statement of at least 6 seconds; or
(g) otherwise clearly distinguishing its business from the business carried on by the Applicants under the name Crescent Capital Partners.
5. The First and Second Respondents, within 28 days, take steps necessary to:
(a) change the names of the Crescent Australian Equity Fund, Crescent Diversified Property Fund and Crescent Islamic Cash Management Fund to comply with Order 3 above;
(b) deregister the domain names crescentinvestments.com.au, crescentfunds.com.au, and crescentfunds.net; and
(c) deliver up on oath to the solicitors for the Applicants, or as they may direct, for destruction all printed materials including business cards, marketing flyers, product disclosure statements, advertising or promotional materials:
(i) in which the names in Order 3 above, or any name substantially identical with any of those names, appears; or
(ii) in which the names in Order 4 above, or any name substantially identical with any of those names, appears without the logo and disclaimer referred to in, or otherwise complying with, Order 4,
in the possession, custody or control of the First or Second Respondent.
155 Unlike the general use of "Crescent" in the names in order 3, the terms of order 4 permit the use of the name "Crescent" when used with "Wealth" provided that there was the differentiation from Crescent Capital in the terms her Honour described.
156 The reason for the difference between order 3 and order 4 is plain. The primary judge must have formed the view that the disclaimer would be sufficient to remove any likelihood of "Crescent Wealth" being misleading or deceptive.
157 Senior counsel for Crescent Capital submitted that the disclaimer in order 4 would not remove the misleading effect of references to "Crescent Wealth" when those references were made orally (ts 78). The same is true of representations by third parties such as in newspaper reports. But, at least on the evidence on this appeal, it seems clear that the possibility merely of repetition orally of Crescent Wealth, or third party publication, would be unlikely to rise to the level of misleading or deceptive conduct rather than transitory confusion, especially in circumstances in which any webpage, product disclosure statement, advertising and promotional materials would all include the Crescent Wealth logo and a statement that it is not associated or affiliated with Crescent Capital. Indeed, this must have been the conclusion reached by the primary judge upon her assessment of the whole of the evidence.
158 Crescent Capital then submitted that disclaimers should only be used in particular circumstances (ts 79). Crescent Capital relied upon the remarks of Lockhart J in Bridge Stockbrokers Ltd v Bridges (1984) 4 FCR 460, 472 which were applied by Sheppard and Burchett JJ in Sterling Winthrop v R & C Products (1994) ATPR 41-308:
There is one point, however, on which I respectfully differ from his Honour, and it is the subject of the cross-appeal. His Honour ordered that the company be restrained in effect from carrying on its business under any name including the word "Bridge" without clearly distinguishing such business from the business carried on by the firm under the name "Bridges, Son and Shepherd". His Honour appears to have had in mind the approach taken by the High Court in Turner v General Motors of Australia Pty Ltd [1929] HCA 22; (1929) 42 CLR 352 where the relief granted [w]as an injunction restraining the defendant from using the words "General Motor" or "General Motors" without clearly distinguishing such business from the business carried on by General Motors (Aust) Pty Ltd. The imposition upon a defendant of the requirement that it disclaim connection with the plaintiff or its business is not a course that has been generally followed in recent times. It may be appropriate in a case such as the General Motors case where a small and recently established organisation was required to distinguish its business from that of a large international organisation whose name was a household word. But w[h]ere two organisations are engaged in the same industry and neither of them is a commercial giant, it may be counter productive to require the newcomer to expressly disassociate himself from the business of the older established enterprise. It may suggest that there is something disreputable or undesirable about the firm from whose business the newcomer is seeking to distinguish himself. Also courts cannot control the way in which people other than the parties will refer to the company, so that the extent to which a disclaimer would serve any useful purpose is I think open to serious question. I would therefore vary the orders of the trial judge to the extent necessary to remove the disclaimer.
159 These considerations will often be decisive reasons to refuse to order a limited injunction coupled with a mandatory disclaimer. But in some cases the more limited injunction with a disclaimer might still be a possible exercise of discretion. The terms upon which an injunction is ordered in order to protect a claimant's rights only to the extent necessary is the second sense in which an injunction is said to be discretionary. The other sense is the decision to award an injunction at all rather than to leave a claimant to a money award such as damages where that is sufficient to protect the rights of the claimant: Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380, 395-396 [31]-[32] (Gaudron, McHugh, Gummow and Callinan JJ).
160 An example of the exercise of a discretion to order an injunction in more limited terms is the decision in Turner v General Motors (Australia) Pty Ltd [1929] HCA 22; (1929) 42 CLR 352. In that case, General Motors (a well-known, large American corporation) sought to restrain a small Australian company from using the words "General Motor" or "General Motors". The American corporation was widely known in Australia and had widely advertised a change from a previous Australian subsidiary to a new Australian subsidiary. In June 1926, Mr Turner commenced trading with the names "General Motors" with the intention to lead the public to believe that his company was the new Australian subsidiary. Mr Turner sought to resist an injunction by defences including laches. The American company did not complain to Mr Turner until July 1926 and did not commence litigation until December 1927. The defence of laches failed. However, as Dixon J observed at 370, the injunction which was ordered did not restrain Mr Turner absolutely from using the name "General Motors". Although Dixon J said that the injunction might have done this, all of the Court considered that the more limited injunction was still an appropriate order. The terms of the limited injunction ordered by the primary judge were varied to accommodate situations such as where Mr Turner used the name merely as a signature. The disclaimer ordered was that Mr Turner could not use the names "without clearly distinguishing such business from the business carried on by [the American company's Australian subsidiary]" (361). Justice Dixon speculated, at 370, that the more limited injunction might have been made because of the potential damage that it could cause to Mr Turner's business arising from the delay in bringing the action (albeit not a delay which amounted to laches). The delay in making a complaint was very short but the delay in bringing an action was a year and a half.
161 Other, more recent, cases have also made limited injunction orders coupled with disclaimers. An example is the decision of Weinberg J in Osgaig Pty Ltd v Ajisen (Melbourne) Pty Ltd [2004] FCA 1394; (2004) 213 ALR 153, 180 [139] which did not prohibit the use of the offending name but required the respondent restauranteur to display signs explaining a lack of association with the applicant restaurant, for an appropriate period, in a prominent location, and clearly visible from the exterior of its restaurant. A similar disclaimer was required to feature in the respondent's advertising material. A key factor in making this award was the limited harm that the applicant might suffer if the respondent were to use the offending characters in its signage (180 [136]).
162 In this case, "Crescent Wealth" was registered as a business name on 15 July 2011, with a press release issued about its name on 5 August 2011. A composite Crescent Wealth trade mark application was lodged, and Facebook page created, in March 2012. A letter of demand was sent to Crescent Wealth in April 2013. This litigation was subsequently commenced by Crescent Capital on 6 May 2014, almost three years after Crescent Wealth was registered as a business name.
163 It would have been open to the primary judge to restrain Crescent Wealth by a more absolute form of injunction, without any required disclaimer. However, I do not consider that the injunction ordered by the primary judge was outside the scope of proper orders to protect the rights of Crescent Capital, particularly having regard to: (i) the time that had elapsed; (ii) the lack of any evidence to support any inference that Mr Yassine intended to deceive or mislead anyone to believe that Crescent Wealth was associated with Crescent Capital ([55]); and (iii) the limited, or lack of, harm to Crescent Capital if the disclaimer were ordered. I have weighed against these factors the serious concerns enunciated by Lockhart J in Bridge Stockbrokers, but on the evidence before the Court I do not consider (and the primary judge did not conclude) there to be a considerable likelihood of damage to reputation to Crescent Capital by an appropriately worded disclaimer. The orders of the primary judge also contemplate (in order 4(g)) alternative wording if any difficulty were caused by words explaining a lack of association or affiliation. It may be that the parties can agree to an alternative form of wording, but since we received no submissions on any form of wording within 4(g), it is appropriate that the primary judge's orders be varied to add an additional order 4(h) to allow the parties liberty for four weeks to apply to a single judge of this Court to amend the form of order in 4(f) or 4(g) by consent.
164 Another submission by Crescent Capital was that there was a reasonable apprehension of a future infringement by the use by Crescent Wealth of a deceptively similar name. It relied upon the decision in Christian v SociΓ©tΓ© Des Produits NestlΓ© SA (No 2) [2015] FCAFC 153; (2015) 115 IPR 421. Two points should be made about that decision. The first is that the order made was to prevent the use of a mark with an immaterial variation from the infringing mark. As I explain below, it was not an order replicating the terms of the statute restraining the use of a "deceptively similar" mark. The second point is that the reason for the order, expressed at [180], was the high risk of future infringement including: (i) it being "abundantly clear" that the respondent intended to use the marks to the "fullest extent possible"; (ii) his attitude during the appeal of belligerence, even defiance, and disrespect for his opponents and the Court; and (iii) his conduct in frustrating attempts to serve him with Court process. Those circumstances are a very long way from the respectful and proper conduct during this appeal by Crescent Wealth, with no indication that it will not comply fully with orders of the Court, and every indication that it will act to avoid the possibility of future contraventions.
165 In any event, the remarks of the Full Court in Christian are apt (458 [181]-[182]):
Nevertheless, we are of the view that the proposed order, which merely repeats the prohibition in the Act, is not appropriate.
The Act already prohibits the use of a mark that is substantially identical, or deceptively similar, to a registered trade mark. Litigation ensues because parties do not agree on whether those conditions are met. To that extent, an injunction in the form requested by the NestlΓ© parties is uncertain and susceptible to subjective determination as to whether the order is complied with. For this reason we are not persuaded that making an order in these terms would ensure finality of litigation. Furthermore, it would add nothing to the existing legal position but would expose [the respondent] to the risk of being in contempt of court. While an injunction in the form of the proposed order can be made, the "practice of granting injunctions in a form which reproduces, with the risk of sanctions for contempt, that which an Act forbids is to be discouraged": Universal Music Australia Pty Ltd v Sharman Networks Ltd (2006) 150 FCR 110; [2006] FCAFC 41 at [40]β[42] (Branson J, Lindgren and Finkelstein JJ agreeing at [53] and [57] respectively).
166 For these reasons too, and contrary to the submissions of Crescent Capital, the primary judge was correct to avoid the extension of the injunction also to any other "deceptively similar" name. As Gleeson CJ, Gummow, Hayne and Callinan JJ said in Melway Publishing Pty Limited v Robert Hicks Pty Limited [2001] HCA 13; (2001) 205 CLR 1, 26 [60], "[a]n injunction expressed in terms which leave unclear the form of conduct which will expose a party to the consequences of breach of a court order, and which beg the major question in issue in the case, is inappropriate".
Grounds 3 and 4: whether deregistration should have been ordered
167 Apart from the issue of the disclaimer, addressed above, Crescent Capital's submissions in relation to these grounds were very brief. Its point was essentially that the primary judge's orders did not match her reasons. Crescent Capital submitted that having found in her reasons that the fund names and domain names should be deregistered, the primary judge should have made orders to that effect.
168 The primary judge ordered that, within 28 days, Crescent Wealth change the names of the three funds (Crescent Australia Equity Fund, Crescent Diversified Property Fund, and Crescent Islamic Cash Fund), and deregister the domain names crescentinvestments.com.au, crescentfunds.com.au, and crescentfunds.net.
169 However, the primary judge did not order a name change or deregistration of the business name CRESCENT WEALTH, the fund names Crescent Wealth Superannuation Fund and Crescent Wealth International Equity Fund, or the domain name crescentwealth.com.au.
170 The relevant reasons of the primary judge were at [89]-[90] as follows (with emphasis added):
The conclusion that the first and second respondents have engaged in conduct which was misleading or likely to mislead or deceive follows from the use of "Crescent Wealth" and the names of the funds and domain names which use the name "crescent" together with generic words such as "investments", "funds" and the like. It is this use that is likely to lead investors to believe that the funds, products or services are those of, or associated with, or affiliated with, Crescent Capital. However, this does not mean that all use of the word "Crescent", alone or in association with other words, or in conjunction with a disclaimer, would result in the misleading of investors/consumers.
Crescent Capital is entitled to a declaration and orders concerning the conduct of the first and second respondents and of the tenth respondent. It is also entitled to orders that within a reasonable time, which would be of the order of 28 days, the first and second respondents, or, if appropriate, another of the respondents, take steps in respect of the deregistration of the offending domain names and the names of the funds.
171 The orders made by the primary judge were not inconsistent with these reasons. In the context of the previous paragraph, the primary judge's reference to the offending domain names and fund names was a reference to those domain names and fund names which would continue to offend without the disclaimer. Further, by focusing only upon [89] and [90] of the primary judge's reasons, Crescent Capital neglects the context of that discussion which was set out at [87]-[88]. There, the primary judge explained that the orders sought by Crescent Capital, including changes of name and orders deregistering domain names and the business name, were too wide.
172 Since I have concluded that the disclaimer condition upon the injunction was not an error, these two grounds of appeal must also be dismissed.
I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edelman.
Associate:
Dated: 12 January 2017
REASONS FOR JUDGMENT
MARKOVIC J:
173 There are two appeals before the Court: one brought by Crescent Funds Management (Aust) Ltd, Crescent Investments Australasia Pty Ltd, Crescent Consolidated Group Holdings Pty Ltd, Crescent Financial Services Pty Ltd, Crescent Foundation Fund Pty Ltd, Crescent Holdings Australia Pty Ltd, Crescent Super Pty Ltd, Crescent Institute Ltd, Yassine Corporation Pty Ltd and Talal Yassine (collectively the Crescent Wealth Parties); and the second brought by Crescent Capital Partners Management Pty Ltd and Crescent Capital Partners Ltd (collectively the Crescent Capital Parties).
174 I have had the benefit of reading the draft reasons for judgment of Greenwood J in relation to the appeal brought by the Crescent Wealth Parties and I agree with those reasons and the orders proposed by his Honour. I have also had the benefit of reading the draft reasons for judgment of Edelman J in relation to the appeal brought by the Crescent Capital Parties and I agree with those reasons and the orders proposed by his Honour.
I certify that the preceding two (2) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic.
Associate:
Dated: 12 January 2017
SCHEDULE OF PARTIES
NSD 517 of 2016
Appellants
Fourth Appellant: CRESCENT FINANCIAL SERVICES PTY LIMITED ACN 155 740 631
Fifth Appellant: CRESCENT FOUNDATION FUND PTY LTD ACN 149 971 577
Sixth Appellant: CRESCENT HOLDINGS AUSTRALIA PTY LTD ACN 150 960 731
Seventh Appellant: CRESCENT SUPER PTY LTD ACN 138 223 686
Eighth Appellant: CRESCENT INSTITUTE LTD ACN 155 826 467
Ninth Appellant: YASSINE CORPORATION PTY LTD ACN 077 199 654
Tenth Appellant: TALAL YASSINE
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2014-09-10 00:00:00
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Fei Yu trading as Jewels 4 Pools v Beadcrete Pty Ltd [2014] FCAFC 117
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/full/2014/2014fcafc0117
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2024-09-13T22:47:00.466638+10:00
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FEDERAL COURT OF AUSTRALIA
Fei Yu trading as Jewels 4 Pools v Beadcrete Pty Ltd [2014] FCAFC 117
Citation: Fei Yu trading as Jewels 4 Pools v Beadcrete Pty Ltd [2014] FCAFC 117
Appeal from: Beadcrete Pty Ltd v Fei Yu trading as Jewels 4 Pools (No 3) [2013] FCA 187
Parties: FEI YU TRADING AS JEWELS 4 POOLS, JEFFERY STUART MCALISTER, PEBBLE MASTERS PTY LTD ACN 087 540 734, TWIN COAST POOLS PTY LTD ACN 104 149 484, MELKEN DEVELOPMENTS PTY LTD TRADING AS BAYSIDE POOLS & PAVING ACN 052 945 169 and GRIN DISTRIBUTIONS PTY LTD ACN 133 541 563 v BEADCRETE PTY LTD ACN 071 743 961, DESIGNER CONCRETE COATINGS PTY LTD ACN 102 760 234, BUYRITE STEEL SUPPLIES PTY LTD ACN 053 173 041 and DESIGNERITE PTY LTD ACN 146 670 706
File number: NSD 977 of 2013
Judges: DOWSETT, MIDDLETON AND ROBERTSON JJ
Date of judgment: 10 September 2014
Catchwords: INTELLECTUAL PROPERTY β Patents β Construction of claims β Construction of integers β Whether error made by primary judge by not construing integers independently β Novelty β Whether error made by primary judge in finding that foreign patents did not anticipate claim.
INTELLECTUAL PROPERTY β Patents β Infringement β Infringement by supply β Whether appellants' product a staple commercial product β Whether instructions for use of appellants' product directed infringement.
Legislation: Patents Act 1990 (Cth) ss 7, 18, 40, 117, 138
Cases cited: General Tire and Rubber Company v Firestone Tyre and Rubber Company Limited [1972] RPC 457 cited
Nobel's Explosives Company Ltd v Anderson (1894) 11 RPC 519 cited
Northern Territory v Collins (2008) 235 CLR 619 cited
Sartas No 1 Pty Ltd v Koukourou & Partners Pty Ltd (1994) 30 IPR 479 cited
Welcome Real-Time SA v Catuity Inc (2001) 113 FCR 110 cited
Welcome Real-Time SA v Catuity Inc (No 2) [2001] FCA 785 cited
Date of hearing: 20 November 2013
Date of last submissions: 20 November 2013
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 90
Counsel for the Appellants: Ms SJ Goddard SC with Mr HPT Bevan and Mr R Rajalingam
Solicitor for the Appellants: Conditsis & Associates
Counsel for the Respondents: Mr AJL Bannon SC with Mr NR Murray
Solicitor for the Respondents: Creagh & Creagh
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 977 of 2013
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: FEI YU TRADING AS JEWELS 4 POOLS
First Appellant
JEFFERY STUART MCALISTER
Second Appellant
PEBBLE MASTERS PTY LTD ACN 087 540 734
Third Appellant
TWIN COAST POOLS PTY LTD ACN 104 149 484
Fourth Appellant
MELKEN DEVELOPMENTS PTY LTD TRADING AS BAYSIDE POOLS & PAVING ACN 052 945 169
Fifth Appellant
GRIN DISTRIBUTIONS PTY LTD ACN 133 541 563
Sixth Appellant
AND: BEADCRETE PTY LTD ACN 071 743 961
First Respondent
DESIGNER CONCRETE COATINGS PTY LTD ACN 102 760 234
Second Respondent
BUYRITE STEEL SUPPLIES PTY LTD ACN 053 173 041
Third Respondent
DESIGNERITE PTY LTD ACN 146 670 706
Fourth Respondent
JUDGES: DOWSETT, MIDDLETON AND ROBERTSON JJ
DATE OF ORDER: 10 SEPTEMBER 2014
WHERE MADE: MELBOURNE (HEARD IN SYDNEY)
THE COURT ORDERS THAT:
1. The appeal be dismissed.
2. The parties exchange submissions as to costs and file same within 14 days after the delivery of these reasons.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 977 of 2013
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: FEI YU TRADING AS JEWELS 4 POOLS
First Appellant
JEFFERY STUART MCALISTER
Second Appellant
PEBBLE MASTERS PTY LTD ACN 087 540 734
Third Appellant
TWIN COAST POOLS PTY LTD ACN 104 149 484
Fourth Appellant
MELKEN DEVELOPMENTS PTY LTD TRADING AS BAYSIDE POOLS & PAVING ACN 052 945 169
Fifth Appellant
GRIN DISTRIBUTIONS PTY LTD ACN 133 541 563
Sixth Appellant
AND: BEADCRETE PTY LTD ACN 071 743 961
First Respondent
DESIGNER CONCRETE COATINGS PTY LTD ACN 102 760 234
Second Respondent
BUYRITE STEEL SUPPLIES PTY LTD ACN 053 173 041
Third Respondent
DESIGNERITE PTY LTD ACN 146 670 706
Fourth Respondent
JUDGES: DOWSETT, MIDDLETON AND ROBERTSON JJ
DATE: 10 SEPTEMBER 2014
PLACE: MELBOURNE (HEARD IN SYDNEY)
REASONS FOR JUDGMENT
BACKGROUND
1 In the specification for Australian Patent No. 733668 (the "patent"), under the heading "Field of Invention", it is said that:
The present invention relates to surface finishes for pathways, walls; swimming pools and other structures and more particularly relates to a surface finish which is of a cementitious nature and which includes least (sic) one aggregate type comprising glass beads. More particularly, the invention relates to a mix forming and to a method of producing the finishes.
2 As the primary Judge observed, there are many typographical errors in the patent. We will neither draw attention to them nor correct them further, unless we deem it necessary in order that our reasoning be comprehensible.
3 The specification discloses that aggregate mixes include stones and pebbles, mixed in a matrix of cementitious material, either cement or resin. The selection of pebbles and stones will affect the appearance of the finish, particularly its colour and texture. Difficulty has been experienced in using glass beads, either alone or with other aggregate materials such as precious or semi-precious stones, sands, quartz, marble and granites. One such problem is that the glass is not sufficiently porous, or tough enough to establish an effective bond with the matrix material. Another problem is caused by alkalinity bleeding out of the glass beads. The specification refers to three patents which involve the use of glass beads, balls or spheres as aggregate material. One such patent involves the use of "crystal balls" of uniform particle size within the range 0.2 β 0.6 mm. Another patent utilizes small and large glass beads, with the smaller beads being present in a greater quantity than the larger beads. The third patent utilizes glass "spheres" of "relatively smaller particle sizes", coated with water-repellent material.
4 At p 3 of the specification the present invention is summarized as follows:
The present invention comprises a surface finish for application to a vertical, horizontal, or sloping surface/s of a structure or object which provides a substrate for said surface finish, the surface finish comprising a matrix formed from a combination of at least a cementitious material, water, and glass beads. The surface finish comprises a blended matrix of cementitious mortar, an aggregate of glass beads used alone or in conjunction with other aggregates β¦ and liquid adhesive which comprise a combination of a siliconiser and polymeriserer for enhancing the bond between the cementitious mortar and glass beads. The finish may be applied to the surface of a structure, such as a building facade as a paving surface, or to other suitable objects formed from a material capable of forming a bond with the finish.
5 Other parts of the specification demonstrate that the glass beads are to be of varying size, the greater proportion being larger beads rather than smaller beads. At p 5 of the specification it is said that:
The glass beads have particle sizes within the range of 1-5 millimeters and a weight average particle size within the range of 1.5-4.5 millimeters. The beads are employed in a particle-size distribution defining a major component within a relatively large incremental size range and a minor component within a smaller incremental size range. The weight of the beads within the large incremental size range is greater than the weight within the smaller incremental size range. Preferably, this weight ratio is in the range of 2-3 and more preferably within the range of about 2-2.6.
The reference to "the range of 2 β 3" apparently means "2:1 to 3:1". The specification contains much more detail to which we will refer when necessary.
6 Claims 1 to 12 are for a structure which includes a "substrate material" and a reflective surface. Claims 13 to 22 are for a product. Claims 23 to 26 are for a method. The claimed invention seems to be a surface material to be used on pathways, walls, swimming pools and other structures. We are primarily concerned with claim 1.
7 The first respondent ("Beadcrete") is the patentee. The second respondent manufactures the relevant product under licence from Beadcrete. The third and fourth respondents are distributors of the product. The appellants supply a product known as "Jewels 4 Pools" which, as the respondents allege, infringes the patent. At trial the appellants denied infringement. The first and second appellants alleged that claim 1 was invalid on various grounds. The primary Judge upheld the validity of claim 1, found infringement and made consequential orders. The cross-claim was dismissed. In the primary Judge's reasons her Honour set out lengthy extracts from the specification and the claims. We need not include all of that material in these reasons.
THE CLAIMS
8 Claim 1 is as follows:
In a structure having a reflective Surface finish, the combination comprising:
(a) a substrate material having an interface surface;
(b) a reflective material disposed on the interface surface of said substrate and comprising a plurality of glass beads and a cementitious material providing a matrix for said glass beads, at least a portion of said glass beads at the surface of said matrix projecting out of the exposed surface of said matrix providing an exposed surface area of said glass beads and being at least partially encapsulated within said matrix to provide an encapsulated surface area of said glass beads; and
(c) at least a portion of said glass beads having a boundary layer of a barrier material interposed between the head surfaces encapsulated within said matrix and being free of said boundary material on bead surfaces projecting upwardly from said matrix, said beads having an average Particle size within the range of 1.5-4.5 millimeters and a particle size distribution defining, major component of said beads within a relatively large incremental size range and a minor component of said beads within a smaller incremental size range wherein the weight of beads in the large incremental size range is greater than the weight of beads within the small incremental size range.
9 Claims 10 and 13 may be relevant to the construction of claim 1. They are as follows:
10 The combination of claim 1 wherein said glass beads having a particle size distribution ranging from a lower value to an upper value having a magnitude no more than three times the magnitude of said lower value, said particle size distribution defining a major component of said beads within a relatively large incremental size range having an average value greater than the midpoint of said upper and lower values and a minor component of said beads within a smaller incremental size range having an average size below said midpoint wherein the weight of beads in the large incremental size range is greater than the weight of beads within the smaller incremental size range.
β¦
13 In a dry cement formulation adapted to be hydrated and applied to a substrate surface to provide a reflective surface, the composition comprising:
(a) portand cement in an amount within the range of 1/3-2/3 of the total weight of said formulation;
(b) glass beads having particle sizes between lower and upper values within the range of 1-5 millimeters and a weight average particle size within the range of 1.5-4,5 millimeters, said beads having a particle size distribution defusing a major component of said beads within a relatively large incremental size range having a an average value greater than the midpoint of said upper and lower values and a minor component of said beads within a smaller incremental size range having an average value below said midpoint wherein the weight of beads in the large incremental size range is greater than the weight of beads within the small incremental size range; and
(c) a latex polymer present in an amount within the range of at least 2 wt.% of the glass beads in said formulation but less than 8 wt.% of the total amount of cement and glass beads in said formulation.
INTEGERS OF CLAIM 1
10 At first instance the case was conducted upon the basis that claim 1 contained nine integers as follows (the added integer numbers being in bold):
(1) In a structure having a reflective Surface finish, the combination comprising:
(2) (a) a substrate material having an interface surface;
(3) (b) a reflective material disposed on the interface surface of said
substrate and comprising a plurality of glass beads and
(4) a cementitious material providing a matrix for said glass beads,
(5) at least a portion of said glass beads at the surface of said matrix projecting out of the exposed surface of said matrix providing an exposed surface area of said glass beads and being at least partially encapsulated within said matrix to provide an encapsulated surface area of said glass beads; and
(6) (c) at least a portion of said glass beads having a boundary layer of a
barrier material interposed between the head surfaces encapsulated
within said matrix and being free of said boundary material on bead
surfaces projecting upward from the said matrix,
(7) said beads having an average Particle size within the range of 1.5-4.5 millimeters and
(8) a particle size distribution defining, major component of said beads within a relatively large incremental size range and a minor component of said beads within a smaller incremental size range
(9) wherein the weight of beads in the large incremental size range is greater than the weight of beads within the small incremental size range.
THE ISSUES
11 At trial the major issues were:
construction of the claims;
clarity for the purposes of s 40(3) of the Patents Act 1990 (Cth) (the "Act");
inventiveness;
want of novelty;
whether the claimed invention satisfied the "manner of manufacture" requirement in s 18 of the Act; and
alleged infringement.
12 On appeal, the issues are:
the construction of claim 1;
clarity for the purposes of ss 40(2)(b) and 40(3) of the Act;
want of novelty;
infringement; and
the form of the injunctive relief.
THE CONSTRUCTION POINT AT TRIAL
13 The first and second appellants submitted that all claims other than claims 10 β 14, 20 and 21 were unintelligible, incapable of infringement and invalid, primarily because integer 8 of claim 1 did not identify a "specified midpoint". The term "midpoint" is used in claims 10 β 14, 20 and 21 in connection with the distinction drawn between larger and smaller glass beads. The first and second appellants effectively submitted that such a midpoint did not appear in the other claims, and so they were invalid. Prior to trial, the respondents had asserted that the distinction between larger and smaller beads in integers 8 and 9 was to be determined by reference to a midpoint, as described in the other claims. However, from an early stage at the trial, the respondents adopted an approach to such distinction which depended upon the term "average particle size" in integer 7. They submitted that the meaning of the word "average" had to be determined, having regard to the circumstances identified in integer 8, in particular, that there were to be larger and smaller glass beads. The respondents advanced four "meanings" of the word, which "meanings" her Honour described at [24]. That paragraph is set out below. Each "meaning" provides a possible method of assessing the average size of particles in a sample of aggregate.
14 The primary Judge identified the word "average" as meaning, "the distribution of the aggregate inequalities β¦ of a series of things among all the members of the series, so as to equalize them, and ascertain their common or mean quantity", or, "the determination or statement of an arithmetical mean". Her Honour then considered the four methods with a view to identifying that which produced the result in accordance with conventional principles. The relevant inequality was size.
15 At [21] β [27] her Honour said:
21 Claims 1β9 and 23β26 all involve an integer of beads "having an average particle size within" a specified range and a "particle size distribution" where the major component of the beads is within a relatively large incremental size range and a minor component of the beads is within a smaller incremental size range wherein the weight of the beads in the large incremental size range is greater than the weight of the beads in the small incremental size range.
22 Claims 1β9 and 23β26 may be contrasted with claims 10, 11, 12, 13, 14, 20 and 21 which involves a combination of claim 1 where, among other things, the particle size distribution defining the major component of the beads with a relatively large incremental size range has an average value greater than the midpoint of the specified upper and lower values and a minor component of the beads within a smaller incremental size range has an average size below that midpoint and wherein the weight of the beads in the large incremental size range is greater than the weight of the beads in the small incremental size range.
23 The [appellants] submitted that the claims lacking any specified midpoint, claims 1 to 9 and 23 to 26, were thereby unintelligible and thus incapable of infringement (and invalid). In any group of beads there may be large and smaller beads resulting from an arbitrary definition of where the boundary between the two groups is to be drawn.
24 The [respondents] submitted that the [appellants'] approach gave no meaning to the phrase "average particle size" as it appears within the claims. The [respondents] identified four possible meanings of the phrase having regard to the ordinary meaning of "average" (which includes the "distribution of the aggregate inequalities β¦ of a series of things among all the members of the series, so as to equalize them, and ascertain their common or mean quantity β¦ " or "the determination or statement of an arithmetical mean" (Oxford English Dictionary). According to the [respondents] an "average particle size" can be ascertained by one of four methods as follows:
(a) identify the particle size of every single particle represented, total all those values and divide that total by the number of particles;
(b) identify every different particle size represented, total the value of all those different particle sizes and divide that total by the number of particle sizes represented;
(c) identity [identify?] the largest and the smallest particle size represented, total those values and divide by two; or
(d) identify the weighted average particle size based on the weight distribution of different sizes of particles (a weighted average, unlike an average, takes into account the frequency at which each size is represented).
25 The [respondents] contended that the phrase "average particle size" in claim 1 of the patent (and all other claims dependent on claim 1) means the weighted average particle size based on the weight distribution of different sizes of particles. As explained below, I agree with this construction.
26 The [appellants] emphasised that this construction had not been suggested by any expert and, indeed, was inconsistent with the approach to the claims taken by Edward Bennett, a civil and structural engineer, who gave evidence for the [respondents]. Mr Bennett treated the phrase "average particle size" in claim 1 as an outcome which should be determined by the method in (c) above (that is, identity [identify?] the largest and the smallest particle size represented, total those values and divide by two). The [appellants] also noted that this construction was inconsistent with the particulars of construction and infringement which the [respondents] served on the [appellants]. These particulars said that "average particle size" was to be mathematically determined by taking the size of the largest and the smallest beads in the sample and determining from those sizes the mean particle size.
27 Both aspects of the [appellants'] submissions may be accepted. However, they are not ultimately material to the issue of construction for three reasons.
16 The first of these reasons concerned the evidence of Mr Bennett. Although Mr Bennett had extensive experience in the use and application of cement in mixes for pool surface finishes, her Honour was not satisfied that he had similar experience and expertise in respect of the methods of mixing and forming surface finishes, whether of swimming pools or otherwise. Thus her Honour was unpersuaded that, "insofar as he gave evidence which assumed a particular meaning of 'average particle size' it should also be assumed that Mr Bennett represents the hypothetical skilled addressee of this patent."
17 The second reason for rejecting this aspect of the appellants' submission was that although the respondents may have advanced a particular construction in correspondence with the appellants, they had also made it clear that they considered construction was, "a matter for the Court", although "expert evidence might be relevant to claim construction insofar as it concerned terms of art or common general knowledge." Her Honour considered that the respondents had qualified their particulars so that they were not bound by them.
18 The third reason was that, in any event, the appellants had an appropriate opportunity, at trial, to deal with the construction proposed by the respondents, and that there was no unfairness arising from the way in which the case had been conducted.
19 Her Honour concluded that:
the term "average particle size" is not a technical term;
there are numerous ways of calculating an average;
the skilled addressee would read the words "average particle size", having regard to the purpose of the phrase in defining the scope of the invention;
it would be apparent to the skilled addressee that the patent "pre-supposed" the existence of a convenient method of determining size and weight distribution of the glass beads;
such known method involved the use of sieves, which method was the subject of an Australian Standard;
the relevant standard did not involve the counting of individual glass beads or identifying the sizes of the largest and smallest beads; and
it was "inconceivable" that a person skilled in the relevant art would address the total number of beads or the size of any particular bead.
20 Her Honour therefore concluded that methods (a), (b) and (c) did not yield the "average particle size" in the sense in which that expression is used in claim 1. The primary Judge then considered whether method (d) should be accepted as producing a result which could be described as the "average particle size". Her Honour set out evidence concerning the standard methods for analysing aggregate, including particle size distribution. Broadly speaking, such evidence reflected the process described in method (d). Her Honour considered that such method would have been well-known to those skilled in the relevant art. Her Honour also concluded that such persons would have read the patent with that knowledge, and that the specification assumed that the size and weight distribution of particles in an aggregate, including glass beads, could be measured.
21 Her Honour noted the use of the term "average particle size" in claim 1 and its dependent claims, and the use of the term "weight average particle size" in claim 13 and its dependent claims. Her Honour accepted that in some circumstances, use of these different terms might lead to the conclusion that the expressions had different meanings. However she concluded that in this patent, such was not the case.
22 Finally, her Honour noted that her construction of claim 1 did not describe the way in which a particle which was of "average particle size" was to be treated. That is, it did not indicate whether such a particle would be a "larger" or "smaller" particle. Her Honour considered that this problem would only be relevant in considering any alleged infringement.
23 The primary Judge returned to the problem when considering clarity for the purposes of s 40(3). Her Honour concluded that the relevant claims did not lack clarity and said at [73], concerning beads which were of "average particle size":
Only two options are open. Either those beads are part of the relatively large particle size range or they are part of the smaller particle size range. The integer does not permit the existence of such beads, if they exist, to be ignored. They must be allocated to one or other component. I do not consider that the lack of specificity about this issue renders the claims in question uncertain. It is possible that a sample of beads may be meaningfully tested and the test results show no beads of the average particle size or such a small proportion that the relative size of the major and minor components could never be affected. In other words, the issue is not so much one of construction (the construction issues can all be resolved, as set out above) but of proof of infringement if any material proportion of the sample happens to be of the average particle size.
24 It is always a little unsettling to find references to infringement in that part of a judgment which deals with construction. As Heerey J said in Welcome Real-Time SA v Catuity Inc (2001) 113 FCR 110 at [21]:
All that needs be added is the perhaps trite observation that the alleged infringement is to be ignored when construing the patent. Although the forensic contest will throw up the particular construction issues to be resolved, a patent must, as the saying goes, be construed as if the infringer had never been born.
25 His Honour was paraphrasing the well-known observation by Lord Esher MR in Nobel's Explosives Company Ltd v Anderson (1894) 11 RPC 519 at 523. That approach to construction is based upon the proposition that the claims must clearly identify the limits of the monopoly claimed.
26 In any calculation of average particle size, there would always be the possibility that some particles taken into account would be of average particle size. We do not immediately understand the problem to which the primary Judge referred. It may have reflected a submission of one or both sides of the litigation. It seems to have been dealing with a claimed lack of clarity at a conceptual level. In any event, neither party appears to rely upon her Honour's concern, although it may be part of the appellants' wider attack on her construction of claim 1.
THE CONSTRUCTION POINT ON APPEAL
27 The relevant grounds are as follows:
4. Her Honour erred (Reasons at [50]) in impliedly construing [integer 8] β¦ as requiring a calculation of the weighted average particle size within the range of beads to determine the boundary between the major and minor components for the purpose of defining the major and minor components of beads within a relatively large incremental size range and a small incremental size range respectively when:
(a) there is no reference in the integer to a weighted average particle size;
(b) this construction is inconsistent with other claims of the Patent in which the boundary between the major and minor components is the midpoint between the upper and lower bead particle sizes;
(c) this construction is contrary to the invention as described in the specification of the Patent and the admissions made by the patentee in the particulars of construction and infringement in the letter from Creagh & Creagh dated 2 May 2011;
(d) this construction is contrary to the evidence of the Respondents' expert, Mr Bennett, which was relied on by the Respondents below.
5. Her Honour should have found that, to the extent that it was valid, the particle size distribution defining the major and minor components of beads for the purposes of claim 1 had to be characterised in terms of particle size values above and below a midpoint between the upper and lower particle sizes of beads in the range.
6. Her Honour erred in finding (Reasons at [28]) that Mr Bennett, the expert witness called by the Respondents, was not the hypothetical skilled addressee of the Patent and in rejecting his evidence, including that given in his cross-examination.
β¦
10. Her Honour erred in finding (Reasons at [35]) that "It would have been inconceivable to those skilled in the art of mixing an aggregate into a cementitious matrix to form a surface finish that they would concern themselves with β¦ the absolute size of any particular glass bead, be it the largest or smallest, in any given matrix", when claims 10 to 22 of the Patent require the identification of the absolute largest and smallest bead in the given matrix and the patentee and its expert Mr Bennett, calculated the midpoint for all of the claims by reference to this approach.
11. Her Honour erred in assessing infringement of claim 1 of the Patent by reference to a mathematical calculation adopted by the Court which had no basis in the words of claim 1 of the Patent, was first advanced by Senior Counsel for the Respondents in oral opening and was otherwise contrary to the patentee's statement of the invention in the specification, as confirmed in its particulars of construction. Her Honour's calculation inevitably results in identifying a boundary between the major and minor components close to the middle of the range of beads by weighted average and is therefore inconsistent with the particle size distribution of the invention.
We should first deal with grounds 6, 10 and 11.
28 Ground 6 concerns the way in which the primary Judge dealt with Mr Bennett's evidence. Her Honour found that:
the hypothetical addressee of the patent was a non-inventive person with skills in the art of mixing and forming surface finishes of a cementitious nature;
Mr Bennett was an engineer who specialized in the construction of swimming pools;
he had extensive experience in the use and application of cement in mixes for pool surface finishes;
it was not apparent that he had similar expertise and experience in respect of the methods of mixing and forming surface finishes, whether of swimming pools or otherwise; and
his evidence was not irrelevant.
Her Honour was also not satisfied that "insofar as he gave evidence which assumed a particular meaning of 'average particle size' it should be assumed that [he represented] the hypothetical skilled addressee of this patent."
29 The appellants have not identified any basis for upsetting her Honour's view of Mr Bennett's expertise. They simply point out that he was chosen by the respondents as their expert witness and identified by them as the skilled addressee. They also refer to his training and experience, but do not suggest that her Honour's summary of it was inaccurate. It may be that the appellants implicitly assert that the case was conducted by the respondents on a particular basis which was inconsistent with that upon which her Honour acted. However, in their written submissions at footnote 13, the appellants indicate that the respondents' change in approach was evident in their opening. Although it seems that at some stage, the appellants complained about the change of direction, her Honour clearly allowed the respondents to conduct the case on the changed basis. There is no appeal against her decision to do so.
30 The final position adopted by the respondents at trial appears at paras 74 β 75 and 83 β 84 of their closing submissions. Her Honour seems to have adopted alternative (a) in para 84. We suspect that the appellants' insistence that her Honour's reasons were not responsive to the respondents' submissions at trial is attributable to the appellants' refusal to accept that integer 8 must be read with integer 7, a reading which we consider to be self-evident.
31 Clearly, it is for the Court to construe a patent, although experts may give evidence as to the meaning which those skilled in the art would give to technical or scientific terms and phrases, and/or unusual or special meanings given by such persons to words which might otherwise bear their ordinary meanings. See Sartas No 1 Pty Ltd v Koukourou & Partners Pty Ltd (1994) 30 IPR 479 at 485 β 486. The appellants do not suggest that Mr Bennett's evidence was as to the meaning of technical or scientific terms or unusual or special meanings. Thus, as far as we can see, her Honour concluded that claim 1 contained no technical or scientific terms, and that the skilled addressee would not have understood any of the terms as having a special or unusual meaning. In those circumstances, it was for the primary Judge to construe the claim. It is clear from the respondents' closing submissions at trial that they submitted that the meaning of the term "average particle size" in integer 7 might inform the construction of integer 8, as her Honour concluded.
32 In ground 10 of the amended notice of appeal, the appellants criticize the primary Judge's observation at [35] that:
It would have been inconceivable to those skilled in the art of mixing an aggregate into a cementitious matrix to form a surface finish that they would concern themselves with the absolute number of glass beads or the absolute size of any particular glass bead, be it the largest or smallest, in any given matrix.
33 The appellants submit that claims 10 to 12 contemplate such an exercise. We consider that her Honour was simply identifying the fact that, as a matter of common sense, it is unlikely that a commercial process of the kind in question would involve the time and expense necessarily incidental to such a task.
34 In ground 11 of the amended notice of appeal the appellants criticize her Honour's construction of claim 1 and assert that it was first raised by the respondents in opening. We have dealt with that matter. The ground otherwise adds nothing to the criticisms contained in grounds 4 and 5, which grounds we will presently address.
35 We should also say something about claim 13 and its dependent claims, 14 β 19. Claim 13 refers to a "weight average particle size", an expression which the respondents used in their closing submissions at paras 14 and 25. They suggested that the concept emerges from the specification. It seems likely that the expression, where used in claim 13, refers back to integers 7 and 8 of claim 1.
36 The primary criticism of her Honour's construction of claim 1 appears in paras 4 and 5 of the amended notice of appeal. The appellants attack the primary Judge's construction of integer 8 of claim 1. However her Honour did not approach the construction of that claim by reference to the integers. Rather, she addressed the meaning of the terms, "cementitious", "aggregate" and "average particle size". Concerning the meaning of the word "cementitious", the appellants submitted that the word encompassed both cements and resins, whilst the respondents contended that it referred only to cements. Her Honour resolved this question in favour of the appellants. The primary Judge concluded that the term "aggregate" was, "an ordinary English word and not a term of art", and that in the context of the patent, the word takes its ordinary geological meaning of, "[a] rock or other deposit composed of distinct minerals closely adhering or combined together". Her Honour concluded that in this sense, glass beads comprised an aggregate.
37 At the heart of the appellants' construction case is the proposition that integer 8 must be construed in isolation from integer 7. The point of this construction seems to be the absence of the term "average particle size" from integer 8. We consider that this approach is fundamentally flawed. The use of integers is very much a forensic technique. It provides a structure within which the Court and the parties address the factual issues. However, the meaning of each claim must be determined by reference to the words, the way in which they are arranged, and in the context of the specification as a whole. Integers 6, 7, 8 and 9 all appear in one, discrete paragraph of claim 1. Paragraphing is an aspect of punctuation which is designed to identify discrete parts of the subject matter in question. Although the paragraphing of claim 1 is not the best imaginable example of the fulfilment of this purpose, there is nothing surprising about the possibility that some parts of para (c) may be related.
38 That paragraph deals with two matters: the use of boundary material and particle size, weight and distribution. We are concerned only with the second matter. Integer 7 prescribes an average particle size which is to be within the specified range of 1.5 β 4.5 mm. In so doing it assumes that particles will be of various sizes. Since it is the average particle size which must fall within the specified range, it follows that some particles may be outside of that range. The words "particle size distribution" in integer 8 assume a characteristic by which large and small beads may be distinguished from each other. The word "defining" seems to mean identifying the major and minor components of the aggregate mixture by reference to size of the particles. Integer 9 assumes that particles can be sized as "large" or "small", and the weight of each category determined. Integers 7, 8 and 9 are clearly inter-dependent. There is no basis for the appellants' insistence on the construction of each in isolation from the others.
39 There is no appeal against her Honour's construction of the term "average particle size" in integer 7. Nonetheless, it was faintly suggested in submissions that it was not correct. The appellants' submission seems to be entirely dependent upon the assumption that the respondents' case was, and is, that the notion of a midpoint as used in claim 10 should be imported into claim 1. The appellants attack such an approach, probably correctly, but refuse to accept or engage with the alternative approach which the respondents advanced at trial, and which her Honour accepted. The appellants' only answer to the alternative case is to assert that integer 8 must be construed without reference to integer 7, a submission which, as we have said, is fundamentally without merit.
40 The appellants submit that at [26], her Honour misquoted Mr Bennett's evidence. The alleged error seems to be that the primary Judge treated Mr Bennett's evidence concerning the construction of integer 8 as dealing with the term "average particle size". The submission reflects the appellants' insistence that integers 7 and 8 be construed in isolation from each other, a view which we have rejected. We need say no more about this criticism.
41 The appellants also submit that as integers 7 and 8 are "independent", there is no basis for finding that "average particle size" means only "weighted average particle size". They submit that expression may also include a "mean". We do not understand the meaning of the term "mean" in that context, or how such an approach might differ from that adopted by the primary Judge. In any event, as we have observed, there is no appeal against her Honour's conclusion as to the meaning of the term "average particle size". The appeal goes only to the importation of that term into integer 8.
42 In effect, the appellants' argument is that there is no way of deciding how to identify a larger or a smaller bead. Given the reference in integer 7 to average particle size, we have no doubt that it was to be the criterion for distinguishing between relatively large and relatively small particles. We see no reason to doubt the correctness of her Honour's construction of claim 1.
SECTIONS 40(2) and 40(3)
43 Section 40 of the Act provided:
(1) β¦
(2) A complete specification must:
(a) describe the invention fully, including the best method known to the applicant of performing the invention; and
(b) where it relates to an application for a standard patentβend with a claim or claims defining the invention; and
(c) where it relates to an application for an innovation patentβend with at least one and no more than 5 claims defining the invention.
(3) The claim or claims must be clear and succinct and fairly based on the matter described in the specification.
(4) β¦
44 Amended appeal ground 18 is as follows:
18. Her Honour should have found that claim 1 was invalid for lack of definition (s 40(2)(b)) and lack of clarity (s 40(3)) by reason of the failure to identify the boundary between the major and minor components.
45 The appellants' submissions on appeal assume that we accept their submission as to claim 1 being, "without a defined boundary". As we have rejected that submission, it is not necessary that we consider this aspect of the appeal.
NOVELTY
46 Pursuant to s 18(1)(b)(i) of the Act, an invention is "a patentable invention" only if it is "novel". Pursuant to s 138(3) the Court may order revocation of a patent if the invention is not a patentable invention. Concerning novelty, s 7(1) of the Act provides:
(1) For the purposes of this Act, an invention is to be taken to be novel when compared with the prior art base unless it is not novel in the light of any one of the following kinds of information, each of which must be considered separately:
(a) prior art information (other than that mentioned in paragraph (c)) made publicly available in a single document or through doing a single act;
(b) prior art information (other than that mentioned in paragraph (c)) made publicly available in 2 or more related documents, or through doing 2 or more related acts, if the relationship between the documents or acts is such that a person skilled in the relevant art would treat them as a single source of that information;
(c) prior art information contained in a single specification of the kind mentioned in subparagraph (b)(ii) of the definition of prior art base in Schedule 1.
47 We note that, subject to s 7(1)(b), the question of novelty is to be determined by reference to each item of prior art information, taken in isolation from any other item. For present purposes the relevant prior art information is comprised of two patents:
GB 2,255,099 (the "UK Patent"); and
CH 665 665 (the "Swiss Patent").
48 Concerning novelty, the respondents cite the following passage from General Tire and Rubber Company v Firestone Tyre and Rubber Company Limited [1972] RPC 457 at 485 β 486:
If the prior inventor's publication contains a clear description of, or clear instructions to do or make, something that would infringe the patentee's claim if carried out after the grant of the patentee's patent, the patentee's claim will have been shown to lack the necessary novelty, that is to say, it will have been anticipated β¦ if carrying out the directions contained in the prior inventor's publication will inevitably result in something being made or done which, if the patentee's patent were valid, would constitute an infringement of the patentee's claim, this circumstance demonstrates that the patentee's claim has in fact been anticipated.
If, on the other hand, the prior publication contains a direction which is capable of being carried out in a manner which would infringe the patentee's claim, but would be at least as likely to be carried out in a way which would not do so, the patentee's claim will not have been anticipated, although it may fail on the ground of obviousness. To anticipate the patentee's claim the prior publication must contain clear and unmistakable directions to do what the patentee claims to have invented β¦
49 Concerning the UK Patent the primary Judge said at [92]:
The UK patent discloses an invention comprising a road marking composition containing glass beads, a synthetic resin and aggregate. In other words, the UK patent discloses an invention comprising a cementitious material providing a matrix for glass beads. The glass beads are preferably to be retained on a 1.18 mm sieve (that is, be larger than 1.18 mm) in specified weight ratios including up to 55% being so retained. Further, the glass beads may include larger glass beads in the size range of 1.5 to 3.5 mm, the proportion of larger glass beads to aggregate being in a specified weight ratio range wherein the larger glass beads exceed the weight of the aggregate. The UK patent also discloses the use of any suitable plasticiser, which from the evidence I infer must be understood to mean a polymer. As such, leaving aside my preferred construction of the patent it is clear that the UK patent discloses the combination of an aggregate and a polymer as well as glass beads.
50 At [93] the primary Judge observed that, concerning claim 1, the appellants had submitted that the UK Patent anticipated it, because, in the absence of a defined midpoint, β¦ "any collection of beads including those in the UK patent will equally possess this feature or not." Her Honour said at [93], concerning that submission:
I disagree for the reasons already given. I consider that the UK patent does not literally disclose either the particular average particle size range or particle size distribution integers of the patent. I say "literally disclose" because there is a principle that something less than a literal disclosure may suffice (referred to as "enabling" disclosure). If the disclosure is not complete but it is sufficient to enable the skilled addressee, in the ordinary course and without invention, to add what is missing in the prior publication to obtain the claimed invention, then the invention is not novel (H Lundbeck A/S v Alphapharm Pty Ltd (2009) 177 FCR 151; [2009] FCAFC 70 at [181]-[183]).
51 At [94] β [95] her Honour said:
The [appellants'] case is that the size range and particle size distributions in the patent are simply arbitrary and there is nothing inventive in the ranges and distributions claimed. I do not consider that this argument can be dismissed merely because the expert evidence in this case was not particularly helpful in disclosing the perspective of an uninventive person skilled in the art at the priority date. First, the UK patent discloses the use of glass beads in the size range of 1.5 to 3.5 mm. The only difference between that size range and the range claimed in the patent is the 1 mm at the upper end of the range (that is, 4.5 mm). Otherwise all of the size ranges claimed are within the disclosure of the UK patent. Given the nature of the invention, which involves relative proportions of large numbers of glass beads, the notion that there is anything inventive at all about adding one millimetre to the size range of the glass beads cannot possibly be accepted. The skilled addressee, in the ordinary course and without invention, would add what is missing in the prior publication to obtain the claimed invention. I cannot reach the same conclusion about the particle size distribution. The UK patent discloses a particle size distribution where more (55%) of the glass beads are larger than 1.18 mm. Hence, it discloses an invention where the major component of said beads within a relatively large incremental size range and a minor component of said beads is within a smaller incremental size range wherein the weight of beads in the large incremental size range is greater than the weight of beads within the small incremental size range, in accordance with the claimed invention. However, this does not relate to the larger glass beads. In so far as the larger glass beads are concerned what is disclosed is a relationship between the beads and the aggregate, not the larger and smaller beads themselves.
For these reasons the UK patent does not destroy the novelty of the invention claimed in the patent.
52 Concerning the UK Patent, amended appeal grounds 20 and 21 are:
20. Her Honour erred in finding that the UK Patent GB 2,255,099 (the UK Patent) did not anticipate claims 1, 2, and 3 of the Patent (Reasons at [94]) on the incorrect basis that the disclosure was limited to the relationship between large glass beads and aggregate.
21. Further, if claims 1, 2 and 3 of the Patent does not require a midpoint between the upper and lower bead particle sizes to define the boundary between the major and minor components, then her Honour should have found that the disclosure of the particle size distribution in the UK Patent anticipates claims 1, 2 and 3.
53 In effect, her Honour found that the UK Patent taught that there should be a larger proportion by weight of larger size beads than smaller size beads, but that it did not teach that there be a particle size distribution in which there were more larger size beads than smaller size beads.
54 The appellants submit that her Honour mischaracterized the disclosure in the UK Patent. They submit that it discloses, "the addition of large beads to the known components of British Standard 3262 ("BS 3262"), substantially all of which are less than 1.18 mm". It is not clear whether, at trial, the appellants advanced such an argument. Her Honour does not refer to it. In their written submissions on appeal, the appellants do not expressly refer to s 7(1)(b), although it might not be difficult to conclude that the UK Patent and BS 3262 should, at least for some purposes, be read as one, given that the latter is expressly referred to in the former.
55 However, in their submissions the appellants mis-state the context in which BS 3262 is mentioned in the UK Patent and its effect. It is mentioned at p 1, l 18 and p 2, l 13. However that patent does not state that the invention involved the addition of large beads to the known components of BS 3262. It rather states that a composition is to be "made according to BS 3262", and that any aggregate is to be in accordance with that standard. BS 3262 provides for the inclusion of some glass beads. However, neither in that standard, nor in the UK Patent are beads treated as "aggregate". See the UK Patent at p 1, ll 7 β 10 and 15 β 17, p 2, ll 12 β 18 and claim 1. Thus it is clear that in those documents any comparison between larger beads and aggregate does not involve a comparison between larger and smaller glass beads. In any event, whatever may have been the composition of BS 3262, it would not follow that in any subsequent mixture with additional glass beads, there would necessarily be a particle size distribution as prescribed in the patent. We agree with her Honour that the UK Patent does not disclose the requirement that the number of larger particles exceed the number of smaller particles. Nor do we see any basis for concluding that the skilled addressee, in the ordinary course and without invention, could have supplied that missing integer.
56 Concerning the Swiss Patent, her Honour said at [96] β [99]:
96 The Swiss patent relates to road markings using glass beads embedded in the marking mass. The invention involves the use of glass beads at least 1.5 mm in diameter, preferably 2β3 mm, projecting from the surface of the marking mass. The specification identifies large glass beads as those of at least 1.5 mm in size, with conventional glass beads being smaller, between 0.15 and 0.8 mm. According to the specification the proportion by weight of the large glass beads can be between 25% and 60%, preferably 30% and 50%. The marking mass can be thermoplastic (that is, a polymer).
97 The difficulty for the [appellants] is that the Swiss patent identifies any glass bead of 1.5 mm or above as large, with those up to 60% (that is, the majority) by weight being large beads as opposed to smaller beads, such beads being between 0.15 and 0.8 mm. In other words, the combination of the size range and size distribution for the Swiss patent is different from the size range and size distribution for the patent in this case, the latter involving beads ranging from 1.5 to 4.5 mm with the particle size distribution wherein the weight of beads in the large incremental size range is greater than the weight of beads within the small incremental size range.
98 From the evidence I cannot be satisfied that the disclosure in the Swiss patent, as at the priority date, would be sufficient to enable the skilled addressee, in the ordinary course and without invention, to add what is missing in the prior publication to obtain the claimed invention.
99 The [appellants'] case in respect of the parent application cannot be understood as an argument to the effect that the parent application itself is a document that anticipates and thus destroys the novelty of the patent. This is because the [appellants] concede that the parent application does not disclose the particle size distribution integer of the patent. This is sufficient to reject the case to the extent that it involved a suggestion of lack of novelty by reason of the parent application. The role of the parent application in the [appellants'] case more concerns the arguments about prior use.
The "parent application" is, as we understand it, the parent application of the Swiss Patent.
57 Her Honour concluded that the Swiss Patent did not anticipate integers 7, 8 and 9. There were two bases for that conclusion. First, at p 4 of the Swiss Patent, the large glass beads are said to be at least 1.5 mm in diameter whilst "conventional size" beads are 0.15 to 0.80 mm in diameter. The proportion by weight of large beads is to be, "between 25% and 60%, preferably 30% and 50%". Claim 1 of the Swiss Patent provides that, "at least some of the large glass beads β¦ have a diameter of at least 1.5 mm β¦". In the patent, the average particle size is to be within the range of 1.5 β 4.5 mm. It is difficult to reconcile this proposition with the Swiss Patent's treatment of beads with a diameter of 0.80 mm as large. The appellants submit that pursuant to the Swiss Patent it is possible to calculate the average particle size. That may be so, but such a process is not disclosed by that patent. Average particle size plays no part in it.
58 The appellants also submit that claim 5 of the Swiss Patent discloses larger beads in the range of 25% to 60%, without any dividing line. It is clear from p 4 (in the first full paragraph) that the proportion is by weight, not particle size. The absence of a "dividing line" simply demonstrates another integer of claim 1 not disclosed in the Swiss Patent. However one looks at it, the Swiss Patent does not disclose integers 7 and 8 and therefore does not anticipate claim 1.
INFRINGEMENT
59 The grounds of appeal on the issue of infringement are numerous and dispersed throughout the amended notice of appeal. Although the respondents pleaded both direct infringement and infringement pursuant to s 117 of the Act, they succeeded only on the latter basis. Her Honour dismissed a number of secondary submissions and, commencing at [123], addressed the alleged infringement of claim 1, finding that:
each appellant had supplied glass beads with other relevant material, together with instructions for use as a surface finish for swimming pools;
people had used the material supplied by the appellants in accordance with the instructions;
the tested beads were "but four colours available from a range of hundreds of colours";
to the appellants' knowledge the four colours had been used in combination with other colours; and
these facts were relevant to proof of infringement.
60 The primary Judge then set out her reasoning with respect to those conclusions, having particular regard to s 117. First, her Honour observed that the infringing product was capable of more than one reasonable use. Her Honour found that:
the tested beads were representative of the appellants' product in the 1 - 3 mm grade;
the appellants had reason to believe that a person would use the product, selecting only beads of one colour;
the appellants' instructions for use included use of a single colour as well as a combination of colours;
a series of tests (the "first Boral tests") did not provide any useful evidence for present purposes, because the sieve sizes did not reflect the sizes relevant to the patent;
a second series of tests (the "second Boral tests") reflected those sizes and so were useful for present purposes;
the weighted average particle sizes were:
clear beads 1.72 mm;
green beads 1.84 mm;
ice-blue beads 1.64 mm; and
cobalt beads 1.83 mm;
in the case of the clear and cobalt beads infringement had not been proven; and
in the case of the green and ice-blue beads, infringement had been proven.
The Boral tests
61 We should explain the first and second Boral tests. The relevant explanation appears at paras 31 β 33 of the respondents' written submissions as follows:
31 In November 2009 and April 2011, tests on Jewels4Pools Products were performed by a Boral laboratory (then named Blue Circle Southern Cement Limited). That laboratory was not accredited by the National Association of Testing Authorities (NATA). The sieves used in those tests were chosen by employees of Blue Circle Southern Cement Limited (Boral) and were of the following diameters: 4.75mm, 3.35mm, 2.8mm, 2.36mm, 2.00mm, 1.7mm, 1.4mm, l.l8mm, 1.0mm and 0.8mm. Those tests were conducted at the request of the respondents for the purpose of considering its action against the appellant. The results of those tests were not relied on at trial (and were not permitted to be used for that purpose). The November 2009 results were sent to the appellants with a letter of demand on 11 April 2011. The April 2011 results were sent to the appellants under cover of letter dated 2 May 2011.
32 ln October 2011, Mr Lotts of Boral Material Technical Services, a NATA accredited facility, initially performed a sieve test of the Jewels4Pools Products with sieves with diameters 4.75mm, 2.36mm, l.l8mm, 600 microns, 425 microns, 300 microns, 150 microns and 75 microns, the results of which appeared in Exhibit 5 (First Boral Test). A few days letter Mr Lotts repeated the test on the Jewels4Pools Product with sieves of diameter 4.75mm, 3.35mm, 2.8mm, 2.36mm, 2.00mm, 1.7mm, 1.4mm, 1.18mm, 1.0mm and 0.8mm (Second Boral Test), in accordance with the diameters of sieves used in the November 2009 and April 2011 Blue Circle tests. Mr Calvar, a Laboratory Supervisor, supervised Mr Lotts' testing. The results of the second October test are set out in Annexure B to the affidavits of both Mr Lotts and Mr Calvar (Second Boral Test).
33 While the Second Boral Test was performed at the request of Peter Carden, an officer of the first respondent, sieve testing with sieves of these diameters satisfied AS 1141. AS 1141 provides that test sieves complying with AS 1152 are the apparatus that may be used in the sieve testing. The new sieves used by Boral in the Second Boral Test comply with AS 1152 and were purchased from Civil Lab, the internationally accredited supplier of sieves to Boral and all of the materials testing industry. Mr Calvar suggested to Mr Carden that he could purchase the sieves from Civil Lab. Both Mr Calvar and Mr Lotts confirmed that the second October test complied with the method specified in AS 1141.
(Footnotes omitted)
62 The appellants do not challenge the accuracy of that explanation. Amended appeal grounds 7, 8 and 9 are as follows:
7. Her Honour erred in giving no weight to the evidence of the first Boral test (Reasons at [131]) or to the cross-examination of the Respondents' expert concerning the first Boral test, as demonstrating that the Respondents' product did not infringe claim 1 of the Patent.
8. Her Honour erred in rejecting the evidence of the first Boral test as "unsuitable" (Reasons at [131]), given that it was done in compliance with the Court's orders, specifically using sieve sizes for aggregate sieving in AS1141 and in light of the statement of the invention in the specification that "the beads can be characterised as falling within two particle size distributions with the larger particle size being the predominant component".
9. Her Honour erred in admitting the evidence of or giving any weight to the second Boral tests in light of the fact that the tests did not comply with the Court's orders and in all the circumstances in which the second Boral test was conducted and disclosed to the Court and the Appellant.
63 The patent addresses particles, the average particle size of which is within the range of 1.5 β 4.5 mm. In the first Boral tests, the only sieve size within that range was 2.36 mm. The next largest sieve size was 4.75 mm. Fairly clearly, the first Boral tests were unlikely to say much about particle sizes between 1.5 and 4.5 mm. The second Boral tests included sieves sized 4.75 mm, 3.35 mm, 2.8 mm, 2.36 mm, 2.00 mm and 1.7 mm. Hence they provided much more information concerning particles within the specified range.
64 The appellants submit that the first Boral tests were conducted in accordance with a Court order whilst the second Boral tests were not. The relevant order provided that the Court:
6. Grants leave for the purposes of Rule 34.50(2)(b) to the [respondents] to rely on experimental proof of the particle size distribution of the product sold by the [appellants], such proof being obtained by submitting an unopened sample of the [appellants'] product to Boral Resources (NSW) Pty Ltd for testing in accordance with Australian Standard 1141.
7. Directs that the [respondents] provide the [appellants] with particulars of the source of the sample provided for testing contemporaneously with service of the results of any such testing.
8. Directs that the sample tested by Boral Resources Pty Ltd be made available to the [appellants] for inspection and, subject to the leave of the Court and if required, for testing.
9. Directs that the admissibility of experimental proof other than in respect of Rule 34.50 be determined at the trial or at such other time as determined by the Court.
65 The appellants submit that the second Boral tests were not conducted in accordance with Australian Standard 1141 ("AS 1141") because they involved the use of sieves of sizes other than those identified in that standard. AS 1141 is concerned with aggregate for use in asphalt, not glass beads for use in a surface finish. Whatever the relevance of including in the order the requirement for compliance with AS 1141, it cannot have been intended that such compliance would make the results useless for all relevant purposes. Further, the use of a 3.35 mm sieve is contemplated by AS 1141. Such a sieve was used in the second Boral tests, but not the first. Her Honour concluded that the second Boral tests provided useful information for all relevant purposes while the first Boral tests did not. At [131] β [132] her Honour gave her reasons, which are, to a great extent, reflected above. Order 9 contemplated the possibility that further tests would be presented at trial, although admissibility was to have been considered at that time.
66 The appellants do not advance any substantial challenge to her Honour's assessment of the evidence. The appellants submit that Mr Bennett, the respondents' expert, was able to form a view based on the first Boral tests. That may be so, but acceptance of such opinion evidence depended upon the primary Judge's assessment of the information upon which it was based. Her Honour assessed that evidence and rejected it.
67 In any event, the order contemplated the possibility that further test evidence would be received at trial. Her Honour must have decided to receive the second Boral tests results. Alternatively, she may have concluded that the second Boral tests were carried out pursuant to the order. In either event no basis can be demonstrated for concluding that her Honour was in error in acting on the evidence provided by the second Boral tests. The appellants' other submissions concerning the Boral tests are based upon the appellants' construction of claim 1, which construction we have rejected, as did the primary Judge. Other submissions may go to weight, but they do not demonstrate any basis for doubting the appropriateness of her Honour's treatment of the Boral tests.
Amended appeal ground 3
68 Amended appeal ground 3 provides:
Her Honour erred in finding that the Appellants' green and ice blue product infringed claim 1 of the Patent in light of the evidence that these products were outside the particle size range of 1.5 to 4.5mm in claim 1 and in light of her Honour's findings concerning the disclosure in Patent Specification CH 668 665 on the question of novelty.
As to particle size range, this ground seems to assume that the evidence of the first Boral tests should be used rather than the evidence concerning the second Boral tests. We have dealt with that matter. As to the Swiss Patent we have already dealt with it in considering the question of novelty. We are unable to discern in appeal ground 3, any further point concerning that patent.
69 The appellants submit that the respondents did not establish infringement because they did not establish that the appellants had instructed or induced others to use beads of only one colour in any pool. The significance of this submission may not be immediately obvious. It arises out of the evidence concerning the Boral tests. In those tests samples of beads of four different colours were discretely tested. The green and ice-blue bead samples infringed, but the clear and cobalt bead samples did not. The appellants submit that only the supply of the green or cobalt beads, or a combination of both would constitute infringement. The presence of beads of other colours might reduce the relative proportions of larger and smaller beads so that infringement could not be inferred.
Section 117
70 Section 117 provides:
Infringement by supply of products
(1) If the use of a product by a person would infringe a patent, the supply of that product by one person to another is an infringement of the patent by the supplier unless the supplier is the patentee or licensee of the patent.
(2) A reference in subsection (1) to the use of a product by a person is a reference to:
(a) if the product is capable of only one reasonable use, having regard to its nature or designβthat use; or
(b) if the product is not a staple commercial productβany use of the product, if the supplier had reason to believe that the person would put it to that use; or
(c) in any caseβthe use of the product in accordance with any instructions for the use of the product, or any inducement to use the product, given to the person by the supplier or contained in an advertisement published by or with the authority of the supplier.
71 The appellants' amended grounds of appeal 12 β 17 are as follows:
12. Her Honour erred in finding that the Appellants infringed claim 1 by the supply of products for the purposes of s 117 of the Patents Act.
13. Her Honour erred in treating the "product" for the purposes of s 117 of the Patents Act as the glass quartz aggregate product together with the Geo Polymer, contrary to the case as pleaded.
14. Her Honour should have found that the glass quartz aggregate product (whether alone or with the Geo Polymer) was a staple commercial product for the purposes of s 117(2)(b) of the Patents Act, including in light of the finding (Reasons at [124]) that the product(s) would be suitable for other commercial uses.
15. Her Honour erred in finding that the Appellants had reason to believe, for the purposes of s 117(2)(b) of the Act, that customers would put the Jewels 4 Pools product to use by selecting a single colour, being either green or ice blue.
16. Her Honour erred in finding that the Appellants' instructions to customers to use the Jewels 4 Pools glass bead product "in any combination of colours you wish to choose" constituted instructions to the customer use the product in a manner which would infringe the patent for the purposes of s 117(2)(c) of the Act.
17. Her Honour erred in granting injunctions to prevent authorising or procuring infringement of s 117 of the Patents Act when the exclusive rights given to the patentee under s 13 and the definition of "exploit" do not extend so far.
72 At [124] the primary Judge dealt with s 117(2)(a). The parties agree that the reference to s 117(2)(b) in [124] should be to s 117(2)(a), as is plainly correct. The primary Judge found that the relevant product could be reasonably used for more than one purpose. Thus s 117(2)(a) was not engaged. Her Honour dealt with s 117(2)(b) at [125], apparently concluding that this provision would be engaged and infringement established under it if one of the four colours tested infringed the patent. That conclusion would necessarily involve a finding that the appellants' product was not a staple commercial product. As to s 117(2)(b), the appellants submit that her Honour ought to have found that the appellants' product was a staple commercial product so that s 117(2)(b) was not engaged. They submit that in considering s 117(2)(a), her Honour found that the appellants' product had "100's of applications". That submission is not strictly correct. Her Honour pointed out that on a website (presumably the appellants' website or that of one of them) it was said that there were "100's of applications, pools, gardens, ponds and many more." In considering s 117(2)(b) her Honour seems not to have addressed expressly the question of whether or not the appellants' product was a staple commercial product. We will return to this matter.
73 Her Honour dealt with s 117(2)(c) at [126], concluding that the provision was engaged.
74 We turn to the grounds of appeal. Appeal ground 12 identifies no alleged error. Ground 13 addresses identification of the appellant's product for the purposes of s 117. The appellants correctly submit that their product as pleaded by the respondents was comprised of the "glass quartz aggregate". See the amended statement of claim at paras 14 and 14B. At numerous points in her reasons, her Honour refers to the product in such a way as to suggest that she was, as the appellants submit, referring to both the aggregate and the polymer as the relevant product. The polymer was relevant to the alleged infringement of claims 13, 20, 21 and 23 β26. However it was not part of the supply said to have been an infringement upon claim 1. The case may not have been conducted in accordance with the pleadings, but we must assume that it was so conducted. If, however, the distinction between the aggregate and the aggregate with the polymer was treated as being of any significance, one would have expected some mention of it in her Honour's reasons. In footnote 37 at para 46 of the appellants' submissions on appeal, it is said that the respondents' pleading of the "Product" was "important", but the importance is not demonstrated.
75 In Northern Territory v Collins (2008) 235 CLR 619 Gummow A-CJ and Kirby J said at [26]:
Of course, the word "staple" has found its way into the language of a contemporary Australian statute designed to apply to modern conditions in this country. However, when the standard local dictionaries are consulted, they do not yield a meaning different from that in the United States. Thus the word has been defined, relevantly:
"(1) a principal commodity grown or manufactured in a locality.
(2) a principal commodity in a mercantile field; goods in steady demand; goods of known or recognised quality.
(3) a principal item, thing, feature, element, or part.
(4) the fibre of wool, cotton, flax, rayon, etc, considered with reference to length and fineness."
(Footnote omitted)
76 At [41] Hayne J said that:
β¦ a staple commercial product is one that is supplied commercially for various uses. β¦ the product β¦ must be an article of commerce that not only can be used in a variety of ways but also is traded for use in various ways. (emphasis in original)
77 Justice Crennan said (Heydon J concurring) at [142] β [145]:
142 The precise scope of the expression "staple commercial product" is not clear. One ordinary adjectival use of "staple", applied to raw materials, conveys the meaning that the material is capable of being used as a constituent element in a number of other products. That focuses on the inherent qualities of the product. Another equally well-known ordinary adjectival use of "staple" conveys the meaning that a product has a foremost place among products, for example, in a particular location. That focuses on the distribution of a product rather than upon its inherent capacity to be a constituent in a number of other products and overlaps with the idea that the product be a "commercial" product.
143 It has been suggested by at least one writer in respect of European rights that a "staple commercial product" has two main qualities: first, it must be "[a] basic product commonly used for various purposes", and secondly, it must be "[g]enerally available on the market".
144 Raw materials such as wool or timber undoubtedly have the first quality. As to the second quality, it is necessary to recognise that s 117(2)(b) operates to limit liability for contributory infringement. Policy arguments in favour of imposing liability for contributory infringement are much weaker with a product that has significant non-infringing uses. The legislative intention evinced in the statutory language, and apparent also from the relevant secondary materials, is to except from liability, the supply of products with significant non-infringing uses, or as it has been put in relation to the American provisions, products with "lawful as well as unlawful uses". A preference for such a construction has also been essayed in respect of s 60(3) of the Patents Act 1977 (UK) by a writer who states "the intention is to stop material particularly adapted to the use of an invention being made available to a putative infringer, but that material which has and, importantly, had, a general purpose of more than de minimis utility, falls within the [UK] exception".
145 The phrase "staple commercial product" means a product supplied commercially for various uses. This does not mandate an inquiry into whether there is "an established wholesale or retail market" or into whether the product is "generally available" even though evidence of such matters may well be sufficient to show that a product is a "staple commercial product". The relevant inquiry is into whether the supply of the product is commercial and whether the product has various uses. Leaving aside the supply to ACOC, the timber here was supplied on commercial terms to various licensees for a variety of non-infringing uses. Accordingly, the Northern Territory is protected by the limitation in s 117(2)(b).
(Footnotes omitted)
78 Her Honour's findings that the appellants had infringed by virtue of the operation of s 117(2)(b) has caused us some concern. Three problems would make it difficult to uphold her Honour's finding that s 117(2)(b) was engaged. They are:
the mis-identification of the product;
the absence of an express finding that the appellants' product was not a staple commercial product; and
the absence of any consideration of that matter in the reasons.
79 We do not mean to be critical of her Honour. It is likely that these deficiencies were the product of the way in which the case was conducted. In the ordinary course, we would consider the relevant evidence and, if possible, make our own findings. The only evidence to which the appellants refer is:
her Honour's finding that there were 100s of uses for the glass beads; and
references in the specification to various other uses.
80 We are inclined to the view that for the purposes of claim 1, the relevant use would be infringing use in any structure. Thus, for example, we do not see use on a path as a distinct use from use in a pool. Both are uses in a structure. The question, then, would be whether glass beads had any use other than as claimed in claim 1. The answer to that question would be relevant to both s 117(2)(a) and s 117(2)(b). We understand her Honour's reference to "100's of applications" is to uses in various structures. If so, then her Honour may not have addressed the correct question.
81 Nonetheless we suspect that her Honour's finding concerning s 117(2)(a) is probably correct. It seems likely that there are uses for glass beads other than as claimed in claim 1. A more difficult question is whether the product is a staple commercial product for the purposes of s 117(2)(b). We are inclined to the view that, on the evidence to which we have been taken, a tribunal of fact could not be satisfied on the balance of probabilities that glass beads were not a staple commercial product.
82 However, because we consider that her Honour was correct in concluding that s 117(2)(c) was engaged, it is not necessary that we form a concluded view concerning the engagement of s 117(2)(b). Given the uncertain state of the evidence and the absence of any substantial submissions concerning the matter, it is better that we not do so. We also need not address appeal ground 15.
83 Concerning s 117(2)(c) her Honour said at [126] β [128]:
126 In terms of s 117(2)(c) I do not accept the [appellants'] characterisations of their instructions to use the product. The [appellants] said that people are instructed to use the glass beads in different colour combinations. In fact, the instructions are to the effect that there are "hundreds of colours and combinations", "a magnificent range of colours and combinations", there being "100's of colours and combinations to choose from and a person may select "any combination of colours you wish to choose", there being "freedom of choice with colour". In other words, the [appellants] instruct that the product may be used as the customer sees fit, either with a single colour or any combination of colours from those available. This satisfies the requirement for instructions to use the product in both these ways; that is, by use of a single colour or a combination of colours. It follows that if one of the four colours tested by the [respondents] infringes the patent, infringement is established under s 117(2)(c).
127 I also do not accept the [appellants'] case that the [respondents] could only prove infringement by locating a pool in which the [appellants'] product has been used and testing the product as used in that application. That is one way the [respondents] might have proved infringement. But ss 117(1) and (2) do not require proof of that kind. It is clear that the respondents supply a product comprising glass beads and Geo Polymer instructed for use and which the [appellants] believe will be used, and in fact has been used by many people, in swimming and spa pool linings. As noted, if the [respondents] can prove any colour of glass beads as tested, when used as instructed with the Geo Polymer, would infringe the patent, then infringement is established by operation of ss 117(2)(b) and (c).
128 The fact that the [appellants] supply only the glass beads and Geo Polymer is not to the point. The [appellants] direct the use of those products with cement, which is a "cementitious material" within the meaning of the claims of the patent. It is also clear from the evidence that at least a portion of the glass beads will project out of the cementitious matrix. Based on Mr Bennett's experience it should also be inferred that it is likely that no more than 40% of the glass beads will be exposed. Given their own experience in lining swimming pools I infer that the [appellants] have reason to believe that their product would be used in this way.
84 The appellants make two submissions concerning s 117(2)(c), namely:
that the sales material to which her Honour referred contained "trivial marketing exhortations" which did not constitute instructions or inducements; and
that there was no evidence of any actual use in a pool of only green or ice-blue beads.
85 As to the first matter we do not accept that, because it may be possible to describe statements as "trivial marketing exhortations", such statements cannot also be instructions. In this respect, we see no error in her Honour's reasons. The website clearly indicates that the product is to be used as a surface finish for swimming pools. It is said to have "100's of colours and combinations", and to be for, use for applications in "pools, gardens, ponds and many more". We see no difficulty in characterizing those statements as instructing a use which infringes claim 1.
86 As to the second matter, we consider that relevant statements identified by the primary Judge clearly addressed the use of the full range of colours offered by the appellants, necessarily including the green and ice-blue products. Those statements also contemplated a combination of colours, necessarily including a mixture of the green and ice-blue products. Such use would infringe claim 1 so that the supply by the appellants of their green or ice-blue product would constitute an infringement. In this respect, we see no error in her Honour's conclusion or in her reasons.
THE RELIEF GRANTED
87 Amongst other orders, the primary Judge ordered that:
1. The [appellants] whether by themselves, their directors, servants, agents or otherwise, be restrained from infringing claim 1 of the Patent during the term thereof.
2. The [appellants] whether by themselves, their directors, servants, agents or otherwise, be restrained during the term of the Patent from, without licence from the [respondents]:
(a) supplying, selling or disposing of, or offering to sell or dispose of, the Jewel4Pools products green and ice blue, for use in isolation or in combination with each other; and/or
(b) authorising, procuring or inducing others to supply or sell or to use the Jewels4Pools products green and ice blue in isolation or in combination with each other.
88 Grounds of appeal 2 and 17 are as follows:
2. Her Honour erred in making Order 1 of the Orders in the form that it was made, given the limited nature of the findings on infringement, namely by only two colours (green and ice blue) out of many bead colours sold by the Appellants and in light of the fact that the parties had agreed on orders in a different form.
β¦
17. Her Honour erred in granting injunctions to prevent authorising or procuring infringement of s 117 of the Patents Act when the exclusive rights given to the patentee under s 13 and the definition of "exploit" do not extend so far.
89 Although the appellants in terms have appealed against both O 1 and O 2, their written submissions seem only to address O 1. During the hearing counsel for the appellants informed us that the parties had agreed to O 2 but not O 1. We proceed on the basis that the appellants press only the appeal against O 1. The appellants submit that O 1 is inappropriate in this case because of the "very limited nature of the Respondents' success". We do not accept that as an accurate assessment of the outcome of the case. The patent has been construed. The appellants were found to have infringed. For the reasons identified by Heerey J in Welcome Real-Time SA v Catuity Inc (No 2) [2001] FCA 785, we consider that her Honour did not err in making O 1. That case demonstrates that in the United Kingdom and in Australia, a patentee who establishes infringement will usually obtain the benefit of an order restraining infringement generally. The reasons for making such an order are identified in the judgment. We find them convincing. In oral submissions counsel for the appellants suggested that in the United States of America, "one is not even necessarily entitled to an injunction as of right" in an infringement case. There is nothing surprising about that general proposition. However it does not in any way undermine the rationale for making such a general order as demonstrated by Heerey J. We see no justification for the appellants' criticism of O 1.
ORDERS
90 The Court orders that:
1. The appeal be dismissed.
2. The parties exchange submissions as to costs and file same within 14 days after the delivery of these reasons.
I certify that the preceding ninety (90) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Dowsett, Middleton and Robertson.
Associate:
Dated: 10 September 2014
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Interpharma Pty Ltd v Commissioner of Patents [2008] FCA 1283
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2024-09-13T22:47:02.978700+10:00
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FEDERAL COURT OF AUSTRALIA
Interpharma Pty Ltd v Commissioner of Patents [2008] FCA 1283
TRADE PRACTICES β misleading and deceptive conduct β "in trade or commerce" β application to Commissioner of Patents for extension of patent term β application alleged to contain misleading and deceptive statements β whether statements made in trade or commerce.
ADMINISTRATIVE LAW β extension of patent term β application for review of decision to grant β standing of applicant β whether person aggrieved β delay in making application β whether disentitling.
PRACTICE AND PROCEDURE β summary judgment β application by defendant β applicable principles.
Administrative Decisions (Judicial Review) Act 1977 (Cth) ss 5, 15, 16
Judiciary Act 1903 (Cth) s 39B
Patents Act 1990 (Cth) ss 138(1), 192
Trade Practices Act 1974 (Cth) ss 52, 82, 87
Federal Court of Australia Act 1976 (Cth) s 31A
White Industries Aust Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298 followed
Glueck v Stang (2008) 76 IPR 75 followed
Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 applied
Village Building Co Ltd v Canberra International Airport (No 2) (2004) 134 FCR 422 cited
RGC Mineral Sands Ltd v Wimmera Industrial Minerals Pty Ltd (No 2) [2000] FCA 22 cited
Assa Abloy Australia Pty Ltd v Australian Lock Co Pty Ltd (2005) 68 IPR 105 applied
Ritz Hotel Ltd v Charles of the Ritz Ltd (1988) 15 NSWLR 158 considered
Australian Foreman Stevedores Association v Crone (1988) 20 FCR 377 followed
INTERPHARMA PTY LTD (ACN 099 877 899) v THE COMMISSIONER OF PATENTS and ELI LILLY AND COMPANY; ELI LILLY AND COMPANY and ELI LILLY AUSTRALIA PTY LTD (ACN 000 233 992); INTERPHARMA PTY LTD (ACN 099 877 899)
VID 160 of 2008
SUNDBERG J
21 AUGUST 2008
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY VID 160 of 2008
BETWEEN: INTERPHARMA PTY LTD (ACN 099 877 899)
Applicant
ELI LILLY AND COMPANY
First Cross-Claimant
ELI LILLY AUSTRALIA PTY LTD (ACN 000 233 992)
Second Cross-Claimant
AND: THE COMMISSIONER OF PATENTS
First Respondent
ELI LILLY AND COMPANY
Second Respondent
INTERPHARMA PTY LTD (ACN 099 877 899)
Cross-Respondent
JUDGE: SUNDBERG J
DATE OF ORDER: 21 AUGUST 2008
WHERE MADE: MELBOURNE
THE COURT ORDERS THAT:
(1) Paragraphs 1 to 6, 8 and 10 of the Amended Application and paragraphs 7 to 19 of the Amended Statement of Claim be dismissed pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth).
(2) The applicant's motion notice of which was filed on 22 July 2008 be dismissed.
(3) The applicant pay the first respondent's costs of the motion referred to in order 2 and of the first respondent's motion notice of which was filed on 22 May 2008.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY VID 160 of 2008
BETWEEN: INTERPHARMA PTY LTD (ACN 099 877 899)
Applicant
ELI LILLY AND COMPANY
First Cross-Claimant
ELI LILLY AUSTRALIA PTY LTD (ACN 000 233 992)
Second Cross-Claimant
AND: THE COMMISSIONER OF PATENTS
First Respondent
ELI LILLY AND COMPANY
Second Respondent
INTERPHARMA PTY LTD (ACN 099 877 899)
Cross-Respondent
JUDGE: SUNDBERG J
DATE: 21 AUGUST 2008
PLACE: MELBOURNE
REASONS FOR JUDGMENT
INTRODUCTION
1 The second respondent (Lilly) is registered as proprietor of Australian Patent No 565856 entitled "difluro nucleoside antivirals". Lilly is also the patentee of the Austrian equivalent of the Australian Patent. The second cross claimant is the exclusive licensee of the Patent in Australia.
2 On 14 January 2000 the Commissioner of Patents granted an extension of term of the Patent for a period of five years ending 7 March 2009. On 19 March 2008 the applicant commenced proceedings seeking, amongst other things:
(a) an order setting aside the Commissioner's decision to extend the term of the Patent (ss 5, 15 and 16 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (ADJR Act) and s 39B of the Judiciary Act 1903 (Cth));
(b) an order rectifying the Register of Patents by removing all references to any extended term of the Patent (s 192 of the Patents Act 1990 (Cth));
(c) an order revoking the Patent (s 138(1) of the Patents Act);
(d) damages pursuant to ss 52, 82 and 87 of the Trade Practices Act 1974 (Cth).
3 On 12 May 2008 Lilly and the second cross claimant filed a cross claim alleging infringement of the Patent.
4 The Patent describes and discloses a class of compounds which have an antiβviral therapeutic effect. The invention described and claimed in the complete specification is a class of compounds being antiviral nucleosides for the treatment of viral infections.
5 In its application for an extension of the term of the Patent, Lilly relied upon registrations on the Australian Register of Therapeutic Goods (ARTG) for the commercial product Gemcitabine hydrochloride. The registrations state that the approved indication for Gemcitabine hydrochloride is:
(a) treatment of patients with locally advanced or metastatic non small cell lung cancer, and
(b) from 4 July 1997, treatment of patients with locally advanced or metastatic non small lung cancer, locally advanced or metastatic adenocarcinoma of the pancreas and 5βFV refractory pancreatic cancer.
6 The applicant claims there is a disconformity between the pharmaceutical substance with the indication described in the ARTG registrations and the class of antiviral compounds described and claimed in the specification. This perceived disconformity forms the basis for its application to review the extension of the term and revoke the Patent for lack of fair basis and false suggestion, the Trade Practices Act claim, and its defence to the infringement action pursuant to s 78 of the Patents Act.
THE TWO MOTIONS
7 Before me are two motions. The first, by Lilly, seeks an order under s 31A of the Federal Court of Australia Act 1976 (Cth) that pars 1 to 6, 8 and 10 of the Amended Application, and pars 7 to 19 of the Amended Statement of Claim be dismissed. The second, by the applicant, seeks leave to amend its Amended Application and Amended Statement of Claim.
8 Section 31A of the Federal Court of Australia Act is in part as follows:
(2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is defending the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.
(3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
(a) hopeless; or
(b) bound to fail;
for it to have no reasonable prospect of success.
9 Lindgren J has recently collected the cases on the meaning and effect of s 31A and comparable provisions: White Industries Aust Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298 at [58]β[59], where he considered the test to be whether there are "real" as opposed to "fanciful" or "merely arguable" prospects.
10 Lilly's motion gives rise to three issues. The first is the viability of the applicant's claim to relief under s 52 of the Trade Practices Act. The second is whether the applicant has standing to claim relief under the ADJR Act, s 192 of the Patents Act and s 39B of the Judiciary Act. The third is whether, assuming it has standing, it should be denied relief because of its delay. In a s 31A context, in each case the question is whether the Court is satisfied that there is no reasonable prospect of the applicant succeeding in the relevant claim or issue.
TRADE PRACTICES ACT
11 The applicant alleges that in applying for an extension of the term of the Patent, Lilly represented to the first respondent (the Commissioner) that the pharmaceutical substance on the ARTG on which it relied was disclosed in claims 1 to 4 and 6 of the Patent. The applicant alleges that these representations were made in trade and commerce and were false.
12 In Glueck v Stang (2008) 76 IPR 75 the applicant alleged that Novopharm, in trade or commerce, engaged in misleading and deceptive conduct in relation to an application to the Australian Patent Office for the grant of letters patent. At [32] to [33] Lindgren J said:
The course of authority outlined above requires me to hold that the alleged representations by Novopharm to the APO β¦ were not made in trade or commerce. They were not made in the course of a trading or commercial relationship between Novopharm on the one hand, and β¦ the APO β¦ on the other hand. Novopharm had no trading or commercial dealings with the APO β¦. Nor were they made in the course of the negotiation of contracts β¦. The alleged representations were made to a government instrumentality pursuant to legislation for the purpose of obtaining an exclusive right or bundle of rights made available by that legislation.
No doubt the alleged representations were made by Novopharm in trade or commerce in a broad nonβs 52 sense. However, in Concrete Constructions the High Court β¦ rejected the view that the expression 'in trade or commerce' in s 52 referred to the 'immense field of activities' in which corporations may engage in the course of, or for the purposes of, carrying on some overall trading or commercial business β¦.
13 The course of authority to which Lindgren J referred consisted of Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594, Village Building Co Ltd v Canberra International Airport (No 2) (2004) 134 FCR 422 at [57]β[58], affirmed on appeal at (2004) 139 FCR 330 at [50]β[55], and RGC Mineral Sands Ltd v Wimmera Industrial Minerals Pty Ltd (No 2) [2000] FCA 22.
14 The applicant sought to distinguish the present case from Glueck on the ground that the facts of the two cases were different. That is true, but the proposition derived by Lindgren J from the authorities referred to is applicable here. Essentially that is because of the passage in Concrete Constructions at 604, upon which Glueck was based, in which it was said:
What the section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it β¦ has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character.
It is that relationship that is absent here. I am not persuaded that Glueck is plainly wrong, and accordingly I should follow it.
15 The applicant filed material that bore on the activities of the Patent Office. However, no reliance was placed on it in the applicant's counsel's submissions, and Lilly's counsel made no reference to it. I have not carried out my own investigation as to what might have been made of the material.
16 In my opinion the applicant has no reasonable prospect of succeeding in its s 52 claim.
STANDING
17 Section 5 of the ADJR Act enables a "person aggrieved" by a decision to which the Act applies to seek an order of review. Section 192(1) of the Patents Act enables a "person aggrieved" by, amongst other things, an entry wrongly existing in the Register of Patents, to apply for an order to rectify the Register. Section 39B of the Judiciary Act does not use the expression "person aggrieved". It was, however, common ground that if the applicant was not a "person aggrieved" under s 5 of the ADJR Act or s 192, it would lack standing under s 39B.
18 In Assa Abloy Australia Pty Ltd v Australian Lock Co Pty Ltd (2005) 68 IPR 105 at [19] the Full Court referred to the observations of McLelland J in a trade mark context in Ritz Hotel Ltd v Charles of the Ritz Ltd (1988) 15 NSWLR 158 at 193 (Ritz), and said:
[Adapting] that language to the design context, the expression would embrace any person having a real interest in having the entry expunged and thus would include any person who would be or in respect of whom there is a reasonable possibility of his or her being 'appreciably disadvantaged in a legal or practical sense' by the entry not being expunged.
19 The applicant's claim to be a person aggrieved is put on the following basis:
Β· since its incorporation in 2002 it has been involved in the business of marketing, selling and supplying pharmaceutical products
Β· in October 2007 it applied to the Therapeutic Goods Administration (TGA) to register GEMCITABINE EBEWE, gemcitabine hydrochloride formulation for the treatment of cancer, which is intended to be manufactured by EBEWE Pharma (the product)
Β· it believes it will obtain TGA approval for registration in the third quarter of 2008
Β· it will not import and sell the product until it has received TGA registration and EBEWE Pharma is able to supply the product
Β· Lilly is the registered owner of the Patent and claims that it has the exclusive right to import and sell the product in Australia while the Patent remains in force
Β· Lilly has not authorised the applicant or EBEWE Pharma to exploit the Patent
Β· Lilly has informed the applicant that it will commence legal proceedings for an injunction unless the applicant undertakes that it will not, prior to the expiration of the term of the Patent, import and sell products containing gemcitabine hydrochloride without Lilly's approval
Β· the applicant has declined to provide the undertaking and denies that the manufacture, importation and sale of the product infringes the Patent
Β· if the product falls within the claims of the Patent (which is denied), the period during which the applicant may be prevented from importing and selling such products in Australia has been prolonged by the extension of the term of the Patent.
20 As I understand the position, Lilly did not attack that formulation of the applicant's claim to be a person aggrieved. What it relies on, so as to assert that the applicant's standing has evaporated, is the decision of an Austrian court on 7 July 2008 enjoining EBEWE Pharma from making and exporting the product. Lilly contends that on the present pleadings the applicant cannot establish an interest in the outcome of the proceeding because, even with the extension of the term in place, it is not in a position to launch a product sourced from EBEWE Pharma in Austria.
21 It is because of the grant of the Austrian injunction that the applicant, in its motion, seeks to amend its Application to overcome that obstacle. It wants to add the following paragraphs to its claim to be a person aggrieved:
(e) On 18 April 2008 the Applicant, as the Sponsor, applied to the TGA to register GEMCITABINE EBEWE gemcitabine hydrochloride powder for the treatment of cancer, which is intended to be manufactured, packed and supplied by SC SindanβPharma SRL of β¦Romania (SindanβPharma) and the manufacturer of the active material gemcitabine hydrochloride is intended to be Shilpa Medicare Limited, India (Shilpa) (SindanβPharma Gemcitabine Hydrochloride powder).
(f) The Applicant has not yet obtained TGA approval for registration of SindanβPharma Gemcitabine Hydrochloride powder but believes that it will obtain such approval in late 2008 or early 2009.
(g) The Applicant has not yet, and will not, import and sell the said SindanβPharma Gemcitabine Hydrochloride powder until such time as:
(i) it receives TGA registration;
(ii) SindanβPharma is able to supply the said SindanβPharma Gemcitabine Hydrochloride powder to it.
22 Lilly opposes the application to amend the pleadings on the ground that it would be futile to grant leave. It relies on three paragraphs of the affidavit of David Gray, the applicant's Managing Director:
26. At the time InterPharma became aware of the [extension] Decision on 2 August 2007, it had not applied for Pharmaceutical Benefits Scheme (PBS) listing of Gemcitabine EBEWE. PBS listing is central to the successful marketing of oncology pharmaceutical products in Australia. InterPharma cannot apply for PBS listing of Gemcitabine EBEWE until it has obtained TGA registration of Gemcitabine EBEWE. At the time of swearing this my Affidavit, InterPharma has not obtained TGA registrations of Gemcitabine EBEWE.
27. It is not possible to apply for PBS listing of any pharmaceutical until TGA registration has been achieved.
β¦
49. Upon obtaining TGA registration and obtaining PBS listing of the Gemcitabine EBEWE, InterPharma, (if not restrained by an order of this Court) intends to import, market and sell Gemcitabine EBEWE for the treatment of cancer, which formulations are alleged by Eli Lilly Australia Pty Ltd and Eli Lilly and Company to infringe the AntiβViral Patent. If the said formulations do fall within the scope of the claims of the AntiβViral Patent (which is denied), then the period during which InterPharma may be prevented from importing, marketing and selling such formulations has been prolonged by the extension of the term of the AntiβViral Patent in the Decision.
23 Lilly notes that while Mr Gray was not in those paragraphs dealing with the Shilpa product, his observations necessarily apply to it. The EBEWE application for TGA approval was filed in October 2007 and, as appears from the applicant's pleading, approval is not expected until the third quarter of this year. The SindanβPharma application was not lodged until April 2008. Lilly says that no reason is advanced for the belief in [21(f)] that approval will be granted in late 2008, and that it should be inferred that it will be later.
24 Lilly also relies on the evidence of Mr Grainger that a PBS application typically takes three months to be processed. Mr Granger also said at [32]β[33]:
the PBS Schedule is published 12 times a year, on the first day of each calendar month. However, if a listing involves a change in the price of other brands (for example, a generic product is listed on the PBS at a lower price and this results in price changes for other brands of that product) then, it may only be listed on the PBS Schedule on one of three dates per year β 1 April, 1 August and 1 December β¦.
For an application to be listed on one of these dates, it must have been made by, respectively, the 1 January, 1 May and 1 September prior to the associated listing date.
25 Lilly's counsel asserted that the Shilpa product would be "listed on the PBS at a lower price". Accordingly, it was said, if there were to be a TGA approval given in late 2008 or early 2009, the earliest time a PBS application could be lodged would be 1 January 2009, and the earliest the Shilpa product would be listed would be 1 April 2009. That would see it available for commercial use after the expiry of the extended term on 7 March 2009. Accordingly, it was said, the applicant's commercial activities will not be affected by the extended term, "other reasons having intervened and having nothing to do with the extension of term".
26 Counsel for the applicant did not challenge the assertion in [25] that the Shilpa product would be listed at a lower price, with the TGA consequences alleged. Rather they took issue with the contention that obtaining PBS listing is a prerequisite to the launch of a product. They did not accept that Mr Gray was saying that. Rather they contended that he was saying that once TGA registration and PBS listing was obtained, importing, marketing and selling would occur.
27 I return to the Assa Abloy test recorded at [18]. Adapted to the present case, the question is whether there is a reasonable possibility that the applicant would be disadvantaged in the sense that it would be prevented from exploiting the invention in any of the respects falling within the definition of "exploit" in the Patents Act. That includes a number of things preparatory to placing a product in the marketplace. Matters falling within the concept of "launching" a product include importing, keeping for the purpose of offering for sale, and using. In my view the fair reading of par 49 of Mr Gray's affidavit is that propounded by the applicant. Nor do I think the use of the word "marketing" in par 26 of that affidavit bears the emphasis Lilly places on it. All Mr Gray is saying is that in order successfully to sell a product, that is to say make money out of it, PBS listing is essential. As appears from [19] and [21], the applicant has pleaded only that it has not yet obtained TGA approval, believes it will obtain it in late 2008 or early 2009, and will not import and sell the product until it receives TGA registration. It does not plead PBS listing as a precondition. The Assa Abloy test speaks of the existence of a reasonable possibility of disadvantage. For the purposes of a s 31A application, I am not satisfied that that possibility does not exist. I am not persuaded that the applicant has no reasonable prospect of successfully prosecuting the ADJR, s 192 and s 39A parts of the proceeding by reason of a lack of standing.
DELAY
28 Section 11(1)(c) of the ADJR Act provides that an application for an order of review in relation to a written decision "that was furnished to the applicant" must be lodged within the prescribed period or within such further time as the court allows. Under subβs (3) the prescribed period is the period commencing on the day on which the decision is made and ending on the 28th day after the decision is "furnished to the applicant". Subsection (4) provides that where no period is prescribed, the court may refuse to entertain an application if of the opinion that the application was not made within a reasonable time after the decision was made. In forming an opinion for the purposes of subs (4), the court is to have regard to the time at which the applicant became aware of the making of the decision: subs (5)(a).
29 In my view delay in relation to the ADJR part of the proceeding is to be determined under s 11(4) and (5) and not under subs (3). In this case the applicant discovered the existence of the decision through its own resources. I agree with Pincus J in Australian Foreman Stevedores Association v Crone (1988) 20 FCR 377 that the expression "furnished to the applicant" contemplates delivery specifically to the applicant by the decisionβmaker. Accordingly the matter is to be approached under subss (4) and (5).
30 It is common ground that the alleged delay in relation to the s 192 and s 39B parts of the case are to be dealt with on the same basis as the ADJR aspect, so that relief may be refused if application was not made within a reasonable time.
31 A chronology of the relevant events will assist in understanding the parties' contentions on delay.
14 January 2000 Extension of term granted
12 March 2002 Applicant incorporated
May 2003 Applicant signed agreement with EBEWE Pharma
Late May 2005, 2006β 2007 Dr Schnait of EBEWE Pharma tells Mr Gray that while Lilly had an Austrian patent for the product he could find no equivalent patent in Australia
2 August 2007 Applicant becomes aware of Australian patent and extension of term
12 October 2007 Applicant obtains patent file from IP Australia
26 October 2007 Applicant's TGA application
5 December 2007 Applicant writes to Lilly contending that extension of term was wrong and seeking confirmation of this
18 December 2007 Lilly sends letter of demand as to infringement
20 December 2007 Applicant seeks without prejudice meeting with Lilly to discuss commercial resolution
11 January to 27 February 2008 Communications about without prejudice meeting
28 February 2008 Without prejudice meeting
6 March 2008 Negotiations break down; Lilly sends second letter of demand
18 March 2008 Applicant informed of Austrian injunction
19 March 2008 Applicant seeks review of extension
32 Lilly points out that the application was made more than eight years after the extension was granted. However the applicant was not incorporated until March 2002, and blame cannot be attributed to it until after that time. It nevertheless remains a relevant consideration that the extension was granted so long ago. See [39] and [40]. The delay between incorporation and application is six years.
33 Lilly also notes the nearly five years interval between the signing of the EBEWE Pharma agreement and the application.
34 There is a more than four year gap between the signing of the agreement and the applicant becoming aware of the patent and extension of term. The only activity in this period is Mr Gray's evidence that he recalls discussing the patent position with Dr Schnait of EBEWE Pharma "during product development and launch meetings in late 2005 and during 2006/2007". Dr Schnait told him that Lilly had a patent in Austria for the product but that he could not find any equivalent patents in Australia. I infer from this that the applicant did not undertake its own searches of the patent databases including those in Australia.
35 It was on 2 August 2007 that the applicant became aware of the extension of the term. It was not until over seven months later that application was made. It was during this interval that the correspondence took place in relation to a "without prejudice" meeting. The correspondence, the meeting and the failure of negotiations account for two of the seven months.
36 Five months elapsed between the applicant obtaining the complete file from IP Australia and the institution of proceedings, a little less than that between the applicant seeking TGA registration and the proceedings, and a three month interval between Lilly's infringement claim and the proceedings.
37 Although I have taken the view that s 11(1)(c) of the ADJR Act is not applicable here, it has relevance notwithstanding that the delay is to be assessed under subss (4) and (5). That is because it prescribes a comparatively short period within which, in the most common situation, an application must be made. In terms of a legislative intention as to what is a reasonable period after an applicant becomes aware of the making of the decision (s 11(5)(a)), there is no great difference between an applicant to whom the Commissioner hands a copy of the decision and one who obtains the decision as a result of its own investigations.
38 I agree with Lilly that the applicant's conduct with respect to its investigation of the extension decision demonstrates a marked lack of urgency at every stage. The explanations for the delay cover only comparatively small parts of the overall period between becoming aware of the extension and the institution of proceedings. There is no evidence that the applicant made its own enquiries and searches in relation to an Australian patent. All that appears is very general evidence, purporting to cover a more than two year period, when Mr Gray spoke to Dr Schnait, and apparently relied on that information (from EBEWE) rather than making his own investigations.
39 Another relevant matter in relation to delay is that the term of a patent is not of interest only to the patentee. As Lilly points out, it is effectively a right in rem, and of significance to all in the patent area who might be interested in trading within or near the subject matter of the patent. For this reason, the Commissioner must publish in the Official Journal a notice that an extension application has been made and is open to public inspection. If an application for extension is accepted, the Commissioner must publish a notice to that effect in the Official Journal. Provision is made for opposition proceedings. If the Commissioner grants an extension, a notice of the grant must be published in the Official Journal. See ss 72, 74(2)(b), 75 and 76(2) of the Patents Act and reg 5.3 of the Patents Regulations 1991.
40 I agree with Lilly that once the opposition period has expired and an extension is granted, the patentee and third parties are prima facie entitled to proceed on the basis of the extension. Admittedly, one must take into account that the applicant was not incorporated until nearly two years after the extension. Nevertheless, the public interest to which I have referred is relevant notwithstanding that. As a matter of fairness in the administration of the patent system, it would be extraordinary if extensions could be challenged some eight years after grant. Even taking into account the applicant's date of incorporation, it would still be extraordinary that a challenge could be made six years after that.
CONCLUSION
41 I am satisfied that the applicant has no reasonable prospect of successfully prosecuting the ADJR, s 192 or s 39B parts of the proceeding because of its delay in instituting the proceeding. Because those parts of the proceeding will not proceed, it would be pointless to allow the amendments sought in the applicant's notice of motion.
I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sundberg.
Associate:
Dated: 21 August 2008
Counsel for the Applicant: BN Caine SC and H Rofe
Solicitor for the Applicant: Stephens Lawyers & Consultants
Counsel for the Second Respondent: SCG Burley SC and NR Murray
Solicitor for the Respondents: Clayton Utz
Date of Hearing: 28 July 2008
Date of Judgment: 21 August 2008
| 6,847 |
federal_court_of_australia:fca/single/2008/2008fca0187
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decision
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commonwealth
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federal_court_of_australia
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text/html
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2008-01-23 00:00:00
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Duus v Dalvella Pty Ltd (No. 2) [2008] FCA 187
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2008/2008fca0187
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2024-09-13T22:47:03.080889+10:00
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FEDERAL COURT OF AUSTRALIA
Duus v Dalvella Pty Ltd (No. 2) [2008] FCA 187
PRACTICE AND PROCEDURE β consideration of an application for an order in relation to costs pursuant to order 62, rule 3 of the Federal Court Rules
Federal Court Rules, Order 62, Rule 3
ROSS ANDREW DUUS AND DAVID JOHN CRANSTOUN v DALVELLA PTY LTD ACN 076 620 409 (IN ITS CAPACITY AS TRUSTEE FOR THE CLIFFSIDE TRUST) AND DONEMATE PTY LTD ACN 076 620 454 (IN ITS CAPACITY AS TRUSTEE FOR THE KINGS BEACH TRUST)
QUD 28 OF 2007
GREENWOOD J
23 january 2008
BRISBANE
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY QUD 28 OF 2007
BETWEEN: ROSS ANDREW DUUS
First Applicant
DAVID JOHN CRANSTOUN
Second Applicant
AND: DALVELLA PTY LTD (ACN 076 620 409) (IN ITS CAPACITY AS TRUSTEE FOR THE CLIFFSIDE TRUST)
First Respondent
DONEMATE PTY LTD (ACN 076 620 454) (IN ITS CAPACITY AS TRUSTEE FOR THE KINGS BEACH TRUST)
Second Respondent
JUDGE: GREENWOOD J
DATE OF ORDER: 23 JANUary 2008
WHERE MADE: BRISBANE
THE COURT ORDERS THAT:
1. Leave be given to the first and second applicants to deliver and tax a bill of costs in relation to the costs the subject of order 2 of the orders of the Court made on 23 January 2008, notwithstanding that the principal proceeding is not concluded and the respondents in the proceeding shall pay those costs either determined by taxation or by agreement forthwith upon taxation or agreement notwithstanding that the principal proceeding is not concluded.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY QUD 28 OF 2007
BETWEEN: ROSS ANDREW DUUS
First Applicant
DAVID JOHN CRANSTOUN
Second Applicant
AND: DALVELLA PTY LTD ACN 076 620 409 (IN ITS CAPACITY AS TRUSTEE FOR THE CLIFFSIDE TRUST
First Respondent
DONEMATE PTY LTD ACN 076 620 454 (IN ITS CAPACITY AS TRUSTEE FOR THE KINGS BEACH TRUST)
Second Respondent
JUDGE: GREENWOOD J
DATE: 23 JANUARY 2008
PLACE: BRISBANE
EX TEMPORE REASONS FOR JUDGMENT
1 I have before me an application for an order that the costs, the subject of order (2) of the orders made today in Duus v Dalvella Pty Ltd [2008] FCA 26, be the subject of a further order pursuant to order 62 rule 3(3) that the party having the benefit of the costs order, the first and second applicants, be entitled to deliver a bill of costs and recover those costs prior to the determination of the proceedings. The authority of Jianshe Southern Pty Ltd v Turnbull Cooktown Pty Ltd (No. 2) β BC200704540 has been cited to me as a basis upon which leave ought not to be given pursuant to order 62 rule 3(3). The point of differentiation between that decision of Besanko J and the present case is that the circumstances confronting Besanko J involved default in the conduct of a proceeding.
2 The orders made in this matter (Duus v Dalvella) relate to orders consequent upon an independent application for leave to extend time for leave to appeal from an interlocutory judgment. The applicants for leave have failed to comply with the rules and seek to make out special grounds for leave. I am satisfied that that matter is a discrete matter rather than a costs order in the course of the resolution of step in the proceeding itself. Accordingly, I make a further order that the costs of the interlocutory proceeding shall be costs which the party having the benefit of that order is entitled to pursue and I give leave to deliver a bill of costs immediately.
I certify that the preceding two (2) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.
Associate:
Dated: 23 January 2008
Counsel for the Applicants (Respondents on the Motion): Mr Sullivan
Solicitor for the Applicants (Respondents on the Motion): DLA Phillips Fox
Solicitor for the Respondents (Applicants on the Motion): Mr Lynch, Lynch & Company
Date of Hearing: 23 January 2008
Date of Judgment: 23 January 2008
| 1,081 |
federal_court_of_australia:fca/single/2002/2002fca1225
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decision
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commonwealth
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federal_court_of_australia
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text/html
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2002-10-03 00:00:00
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Cassidy v NRMA Health Pty Ltd [2002] FCA 1225
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2002/2002fca1225
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2024-09-13T22:47:03.452999+10:00
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FEDERAL COURT OF AUSTRALIA
Cassidy v Nrma Health Pty Ltd [2002] FCA 1225
PRACTICE AND PROCEDURE β subpoenas β costs of complying with β whether legal costs recoverable β recovery of costs on solicitor and client basis β Federal Court Rules O 27 r 4A.
Federal Court Act 1976 (Cth), s 43
Federal Court Rules O 27 r 4A
Fuelexpress Limited v LM Erickson Pty Limited (1987) 75 ALR 284 followed
Mowie Fisheries Ltd v Switzerland Insurance Australia Limited (NG 750 of 1994, 23 July 1996, unreported) referred to
BRIAN CASSIDY, CHIEF EXECUTIVE OFFICER OF AUSTRALIAN COMPETITION AND CONSUMER COMMISSION & AUSTRALIAN SECURITIES
AND INVESTMENTS COMMISSION v NRMA HEALTH PTY LIMITED (ACN 075 799 236) & NRMA INSURANCE LIMITED (ACN 000 016 722) & SAATCHI & SAATCHI AUSTRALIA PTY LTD (ACN 001 720 921)
N3011 of 2001
JACOBSON J
3 OCTOBER 2002
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY N 3011 of 2001
BETWEEN: BRIAN CASSIDY
CHIEF EXECUTIVE OFFICER
AUSTRALIAN COMPETITION
AND CONSUMER COMMISSION
FIRST APPLICANT
AUSTRALIAN SECURITIES
AND INVESTMENTS COMMISSION
SECOND APPLICANT
AND: NRMA HEALTH PTY LIMITED
ACN 075 799 236
FIRST RESPONDENT
NRMA INSURANCE LIMITED
ACN 000 016 722
FOURTH RESPONDENT
SAATCHI & SAATCHI AUSTRALIA PTY LTD
ACN 001 720 921
FIFTH RESPONDENT
JUDGE: JACOBSON J
DATE OF ORDER: 3 OCTOBER 2002
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The legal costs and expenses incurred by NRMA Health Pty Limited and NRMA Insurance Limited in compliance with the subpoenas, issued on 25 July 2002, be paid by the first and second applicants on a party and party basis.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY N 3011 of 2001
BETWEEN: BRIAN CASSIDY
CHIEF EXECUTIVE OFFICER
AUSTRALIAN COMPETITION
AND CONSUMER COMMISSION
FIRST APPLICANT
AUSTRALIAN SECURITIES
AND INVESTMENTS COMMISSION
SECOND APPLICANT
AND: NRMA HEALTH PTY LIMITED ACN 075 799 236
FIRST RESPONDENT
NRMA INSURANC LIMITED
ACN 000 016 722
FOURTH RESPONDENT
SAATCHI & SAATCHI AUSTRALIA PTY LTD
ACN 001 720 921
FIFTH RESPONDENT
JUDGE: JACOBSON J
DATE: 3 OCTOBER 2002
PLACE: SYDNEY
REASONS FOR JUDGMENT
(MOTION FOR COSTS OF COMPLIANCE WITH SUBPOENAS)
1 NRMA Health Pty Limited and NRMA Insurance Limited ("the NRMA companies") seek to recover under O 27 r 4A of the Federal Court Rules their legal costs incurred in compliance with subpoenas issued by the applicants. The only issue, which arises, is whether the costs should be ordered on a solicitor and client basis or a party and party basis.
2 No evidence was filed in support of the application but I was informed from the Bar table that the NRMA companies were required to obtain legal advice as to the scope of the subpoenas. I was informed that the NRMA companies' solicitors were of the view that the subpoenas were too broad and that significant legal costs were incurred in responding to the subpoenas.
3 The Court file shows that three directions hearings were held and it seems that the width of the subpoenas was considered at those directions hearings with the result that a relatively small number of documents were produced.
4 Order 27 r 4A provides that where a person named in a subpoena is not a party to the proceedings and incurs expense in compliance with a subpoena, the Court may order the party who issued the subpoena to pay an amount to compensate the person "for such expense or loss as is reasonably incurred or lost by that person in complying with the subpoena."
4 The NRMA companies were named as the first and fourth respondents to the proceedings but, on 3 July 2002, consent orders were made for declaratory and injunctive relief against them. The orders also provided for the proceedings to be discontinued against the NRMA companies.
5 The subpoenas were issued on 25 July 2002. Thus, at the time when the NRMA companies were named in the subpoenas, they were not parties to the proceedings.
6 I have looked at the subpoenas in the Court file. They are very wide but there is no evidence before me as to the amount of the costs, which were incurred, or the legal work, which was carried out.
7 In Fuelexpress Limited v LM Erickson Pty Limited (1987) 75 ALR 284, at 286 ("Fuelexpress"), Lockhart J said:-
"The intent of r 4A is to compensate a person subpoenaed to produce documents for expense or loss reasonably incurred in complying with the subpoena. It is not the case of a successful party to litigation seeking recovery of costs where the distinction of solicitor and client costs on the one hand and party and party costs on the other is observed by taxing officers. It is a case of a third party seeking compensation for what it has actually cost it in expense or loss in complying with the subpoena."
8 Fuelexpress was followed by Tamberlin J in Mowie Fisheries Ltd v Switzerland Insurance Australia Limited (NG 750 of 1994, 23 July 1996, unreported).
9 It therefore seems to me to be clear that if I exercise my discretion under r 4A, the order, which I make, should be for payment of the NRMA companies' costs on a solicitor and client basis.
10 However, in the absence of any evidence as to the amount of the costs, which were incurred, or the legal work, which was carried out, it would, in my view, be unsafe to exercise my discretion to make an order under O 27 r 4A. I note that in Fuelexpress there was evidence of the costs, which had been incurred. Also, Lockhart J noted that the work, which was carried out, had been succinctly identified in an affidavit in support of the motion.
11 Moreover, in my view, I am entitled to take into account the fact that the NRMA companies were parties to the proceedings up to 3 July 2002 and that the subpoenas were issued approximately 3 weeks after the discontinuance.
12 It seems to me that the purpose of O 27 r 4A is to compensate strangers to the litigation for their expenses. The NRMA companies were not complete strangers because of their involvement prior to the issue of the subpoenas. They could therefore be expected to have had knowledge of the issues and to have been able to make a judgment as to most of the questions that arose as to whether, and if so, what documents were required to be produced without the need to closely consult their solicitors.
13 Accordingly, I do not propose to make an order under O 27 r 4A. Nevertheless, the applicants have agreed to pay the costs of the NRMA companies on a party and party basis. I have power to make such an order under s 43 of the Federal Court of Australia Act 1976 (Cth).
14 Accordingly, I propose to order that the legal costs and expenses incurred by the NRMA companies in compliance with the subpoenas be paid by the first and second applicants on a party and party basis.
I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.
Associate:
Dated: 3 October 2002
Counsel for the Applicant: Mr S Rares SC and Ms M Painter
Solicitor for the Applicant: Australian Government Solicitor
Solicitor for the First and Second Respondents Blake Dawson Waldron
Counsel for the Fifth Respondent: Mr S Gageler SC
Solicitor for the Fifth Respondent: Clayton Utz
Date of Hearing: 18 September 2002
Date of Judgment: 3 October 2002
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federal_court_of_australia:fca/single/1998/1998fca1301
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decision
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commonwealth
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federal_court_of_australia
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text/html
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1998-10-09 00:00:00
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Foster, Peter Clarence v The Attorney-General of the Commonwealth of Australia [1998] FCA 1301
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/1998/1998fca1301
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2024-09-13T22:47:03.556050+10:00
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IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY QG 81 of 1998
BETWEEN: PETER CLARENCE FOSTER
Applicant
AND: THE ATTORNEY-GENERAL OF THE COMMONWEALTH OF AUSTRALIA
Respondent
JUDGE(S): SPENDER J
DATE OF ORDER: 12/10/98
WHERE MADE: BRISBANE
THE COURT ORDERS:
1. The respondent pay to the applicant two thirds of the costs of and incidental to the application, including reserved costs if any, to be taxed if not agreed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY QG 81 of 1998
BETWEEN: PETER CLARENCE FOSTER
Applicant
AND: THE ATTORNEY-GENERAL OF THE COMMONWEALTH OF AUSTRALIA
Respondent
JUDGE(S): SPENDER J
DATE: 12/10/98
PLACE: BRISBANE
REASONS FOR JUDGMENT
As to the question of costs, the ordinary rule is that costs should follow the event. The applicant has been successful in the application. It is however possible where it is appropriate so to do for an order to be made derogating in whole or in part from the order generally made. In this particular case the applicant has succeeded on one of the grounds which while covered in the submissions which had previously been prepared was not in fact covered by the application or by the grounds on which it was originally said to be supported.
In respect of the other grounds, which were voluminous, or which called for the consideration of a great volume of material, the applicant was unsuccessful. In all the circumstances it seems to me to be a case where I ought properly to recognise that there has been some failure on the part of the applicant in the case which it brought and to reflect that failure by the making of an order which grants to him less than the full costs he would get by application of the general rule.
By way of costs I order that the respondent pay to the applicant two-thirds of the costs of and incidental to the application, including reserved costs if any, those costs to be taxed if not agreed.
I certify that the preceding page is a true copy of the Reasons for Judgment herein of the Honourable Justice Spender.
Associate:
Dated: 12/10/98
Counsel for the Applicant: Mr P W Hackett
Solicitor for the Applicant: Witheriff Nyst
Counsel for the Respondent: Mr J A Logan
Solicitor for the Respondent: Australian Government Solicitor
Date of Hearing (on form of orders and costs): 12 October 1998
Date of Judgment (on form of orders and costs): 12 October 1998
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federal_court_of_australia:fca/single/1987/1987FCA0068
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decision
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commonwealth
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federal_court_of_australia
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application/pdf
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1987-02-20 00:00:00
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Re Gray, E.A. v. Ex parte Horne, S.L. & Anor [1987] FCA 68
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/1987/1987FCA0068.pdf
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2024-09-13T22:47:03.653431+10:00
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Bankruptcy -
good faith
trustee.
CATCHWORDS
Disposition of property -
Bankruptcy Act 1966 - s.121
Family Law Act 1975 - s.86
Vandervell v. I.R.C. Β£19673 2 A.C. 291.
RE: ELIZABETH ANN GRAY
EX PARTE:
STIRLING LINDLEY HORNE v.
CORPORATION PTY. LTD.
No. 344 of 1
Jenkinson J.
Melbourne
20 February,
Whether parties acted in
- Intent to defraud creditors -
FIRST
Void as against
INSURANCE CREDIT
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE
OF VICTORIA
No. 344 of 1983
RE: ELIZABETH ANN GRAY
Bankrupt
EX PARTE: STIRLING LINDLEY HORNE
(as trustee of the estate
Elizabeth Ann Gray,
Bankrupt )
Applicant
AND: FIRST INSURANCE CREDIT
CORPORATION Pry. LTD.
Respondent
CORAM: Jenkinson J.
PLACE: Melbourne
DATE: 20 February, 1987
REASONS FOR JUDGMENT
Application by a bankrupt's trustee for a declaration
that a disposition of land which is occupied by the bankrupt and
of which the respondent is the registered proprietor of an estate
in fee simple is, by virtue of the operation of 5.121 of the
Bankruptcy Act 1966, void as against the trustee.
The land is the site of a residence where the bankrupt
and her husband and children lived until he separated from her in
1970. Thereafter she has lived in the house with children of the
marriage. Her husband, Donald Edgley Gray, had become the
2.
registered proprietor of the fee simple estate in the land in
1963. A deed dated 20 September 1982 between the bankrupt and her
husband, which included a covenant by each to "join in seeking the
registration of this Maintenance Agreement in the appropriate
Court under the provisions of the Family Law Act 1975", commenced
with the following recitals:
"A. The husband and wife were married at
Bendigo East in the State of Victoria on
the 10th day of February 1962, and no
Application has been made for Dissolution
of the Marriage.
B. That there are two children of the
Marriage under the age of 18 years, as
follows:
PETER GRAY born the 6th September 1964,
and
STEVEN GRAY born the 9th June 1966.
Cc. The parties ceased to co-habit or live
together as husband and wife on the 16th
June 1970.
D. The husband is registered as sole
proprietor of the former matrimonial home
which is situated at and known as 38
Fintonia Street, North Balwyn in the
State of Victoria andis the land more
particularly known as Lot 42 on Plan of
Subdivision No. 42191 Parish of
Boroondara and being the whole of the
land more particularly described in
Certificate of Title Volume 8485 Folio
637.
E. The former matrimonial home is by mutual
agreement valued by the parties in the
sum of $150,000.00.
F. The former matrimonial home as stated in
clause BD. is subject to a registered
Mortgage to the Hotham Permanent Building
Society (Melbourne Branch). The balance
outstanding to Hotham Permanent Building
Society as at the 31st August 1982, was
$71,186.71.
G. The husband and wife contributed equally
3.
to the establishment of the former
matrimonial home in which the wife and
children of the Marriage have been
residing since the date of separation.
H. The husband and wife have reached
agreement in relation to the settlement -
of their respective interests ain the
former matrimonial property and is the
desire of the husband and wife that their
intentions with respect to the former
Matrimonial home are as outlined in this
Agreement."
The covenants of the agreement relating to the land were:
"1. That the husband shall within thirty (30)
days of the date of this Agreement
transfer to his wife absolutely the
former matrimonial home being all that
piece of land being Lot 42 on Plan of
Subdivision No. 42191 Parish of
Boroondara and being the whole of the
land more particularly described an
Certificate of Title Volume 8485 Folio
637 which is situated at and known as 38
Fintonia Street, North Balwyn in the
State of Victoria.
2. That the husband shall forthwith continue
and assumes liability for and to meet all
instalments due pursuant to the Mortgage
over the property to the Hotham Permanent
Building Society Loan Account No. 1.2572
and shall indemnify and keep indemnified
the wife in respect of all such Mortgage
repayments due to the Hotham Permanent
Building Society.
3. That the husband agrees that the wife is
entitled to immediate occupation of the
former matrimonial home together with the
children of the marriage indefinitely."
There were other covenants with respect to chattels and periodic
maintenance payments. The agreement was registered in the
Magistrates' Court at Northcote in or about September 1982,
pursuant to the provisions of 5.86 of the Family Law Act 1975.
4.
But the transfer contemplated in clause 1 of the agreement did not
take place.
Mr. Gray had been for a number of years engaged in. the
business of manufacturing bodies for large motor vehicles, such as
cargo vans, pantechnicons, and vehicles for specialised use, as,
for example, vehicles for the transport of large sums of cash.
The business was carried on by Lucar Pty. Ltd., which Mr. Gray
controlled. On 14 October 1982 the Supreme Court of Victoria
ordered that the company be wound up because it was insolvent. As
guarantors of some of the company's debts the bankrupt and Mr.
Gray were themselves in financial difficulty during 1982 and in
1983 until each presented a bankruptcy petition against himself
which the Registrar accepted on 10 April 1983. Much of the
personal property of Lucar Pty. Ltd. was sold in 1982 by its
liquidator to a company which at about the time of the sale took
as its name Lucar (Vic.) Pty. Ltd. and thereafter carried on a
business similar to that which Lucar Pty. Ltd. had carried on
until the latter company went into liquidation. Mr. Gray was
employed by Lucar (Vic.) Pty. Ltd. in a managerial capacity.
The respondent Farst Insurance Credit Corporation Pty.
Ltd. has at all material times been controlled by Ronald Andrew
Miller, who and whose former wife have at all material times been
its only shareholders. Mr. Miller had for a number of years been
employed by finance companies and in the course of his employment
he had maintained a friendly business connection with Mr. Gray, to
whose company and customers Mr. Miller had over the years arranged
the granting of loans by his employers. In 1982 Mr. Miller was in
5.
a different field of business activity, but he had heard of the
financial difficulties of Mr. Gray and lLucar Pty. Ltd. and he
heard also, late in that year, that Mr. Gray was seeking to sell
his house. Mr. Miller and Mr. Gray negotiated first the sale by
the latter to the respondent of a house of which Mr. Gray was the
owner and occupier, and then they negotiated the sale by Mr. Gray
to the respondent of the house in which the bankrupt lives. In
the case of each sale there was an understanding between Mr. Gray
and Mr. Miller that the respondent would lease the house, in the
one case for occupation by Mr. Gray and in the other case for
occupation by the bankrupt. In effectuation of that understanding
a lease at a commercially reasonable rent has been granted by the
respondent to Ginet Pty. Ltd. in each case. The latter company is
associated with Lucar (Vic.) Pty. Ltd.. Each of Mr. Gray and the
bankrupt has continued at all material times in occupation of the
house each respectively was occupying at the time of sale.
The sale of the house at 38 Fintonia Street North Balwyn
had the bankrupt's approval. In or about October 1982 Mr. Gray
suggested that the two houses be sold and that he attempt to make
arrangements under which the bankrupt would be enabled to continue
in occupation of the house at 38 Fintonia Street North Balwyn,
free of any obligation to pay rent. She agreed to his proposal,
which he coupled with a promise to try to arrange that the
bankrupt be employed by Lucar (Vic.) Pty. Ltd.. She had been both
a director and an employee of Lucar Pty. Ltd..
The only written evidence of the arrangement between the
bankrupt and Mr. Gray for sale of the Fintonia Street house was
6.
the following document, signed by the bankrupt and by a witness,
on writing paper of her solicitors:
a
AUTHORITY
I, ELIZABETH ANN GRAY of 38 Fintonia Street,
North Balwyn in the State of Victoria, hereby
confirm my instructions to my Solicitors
Messrs. Comito, Iacovino & Co., on the 12th
October 1982, that in view of cordial
discussions between myself and my estranged
husband DONALD EDGLEY GRAY and arrangements
made between myself and my estranged husband I
directed my Solicitors not to implement the
Terms of Agreement pursuant to Section 4&6
dated the 20th September 1982, re: the
transfer of the home at 38 Fintonia Street,
North Balwyn (more particularly described in
Certificate of Title Volume 8485 Folio 637),
to me. I hereby confirm those instructions
that arrangements had been made between myself
and my ex-husband and that my said Soliticors
are not in default in not having pursued the
Transfer of the property into my sole name in
accordance with the Agreement hereinbefore
mentioned.
DATED: this 9th day of February 1983."
The bankrupt and Mr. Miller gave evidence. Mr. Gray did
not. She swore that she did not believe that she had given any
thought, at the time when the house was being sold, to the
possibility that unless the house were sold under the arrangement
she made with Mr. Gray the creditors who were pressing her and him
for payment would take the house in satisfaction of her
indebtedness. She swore that she thought, at the time of the sale
of the house, that no great sum would remain of the purchase price
after discharge of the mortgage to which she knew the land at 38
Fintonia Street was subject, and that ownership of the land was of
little value to her in comparison with retention of her job and a
7.
right to occupy the house free of rent. She swore that she simply
"went along" with the proposals Mr. Gray made to her, just as she
had habitually done his bidding in affairs of business. She swore
that she took no legal advice in connection with her agreement
that the house be sold. She swore that it was her belief that the
proceeds of sale of the house, after payment of the indebtedness
secured by mortgage, (proceeds she believed to have been about
$30,000) had been lent to Lucar (Vic.) Pty. Ltd.
If that was her belief, she was mistaken. Mr. Miller
gave evidence that he had intended, when he first agreed to buy
the Fiantonia Street house, to provide about $30,000 of the
purchase price, which was $102,000, out of his own funds, which he
expected to be shortly augmented by substantial commissions. The
balance was to be financed by a loan to be secured by first
mortgage. His expectation of the commissions was, as he swore,
disappointed and he thereupon told Mr. Gray that he "would have to
renege on the deal". It was then agreed between Mr. Gray and Mr.
Miller that Lucar (Vic.) Pty. Ltd. would lend the respondent
$31,500 which it would apply in part payment of the price. In the
result, only $10,200 of the purchase price came from Mr. Miller's
own funds. The source of the funds advanced by Lucar (Vic.) Pty.
Ltd. was said to be Mr. Gray. Certainly Mr. Gray lent that
company $30,000 at about the time when the loan by the company to
the respondent was made.
Mr. Miller swore that he entered into the purchases of
the two houses upon the understanding, which he confirmed before
settlement with the directors of Lucar (Vic.) Pty. Ltd., that each
house would be let to that company, for occupation by Mr. Gray in
the one case and by the bankrupt in the other. He swore that he
regarded the business which Lucar (Vic.) Pty. Ltd. had acquired as
one which would be profitable, and thought that Lucar (Vic.) _Pty.
Ltd. would be a satisfactory tenant. It was at some unspecified
later time that Ginet Pty. Ltd. was proposed, and accepted by the
respondent as tenant. Mr. Miller swore that it was represented to
him by Mr. Gray that it was in consideration of Mr. Gray's
undertaking employment by Lucar (Vic.) Pty. Ltd. as the general
Manager of the business that that company was prepared to take a
lease of each house.
Mr. Miller gave in evidence his belief that Mr. Gray was
moved to sell the two houses because he "was in very dire
financial straits and he had no choice; he could not meet his
payments". Mr. Miller was not aware that the bankrupt had any
proprietory interest in the Fintonia Street house. He knew that
she lived there and would continue to live there, if the proposal
made by Mr. Gray were carried out. He knew that the bankrupt had
been a director of Lucar Pty. Ltd.. He agreed in evidence that,
if at the time of the sales of the houses he had adverted to the
Matter, he would have assumed that the bankrupt, no less than Mr.
Gray, had guaranteed the performance of substantial financial
obligations of Gucar Pty. Ltd... Mr. Miller swore that he did not
remember whether he had adverted to the matter.
It was the submission of Mr. R. Johnstone of counsel for
the applicant trustee that the transfer of the legal estate in the
land known as 38 Fintonia Street Balwyn from Mr. Gray to the
9.
respondent with the consent of the bankrupt effected also a
"disposition", within the meaning of that word in 5.121 of the
Bankruptcy Act 1966, of the equitable fee simple estate which
according to Mr. Johnstone's submission had been in the bankrupt
from the time - and in consequence of the making - of the
agreement embodied in the deed dated 20 September 1982. The
disposition had been made by the bankrupt with intent to defraud
her creditors, and it was not a disposition in favour of a person
who acted in good faith, Mr. Johnstone submitted.
I am persuaded, notwithstanding the bankrupt's evidence,
that she acceded to the proposal by Mr. Gray that her house be
sold in the belief that thereby the house would be put beyond the
reach of her unsecured creditors, whom she knew she could not pay,
and that her agreement was given to the proposal with the intent
that her unsecured creditors be in that way denied recourse to the
house, her equitable interest in which she believed to be worth
some thousands of dollars.
I hold that upon registration of the deed dated 20
September 1982 (if not upon its execution) the bankrupt held the
equitable fee simple ain the land on which the house stood, and
that her agreement in the proposal that the land should be sold,
coupled with the sale and transfer by Mr. Gray to the respondent
pursuant to that agreement, constituted a "disposition of
property" by her within s.121(1) of the Bankruptcy Act 1966. (See
Vandervell v. I.R.C. Β£1967] 2 A.C. 291.) The evidence did not in
my opinion support an inference that the bankrupt was expressing
an intention, or that Mr. Gray was requesting her, to surrender or
10.
release to him her beneficial interest in the land.
The intention with which I have found that the bankrupt
acceded to the proposal for sale of the land constituted, in my
opinion, an "intent to defraud creditors" within the meaning of
that expression in s.121(1). If it were mecessary to find, in
order to reach that conclusion, that the bankrupt had no
expectation, when she agreed to the sale, that the proceeds of
sale remaining after discharge of the mortgage would be made
available to her creditors, I would make that finding. Her
understanding was, she said in evidence, that those proceeds of
sale had been lent to Lucar (Vic.) Pty. Ltd... When asked whether
the loan had been made by Mr. Gray, she replied : "Well, whoever
the money belonged to, I suppose, whether it was mine or his, or
it was in his name". Her evidence is not of the time before sale,
but of the time after sale of the house. But my finding is that
she was content that the proceeds of sale should be applied by Mr.
Gray, not in discharge of her debts, but in whatever way should be
best calculated to produce the result that she would be able to
continue in occupation of the house, rent free, and able to
continue in employment in the business which Mr. Gray managed.
I am persuaded that the consideration agreed for the
sale of the house was, although on the low side, a reasonable
commercial consideration, and so "valuable consideration" within
the meaning of that expression in s.121(1). But I am persuaded
that Mr. Miller did not act "in good faith", in the sense of that
phrase in that sub-section. I accept his evidence that he thought
that Mr. Gray was the beneficial owner of both houses, but nothing
11.
turns on that circumstance, for present purposes. Mr. Miller
believed Mr. Gray to be in acute financial embarrassment at the
time when the sales were negotiated and when they were completed.
Being informed by Mr. Gray that Lucar (Vic.) Pty. Ltd. would be
responsible for a reasonable rent of each house, each of which
would continue in the occupation of the person then occupying it,
Mr. Miller must have suspected that Mr. Gray's object in selling
on the understanding that the purchaser would let each house to
Lucar (Vic.) Pty. Ltd. was to withdraw the two houses from the
reach of Mr. Gray's creditors without losing the benefit of the
accommodation they afforded him and his family. If he had
repressed those suspicions at first, they would have been
confirmed by Mr. Gray's response to Mr. Miller's intimation that
he found himself unable to proceed because of a shortage of funds.
In each case Lucar (Vic.) Pty. Ltd. offered to lend Mr. Miller
funds, so that the sales might proceed. It is to be borne in mind
that Mr. Miller has had long experience in commerce, including
money lending. I am persuaded that Mr. Miller believed, when the
sale of the Fintonia Street house was being completed, that the
vendor's object in selling was to put the house beyond the reach
of the vendor's creditors. Mistaken though Mr. Miller was as to
the identity of the person whose creditors were to be defeated,
his state of mind was in my opinion nat that of "a person who
acted in good faith", within the meaning of that expression in
s.121(1), in relation to the transfer of the property.
12.
There will be a declaration that the disposition of
bankrupt's property is void
will hear the
the orders to be made.
representatives of the parties
as against the applicant trustee.
as to the terms
we me
et
tor -
HW Fenons for Jute.
ff
see SO
ae
a - Ca
"y -locre oa rus cony of ot
a of tic
f Honomebic Mr. Tu uct GCOUKINSON
f q Lapa.
Dated: 20 Februar a j
ny (4997
the
I
of
No. 344 of 1983
Counsel for the Applicant Mr. R. M. Johnstone
Solicitors for the Applicant Cornwall Stodart & Co.
Counsel for the Respondent Mr. S.P. Newton
Solicitors for the Respondent Batley Timms & Nicholson
Dates of Hearing 4, 5, 28 and 29 August, 1986
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MZXBQ v Minister for Immigration & Citizenship [2008] FCA 319
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2008/2008fca0319
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2024-09-13T22:47:03.898682+10:00
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FEDERAL COURT OF AUSTRALIA
MZXBQ v Minister for Immigration & Citizenship [2008] FCA 319
MIGRATION β application of s 424A Migration Act 1958 (Cth) β whether Tribunal's reasons should be examined
WORDS AND PHRASES β "unbundling"
Migration Act 1958 (Cth) s 424A
Minister for Immigration and Citizenship v Applicant A125 of 2003 [2007] FCAFC 162 cited
NBKT v Minister for Immigration and Multicultural Affairs [2006] FCAFC 195 cited
Re Refugee Review Tribunal; Ex parte Aala (2000) 204 CLR 82 applied
SAAP v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 215 ALR 162 cited
SZBYR v Minister for Immigration and Citizenship (2007) 235 ALR 609 applied
SZCJD v Minister for Immigration and Multicultural and Indigenous Affairs [2006] FCA 609 cited
SZDPY v Minister for Immigration and Multicultural Affairs [2006] FCA 627 cited
SZICU v Minister for Immigration and Citizenship [2008] FCAFC 1 cited
SZKLG v Minister for Immigration and Citizenship [2007] FCAFC 198 cited
SZKLG v Minister for Immigration and Citizenship [2007] FCAFC 198 cited
VAF v Minister for Immigration and Multicultural and Indigenous Affairs(2004) 206 ALR 471 cited
Greenbaum, The Oxford English Grammar (1996)
MZXBQ v MINISTER FOR IMMIGRATION AND CITIZENSHIP AND REFUGEE REVIEW TRIBUNAL
VID1118 OF 2007
HEEREY J
12 March 2008
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY VID1118 OF 2007
BETWEEN: MZXBQ
Appellant
AND: MINISTER FOR IMMIGRATION AND CITIZENSHIP
First Respondent
REFUGEE REVIEW TRIBUNAL
Second Respondent
JUDGE: HEEREY J
DATE OF ORDER: 12 March 2008
WHERE MADE: MELBOURNE
THE COURT ORDERS THAT:
1. The appeal is dismissed with costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY VID1118 OF 2007
BETWEEN: MZXBQ
Appellant
AND: MINISTER FOR IMMIGRATION AND CITIZENSHIP
First Respondent
REFUGEE REVIEW TRIBUNAL
Second Respondent
JUDGE: HEEREY J
DATE: 12 march 2008
PLACE: MELBOURNE
REASONS FOR JUDGMENT
1 This appeal from the Federal Magistrates Court (MZXBQ v Minister for Immigration [2007] FMCA 1835, Burchardt FM) raises two questions:
(i) whether information which the Refugee Review Tribunal indicates in the course of the hearing, and prior to delivery of its reasons, is relevant to an assessment of the credibility of the appellant's claims, but which is not mentioned in the reasons for affirming the decision under review, comes within the obligations imposed by s 424A of the Migration Act 1958 (Cth); and
(ii) whether the learned Magistrate erred in finding that the lack of any reference in the Tribunal's reasons to the information in question had the effect that s 424A had no application.
2 Section 424A at the relevant time provided as follows:
(1) Subject to subsections (2A) and (3), the Tribunal must:
(a) give to the applicant, in the way that the Tribunal considers appropriate in the circumstances, clear particulars of any information that the Tribunal considers would be the reason, or a part of the reason, for affirming the decision that is under review; and
(b) ensure, as far as is reasonably practicable, that the applicant understands why it is relevant to the review, and the consequences of it being relied on in affirming the decision that is under review; and
(c) invite the applicant to comment on or respond to it.
(2) The information and invitation must be given to the applicant:
(a) except where paragraph (b) applies β by one of the methods specified in section 441A; or
(b) if the applicant is in immigration detention β by a method prescribed for the purposes of giving documents to such a person.
(2A) The Tribunal is not obliged under this section to give particulars of information to an applicant, nor invite the applicant to comment on or respond to the information, if the Tribunal gives clear particulars of the information to the applicant, and invites the applicant to comment on or respond to the information, under section 424AA.
(3) This section does not apply to information:
(a) that is not specifically about the applicant or another person and is just about a class of persons of which the applicant or other person is a member; or
(b) that the applicant gave for the purpose of the application for review; or
(ba) that the applicant gave during the process that led to the decision that is under review, other than such information that was provided orally by the applicant to the Department; or
(c) that is nonβdisclosable information.
3 The appellant is a citizen of Sri Lanka who arrived in Australia on 8 January 1996. On 29 June 1997 he lodged an application for a protection visa. The Tribunal decision affirmed by the Federal Magistrates Court was the third Tribunal hearing on the appellant's claims. Two earlier decisions of the Tribunal had been set aside.
4 The appellant claimed to have well-founded fear of persecution arising from his support of the United National Party. He claimed that he was subject to physical attacks because he had witnessed the Sports Minister, a member of the opposing party, buying votes during an election campaign. The appellant claimed the Minister had arranged for the appellant's kidnap and murder. The appellant went into hiding and fled Sri Lanka.
5 For the purposes of the present appeal the only "information" said to have engaged the operation of s 424A is that friends of the appellant contributed $20,000 to provide a bond for his release from immigration detention.
6 The transcript of the hearing shows that the Tribunal questioned the appellant about what it described as "another big issue for me in terms of your credibility". That issue was the appellant's assuming a false identity and using another person's passport to obtain work as taxi driver. As a result the appellant had been placed in immigration detention for breaching his visa conditions by working. After questioning the appellant about this issue the following exchange took place:
Tribunal: I don't want to look into the legal [sic] again. I'm concerned that there is solid evidence on this file about your credibility and therefore that supports credibility concerns the Tribunal has. May I ask you, a very good friend of yours put up a $20,000 surety for you. Who is this person who had $20,000 that they could put up so that you could be released from detention?
Interpreter: (indistinct)
Tribunal: Who is he to you? What is his relation to you?
Interpreter: He is a friend of mine.
Tribunal: A friend of yours gave $20,000?
Interpreter: Not one, they all gave the money and put it under his name and it was for the $20,000 for the detention.
Tribunal: Yes. And yet you have no money to live in Australia but these people were able to $20,000 [sic] for you?
Interpreter: I'm a good friend of theirs, that's why they do it.
Tribunal: So they couldn't support you when you were broke, you had to assume a false identity and lie that they could support you with $20,000 when you were caught. Is that correct?
Interpreter: They have helped me; they have bought me food.
The Tribunal then proceeded to ask the appellant the names of his friends, which he gave.
7 The hearing was held on 29 June 2006. On 17 November the Tribunal sent a lengthy letter under s 424A inviting the appellant to comment on six issues. The fifth issue concerned the breach of his visa condition and false statements given to the Department about that. It was said:
This information is important because it indicates that you were not honest in your interview regarding your illegal driving until you were confronted with evidence to the contrary. Accordingly it may support the finding that you are not a witness of the truth.
8 The Tribunal's letter did not mention the $20,000 bond issue.
9 The appellant responded in an undated letter which was received by the Department on 30 November 2006. In relation to the fifth issue he said that he did work illegally in Australia as he had no relatives or friends for indefinite support. He had to live somehow. He regretted that he "had to use illegal means to help me to simply stay alive".
10 In rejecting the appellant's claim the Tribunal found that he "lacks credibility in all of his claims and has not been a witness of truth". The Tribunal supported this general finding as to lack of credibility "by reference to his lack of honesty in his interview with officials regarding his breach of the conditions of his visa when he assumed the identity of Mohamed Vasih and worked in both this name and his own". The Tribunal's reasons, like the s 424A letter, contained no mention of the $20,000 bond.
11 Before the Federal Magistrates Court the appellant alleged another breach of s 424A which has not been pursued on the present appeal. In relation to the $20,000 bond issue the learned Magistrate noted at [19] the interchange between the Tribunal and the appellant already referred to, the fact that the issue had not been referred to in the s 424A letter and "more importantly, (had not been) referred to in the Tribunal's reasons for judgment either".
12 His Honour noted that counsel for the appellant had nonetheless suggested that the use of the phrase "future conditional" in the High Court's decision in SZBYR v Minister for Immigration and Citizenship (2007) 235 ALR 609 required the Tribunal to give notice of this in the s 424A letter. The learned Magistrate said at [21]:
The reality is of course that in its findings and reasons β in other words those parts of the decision that operate as a springboard for s 424A to apply β the Tribunal made no reference whatever to the bond issue. It referred to another of other matters which went to the applicant's credit, but not that one.
The learned Magistrate then said that even if it were shown that the Tribunal had breached s 424A he would reject the application for constitutional writs on discretionary grounds. Findings made in relation to those matters in respect of its decision were "unimpeachable" so there would be no utility in returning the matter.
13 On the appeal counsel for the appellant argued:
1. SZBYR establishes that it is not the Tribunal's published reasons or its reasoning process which determines the applicability of s 424A. The learned magistrate erred in treating the absence of any mention of the $20,000 bond issue in the Tribunal's reasons as determinative;
2. The material about the bond was "information" within the meaning of s 424A. It was not a case of mere inconsistency or omission;
3. The information went directly to the issue whether the appellant was to be believed in all his claims;
4. The information would "undermine" the appellant's claims to be a person to whom Australia owed protection obligations because he was not to be believed in his claims.
14 Counsel for the Minister argued:
1. Because the Tribunal did not mention the bond issue in the s 424A letter or its findings and reasons it was not "the reason, or part of the reason, for affirming the decision under review". (Thus the Minister's primary argument was that the Magistrate was correct in determining the applicability of s 424A by referring to the Tribunal's reasons);
2. On its face it may have been true that the appellant's friends put up the $20,000. The bond information did not contain a "rejection, denial or undermining" of the appellant's claim to be a person to whom Australia owed protection obligations;
3. The Tribunal was not obliged to comply with s 424A prior to the hearing under s 425: SZKLG v Minister for Immigration and Citizenship [2007] FCAFC 198 (I do not believe the appellant argued that the Tribunal was obliged to do so);
4. In any event, the bond information was excluded from the operation of s 424A by subs (3)(b) since it was information the appellant "gave" to the Tribunal.
15 To understand the arguments on the present appeal it is necessary to refer in some detail to what the majority of the High Court said in SZBYR. In that case the information said to have attracted s 424A were claims made in a statutory declaration in support of the appellant's visa application. The Tribunal had drawn the appellant's attention to discrepancies between his oral evidence and the written claims in the statutory declaration. The appellant's only explanation was that his memory was poor.
16 Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ, after referring to SAAP v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 215 ALR 162, said at [15]-[22]:
[15] This then requires close attention to the circumstances in which s 424A is engaged. Section 424A does not require notice to be given of every matter the tribunal might think relevant to the decision under review. Rather, the tribunal's obligation is limited to the written provision of "particulars of any information that the tribunal considers would be the reason, or a part of the reason, for affirming the decision that is under review". What, then, was the "information" that the appellants say the tribunal should have provided? In their written submissions, the appellants appeared to focus on the requisite "information" as being the "inconsistencies" between their statutory declaration and oral evidence. However, in oral argument they focused on the provision of the relevant passages in the statutory declaration itself, from which the inconsistencies were later said to arise.
[16] Four points must be noted about this submission. First, while questions might remain about the scope of par (b) of s 424A(3), it was accepted by both sides that information "that the applicant gave for the purpose of the application" did not refer back to the application for the protection visa itself, and thus did not encompass the appellants' statutory declaration. In this regard, the parties were content to assume the correctness of the Full Federal Court decisions in Minister for Immigration and Multicultural Affairs v Al Shamry [(2001) 110 FCR 27] and SZEEU v Minister for Immigration and Multicultural and Indigenous Affairs [(2006) 150 FCR 214]. Accordingly, no occasion now arises for this Court to determine whether that assumption was correct.
[17] Secondly, the appellants assumed, but did not demonstrate, that the statutory declaration "would be the reason, or a part of the reason, for affirming the decision that is under review". The statutory criterion does not, for example, turn on "the reasoning process of the tribunal", or "the tribunal's published reasons". The reason for affirming the decision that is under review is a matter that depends upon the criteria for the making of that decision in the first place. The tribunal does not operate in a statutory vacuum, and its role is dependent upon the making of administrative decisions upon criteria to be found elsewhere in the Act. The use of the future conditional tense (would be) rather than the indicative strongly suggests that the operation of s 424A(1)(a) is to be determined in advance β and independently β of the tribunal's particular reasoning on the facts of the case. Here, the appropriate criterion was to be found in s 36(1) of the Act, being the provision under which the appellants sought their protection visa. The "reason, or a part of the reason, for affirming the decision that is under review" was therefore that the appellants were not persons to whom Australia owed protection obligations under the Convention. When viewed in that light, it is difficult to see why the relevant passages in the appellants' statutory declaration would itself be "information that the tribunal considers would be the reason, or a part of the reason, for affirming the decision that is under review". Those portions of the statutory declaration did not contain in their terms a rejection, denial or undermining of the appellants' claims to be persons to whom Australia owed protection obligations. Indeed, if their contents were believed, they would, one might have thought, have been a relevant step towards rejecting, not affirming, the decision under review.
[18] Thirdly and conversely, if the reason why the tribunal affirmed the decision under review was the tribunal's disbelief of the appellants' evidence arising from inconsistencies therein, it is difficult to see how such disbelief could be characterised as constituting "information" within the meaning of para (a) of s 424A(1). Again, if the tribunal affirmed the decision because even the best view of the appellants' evidence failed to disclose a Convention nexus, it is hard to see how such a failure can constitute "information". Finn and Stone JJ correctly observed in VAF v Minister for Immigration and Multicultural and Indigenous Affairs [(2004) 206 ALR 471 at 477] that the word "information"
β¦does not encompass the tribunal's subjective appraisals, thought processes or determinations ... nor does it extend to identified gaps, defects or lack of detail or specificity in evidence or to conclusions arrived at by the tribunal in weighing up the evidence by reference to those gaps, etcβ¦
If the contrary were true, s 424A would in effect oblige the tribunal to give advance written notice not merely of its reasons but of each step in its prospective reasoning process. However broadly "information" be defined, its meaning in this context is related to the existence of evidentiary material or documentation, not the existence of doubts, inconsistencies or the absence of evidence. The appellants were thus correct to concede that the relevant "information" was not to be found in inconsistencies or disbelief, as opposed to the text of the statutory declaration itself.
[19] Fourthly, and regardless of the matters discussed above, the appellants' argument suggested that s 424A was engaged by any material that contained or tended to reveal inconsistencies in an applicant's evidence. Such an argument gives s 424A an anomalous temporal operation. While the Act provides for procedures to be followed regarding the issue of a notice pursuant to s 424A before a hearing, [Footnote states: "Notably, in the sequential interaction of ss 424A, 424B, 424C(2) and 425(2) of the Act."], no such procedure exists for the invocation of that section after a hearing. However, if the appellants be correct, it was only after the hearing that the tribunal could have provided any written notice of the relevant passages in the statutory declaration from which the inconsistencies were said to arise, as those inconsistencies could not have arisen unless and until the appellants gave oral evidence. If the purpose of s 424A was to secure a fair hearing of the appellants' case, it seems odd that its effect would be to preclude the tribunal from dealing with such matters during the hearing itself.
[20] Moreover, supposing the appellants had responded to a written notice provided by the tribunal after the hearing, if inconsistencies remained in their evidence, would s 424A then oblige the tribunal to issue a fresh invitation to the appellants to comment on the inconsistencies revealed by β or remaining despite β the original response to the invitation to comment? If so, was the tribunal obliged to issue new notices for so long as the appellants' testimony lacked credibility? If the appellants' desired construction of s 424A leads to such a circulus inextricabilis, it is a likely indication that such a construction is in error.
[21] The short answer to all these points is that, on the facts of this case, s 424A was not engaged at all: the relevant parts of the appellants' statutory declaration were not "information that the tribunal considers would be the reason, or a part of the reason, for affirming the decision that is under review". Section 424A has a more limited operation than the appellants assumed: its effect is not to create a back-door route to a merits review in the federal courts of credibility findings made by the tribunal. That being so, this case does not require this Court to address the differences in opinion in the Federal Court concerning the "unbundling" of tribunal reasoning. [Footnote states: "Compare VAF with SZEEU."]
[22] Once the limited scope of s 424A is appreciated, and once the proper meaning of the word "reason" in s 424A(1)(a) is discerned, the apparent need for "unbundling" is correspondingly reduced. The respondent minister's concern about "minor" or "unimportant" matters engaging s 424A is largely to be resolved by the proper application of s 424A itself, not by any extra-statutory process of "unbundling". (Emphasis added.)
17 Their Honours went on to hold that in any event the discretion under the principles discussed in Re Refugee Review Tribunal; Ex parte Aala (2000) 204 CLR 82 would be exercised because no useful result could ensue from the grant of the relief. Even if the appellants were correct as to the proper operation of s 424A they could not overcome the Tribunal's finding that their claim lacked the requisite Convention nexus.
18 There have been three decisions of the Full Court since SZBYR which touch on the aspect of s 424A previously under discussion. In Minister for Immigration and Citizenship v Applicant A125 of 2003 [2007] FCAFC 162 the Full Court looked at the transcript of proceedings and reasons of the Tribunal in determining the applicability of s 424A: see [58], [64]-[68]. Their Honours at [70] referred to what was said in SZBYR at [18], that is to say on the meaning of "information" and whether it extends to doubts, inconsistencies or the absence of evidence, but not to [17].
19 In SZKLG v Minister for Immigration and Citizenship [2007] FCAFC 198 the information in question was the fact that the appellant had made an earlier application for protection visa which was different from the claim the subject of the instant appeal. The Tribunal sent the appellant a s 424A letter. The appellant's only challenge to its adequacy was a claim that it should have been sent prior to the s 425 hearing. Their Honours at [34] found "no express statutory basis for imposing such a temporal requirement". The purpose of s 424A was to ensure that the overall decision-making process, of which the s 425 hearing is only part, is fair. Their Honours said at [34]:
That this is so appears from SZBYR at [17] where the majority held that the s 424A process must occur in advance of, and independently of, the Tribunal's reasoning process, not prior to the s 425 hearing.
The Full Court had earlier at [33] said that "considers" in s 424A(1)(a) bears the meaning "be of the opinion that". Their Honours said:
Clearly, it is that meaning which is intended in s 424A. The obligation to proceed pursuant to s 424A arises only if the Tribunal forms the opinion that particular information would be the reason, or part of the reason, for affirming the relevant decision. The conditional nature of the obligation reflects the fact that the Tribunal must consider the question in advance of its decision, considering the information upon which it would act, should it decide to affirm the relevant decision. Although the appellant asserts that the Tribunal formed the requisite opinion prior to the s 425 hearing, we see no evidence to that effect. It may have done so, but it may also have proceeded on the basis that the importance of the information could only be assessed after the appellant had given evidence. It is also possible that prior to the hearing, the Tribunal had not fully appreciated the potential significance of the information. It is not apparent that the Tribunal took the course contended for by the appellant.
20 In SZICU v Minister for Immigration and Citizenship [2008] FCAFC 1 the Full Court quoted [17] and [18] from SZBYR and stated at [25]:
It is not necessary for present purposes to enter upon the question as to how far, in light of the above observation, a court can or should enter upon a consideration of the Tribunal's actual reasons for affirming the decision under review, when determining whether in a given instance a s 424A obligation to give information prior to the making of that decision had arisen.
21 That question, however, does arise in the present case. It is squarely put by counsel for the appellant that the learned Magistrate was wrong in saying that because the Tribunal made no reference in its reasons to the $20,000 bond issue, s 424A imposed no obligation in relation to that issue. There can be no doubt the learned Magistrate relied on an examination of the Tribunal's reasons in concluding that it did not consider the $20,000 bond issue a reason, or part of the reason, for affirming the decision under review. Counsel submitted that in this respect the learned Magistrate's reasoning was flawed.
22 SZYBR's explicit rejection of reference to "the reasoning process of the tribunal" or "the tribunal's published reasons" or "the tribunal's particular reasoning on the facts of the case" in determining the applicability of s 424A impliedly overrules a substantial body of authority in the Federal Court.
23 For example in SZEEU Allsop J said at [204]:
The assessment whether the Tribunal has complied with s 424A(1) requires close attention to the reasons of the Tribunal, because it is the information that the Tribunal considers relevant that must be assessed in order to see whether, prior to the decision being made, it would be the reason or a part of the reason for affirming the decision.
24 Moore J took the same approach. Thus in dealing with one of the cases before the Court his Honour analysed the Tribunal's reasons and concluded that the information in question was a "subsidiary and peripheral reason for rejecting the appellant's claim" (at [22]). Weinberg J at [155] relevantly agreed with Allsop J.
25 In SZBYR at [22] the majority rejected the concept of "unbundling". The expression appears in the judgment of Allsop J in Paul at [99] and later in SZEEU at [208] where his Honour said:
Whether or not information is the reason or part of the reason for affirming the decision was discussed in Paul at [99]-[100], [107]-[108] and [116] and by VAFat [29]-[41]. The approaches taken by the respective majorities in VAFand Paul were very similar. The majority in VAF did not disapprove of Pauland to a degree built upon the reasoning in it. Aspects common to the approaches in both Pauland VAFwere as follows:
(a) To identify the reason or part of the reason for the affirmation of the decision requires some "unbundling" of the reason for the affirmation of the decision which is ultimately the relevant lack of satisfaction of the existence of protection obligations.
(b) In circumstances where (as is usually the case) the complaint is in the context of a decision of the tribunal that has been made supported by a set of reasons generally this is to be undertaken by reference to the reasons of the tribunal in the context in which one finds them.
26 In both Paul and VAF there was an examination of the Tribunal's reasons in the course of determining the "reason or part of the reason" issue.
27 SZBYR, and in particular [17] of the majority judgment, essentially says that a court must assess the "information" in question in terms of its dispositive relevance to the Convention claims advanced by the applicant before the Tribunal. For example, let it be assumed an applicant claimed fear of persecution in a country because he was a Christian, and the Tribunal has a written statement from X that the applicant said to him he never was a Christian and had invented the claim in order to get a visa. If true, X's statement, being "evidentiary material or documentation", would be a reason for the Tribunal's affirming the refusal of a visa. It would "undermine" his claims to have well-founded fear of persecution by reason of religion. By contrast, a statement by Y that the applicant had worked in Australia under a false name would at best only go to the applicant's credibility. If the Tribunal in either of these hypothetical instances had not given a s 424A notice the reviewing court would have to characterise the statements of X and Y and determine whether or not they attracted the s 424A obligation as at the time they came to the Tribunal's attention. This assessment would not depend on the use the Tribunal subsequently made of the statements in its reasons.
28 Conditional clauses generally express a direct condition, indicating that the truth of the host clause is dependant on the fulfilment of the condition in the conditional clause: Greenbaum, The Oxford English Grammar (1996) p 340. The meaning conveyed by s 424A(1)(a) is that the Tribunal considers that if the information is true (conditional clause), it would be the reason, or a part of the reason, for affirming the decision (host clause). Ex hypothese, the Tribunal does not know whether the information is true or not. That is the point of giving the applicant the opportunity to rebut, qualify or explain the information. That is why subsequent use made by the Tribunal in its reasons, on the basis that the information is true, is no guide to whether the Tribunal at the earlier point in time should or should not have applied s 424A.
29 It can also be noted that the section speaks of information that "would" be the reason etc, not "could" or "might". This is another indication that information merely going to credibility is not within the section. An applicant may be disbelieved on some issues, but believed on others, or the application may be determined one way or the other by issues unrelated to credibility. Lack of credibility in itself does not necessarily involve rejection, denial or undermining of an applicant's claims.
30 Accordingly, counsel for the appellant was correct in submitting that the learned Magistrate's reasons in the present case were flawed. He reached the right decision for the wrong reasons. He thought the $20,000 bond issue could not have been a reason for affirming the decision if the Tribunal never mentioned it. Post-SZBYR the correct approach would have been for the Tribunal to consider whether the $20,000 bond information, if true, would be the reason, or part of the reason, for affirming the decision to refuse the appellant's protection visa application. For all the Tribunal knew, the appellant's account may have been true. The fact that he named the friends suggests a reason why the Tribunal did not pursue the matter further. Even if the account was untrue, and in fact the appellant provided the $20,000 himself, at most it might suggest he was lying when he said he worked illegally because he needed money. Either way, the issue was quite peripheral. Untruthfulness of the appellant's account would not be the reason, or part of the reason, for affirming the decision under review.
31 However, discretionary relief would properly have been refused anyway, as the learned Magistrate intimated, because no useful result could ensue: SZBYR at [29].
32 Turning to the Minister's alternative argument based on s 424A(3)(b), I agree that the appellant "gave" the relevant information because he confirmed at the hearing that the bond was provided by his friends. It is not to the point that the Tribunal may have already been in possession of the information or that it was provided by the appellant in answer to the Tribunal's questioning: SZCJD v Minister for Immigration and Multicultural and Indigenous Affairs [2006] FCA 609 at [42]-[43], see also SZDPY v Minister for Immigration and Multicultural Affairs [2006] FCA 627 at [35], NBKT v Minister for Immigration and Multicultural Affairs [2006] FCAFC 195 at [61].
33 The appeal will be dismissed with costs.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey.
Associate:
Dated: 12 March 2008
Counsel for the Appellant: J A Gibson
Solicitors for the Appellant: Goz Chambers Lawyers
Counsel for the Respondent: W S Mosley
Solicitor for the Respondent: Australian Government Solicitor
Date of Hearing: 3 March 2008
Date of Judgment: 12 March 2008
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Roberts-Smith v Fairfax Media Publications Pty Limited (No 25) [2021] FCA 1558
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Federal Court of Australia
Roberts-Smith v Fairfax Media Publications Pty Limited (No 25) [2021] FCA 1558
File numbers: NSD 1485 of 2018
NSD 1486 of 2018
NSD 1487 of 2018
Judgment of: ABRAHAM J
Date of judgment: 14 December 2021
Catchwords: PRACTICE AND PROCEDURE β application for leave to inspect, uplift and copy documents β legal professional privilege β whether privilege has been waived β whether conduct of respondents is consistent with the maintenance of the privilege β where documents sought are relevant to the respondents' application for leave to issue a subpoena to a witness to give evidence β privilege waived β leave granted
Cases cited: Attorney-General (NT) v Maurice [1986] HCA 80; (1986) 161 CLR 475
Australian Securities and Investments Commission v Australian Lending Centre Pty Ltd (No 2) [2011] FCA 1057; (2011) 283 ALR 299
AWB Ltd v Cole (No 5) [2006] FCA 1234; (2006) 155 FCR 30
Commissioner of Taxation v Rio Tinto Ltd [2006] FCAFC 86; (2006) 151 FCR 341
Council of the New South Wales Bar Association v Archer [2008] NSWCA 164; (2008) 72 NSWLR 236
DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 384; (2003) 127 FCR 499
Goldberg v Ng [1995] HCA 39; (1995) 185 CLR 83
Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1
New South Wales v Betfair Pty Ltd [2009] FCAFC 160; (2009) 180 FCR 543
Osland v Secretary, Department of Justice [2008] HCA 37; (2008) 234 CLR 275
Roberts-Smith v Fairfax Media Publications Pty Limited (No 12) [2021] FCA 465
Roberts-Smith v Fairfax Media Publications Pty Limited (No 23) [2021] FCA 1460
Division: General Division
Registry: New South Wales
National Practice Area: Other Federal Jurisdiction
Number of paragraphs: 75
Date of hearing: 29 November 2021
Counsel for the Applicant: Mr A Moses SC with Mr P Sharp
Solicitor for the Applicant: Mark O'Brien Legal
Counsel for the Respondents: Mr N Owens SC with Ms L Barnett and Mr C Mitchell
Solicitor for the Respondents: MinterEllison
Counsel for the Commonwealth: Ms C Ernst
Solicitor for the Commonwealth: Australian Government Solicitor
ORDERS
NSD 1485 of 2018
BETWEEN: BEN ROBERTS-SMITH
Applicant
AND: FAIRFAX MEDIA PUBLICATIONS PTY LIMITED (ACN 003 357 720) (and others named in the Schedule)
First Respondent
NSD 1486 of 2018
BETWEEN: BEN ROBERTS-SMITH
Applicant
AND: THE AGE COMPANY PTY LIMITED (ACN 004 262 702) (and others named in the Schedule)
First Respondent
NSD 1487 of 2018
BETWEEN: BEN ROBERTS-SMITH
Applicant
AND: THE FEDERAL CAPITAL PRESS OF AUSTRALIA PTY LIMITED (ACN 008 394 063) (and others named in the Schedule)
First Respondent
order made by: Abraham J
DATE OF ORDER: 14 December 2021
THE COURT ORDERS THAT:
1. The respondents are to produce to the Court, Documents 1, 2, 3 and 17 in the respondents' First Objection Schedule, responsive to the Notice to Produce issued by the applicant on 5 November 2021.
2. The applicant is granted leave to inspect, uplift and copy the following documents:
(a) Documents 1, 2, 3 and 17 (in unredacted form) in the respondents' First Objection Schedule; and
(b) Document 12 (in unredacted form) in the respondents' Third Objection Schedule (being in response to the subpoena issued to Person 56).
3. The respondents are to pay the applicant's costs of this application, to be agreed or assessed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
ABRAHAM J:
1 Mr Ben Roberts-Smith VC MG is a former soldier who was deployed on multiple occasions to Afghanistan. In August 2018, Mr Roberts-Smith commenced proceedings in this Court seeking damages for alleged defamatory publications by Fairfax Media Publications Pty Ltd, The Age Company Pty Ltd, The Federal Capital Press of Australia Pty Ltd and certain journalists. The publications are alleged to have carried a number of imputations concerning the conduct of Mr Roberts-Smith whilst serving in Afghanistan. The alleged imputations include that Mr Roberts-Smith broke the moral and legal rules of military engagement and that he is therefore a criminal. By their defence, the respondents claim to be able to justify the imputations, a matter on which they bear the onus of proof. The substantive hearing commenced on 7 June 2021, and the applicant's case in chief has closed. The hearing has been adjourned as a result of difficulties which have arisen as a consequence of Covid-19 restrictions.
2 The applicant served a notice to produce on the respondents on 5 November 2021 and 11 November 2021 respectively, following the filing by the respondents on 28 October 2021 of an application for leave to issue a subpoena to Person 56, a potential witness, to give evidence at the hearing. That application is yet to be heard.
3 On 10 November 2021, in response to the 5 November notice, the respondents served on the applicant an objection schedule claiming legal professional privilege and relevant documents comprising, two emails and an email chain between their solicitors and counsel acting for Person 56. On 12 November 2021, the respondents served an updated objection schedule (First Objection Schedule).
4 On 15 November 2021, the respondents served an objection schedule on the applicant in response to the 11 November notice (Second Objection Schedule).
5 The applicant also issued a subpoena to Person 56 dated 11 November 2021, to which documents have been produced. One of those documents included is an email from Sean Richter (the legal representative for Person 56) to Anthony Reilly, of the Department of Defence, dated 5 August 2021. The respondents were given first access to the documents. As a result, the respondents make a claim for legal professional privilege over part of that email, as reflected in their objection schedule served on 24 November 2021 (Third Objection Schedule). To date, the 5 August email has only been produced to the applicant in a redacted form. The applicant seeks an unredacted copy of that document.
6 On 15 November 2021, the applicant filed an interlocutory application seeking access to certain documents over which the respondents claim are privileged.
7 The applicant seeks access orders to the following documents:
(1) documents which are responsive to categories 1, 2 and 3 of the 5 November notice, as identified in the First Objection Schedule, and over which legal professional privilege is claimed (identified as Documents 1 and 2 in the First Objection Schedule);
(2) an unredacted copy of an email between Dean Levitan, a solicitor for the respondents, and Mr Richter dated 1 September 2021 (identified as Document 17 in the First Objection Schedule);
(3) an unredacted copy of an email between Mr Richter and Mr Reilly dated 5 August 2021 (identified as Document 12 in the Third Objection Schedule); and
(4) any other documents described by the respondents in their objection schedules to the extent that those documents record such communications between the respondents and Person 56 in relation to the arrangement or understanding relating to Person 56's attendance at the hearing to give evidence or otherwise concern or touch upon the arrangement or understanding.
8 The applicant accepts that the documents enumerated in the respondents' objection schedules are privileged. The issue for determination is whether that privilege has been waived over the documents in question. I note that the applicant is no longer seeking access to documents over which privilege is claimed in connection with the notice to produce dated 11 November 2021.
9 For the reasons below, privilege has been waived in respect to Documents 1, 2, 3 and 17 in the First Objection Schedule and Document 12 in the Third Objection Schedule. I also consider that privilege has been waived in respect of Document 3 in the First Objection Schedule.
Material relied on
10 The applicant read an affidavit of Paul Victor Svilans, his solicitor, dated 15 November 2021, which generally annexed the notices to produce and the schedule of objections, the subject of this application (Svilans Affidavit). It details the interactions between the parties in respect to the notices to produce. The affidavit was admitted subject to paragraph [6] and the annexure referred to therein.
11 The Svilans Affidavit included correspondence from the respondents dated 10 November 2021 which enclosed an objection schedule and two emails over which the respondents accepted privilege has been waived by virtue of Peter Bartlett's affidavit of 28 October 2021 (October Bartlett Affidavit). That correspondence also enclosed an email chain which was partly redacted and over which the respondents elected to partially waive privilege (included in the email chain is a redacted copy of the email of 1 September 2021).
12 The applicant also tendered a bundle of documents, which was admitted (subject to one sentence which appears in the copy of the transcript of the hearing on 18 November 2021). The tender bundle contained, inter alia, two affidavits of Mr Bartlett, solicitor for the respondents, including the October Bartlett Affidavit, which was filed by the respondents in support of their application for leave to issue a subpoena to Person 56, and another dated 15 March 2021, which had been relied on by the respondents in connection with an earlier application for leave to issue subpoenas to certain witnesses (including Person 56) and amend their defence (March Bartlett Affidavit).
13 Given the significance of the October Bartlett Affidavit to the submissions, it is appropriate to recite it in full:
1. I am a partner of MinterEllison and am the lawyer for the Respondents in these proceedings. I am authorised to swear this affidavit on behalf of the Respondents.
2. Nothing in this affidavit or its annexure is intended to waive any client legal or legal professional privilege. To the extent that any part of this affidavit may be construed as a waiver of privilege, I withdraw and do not rely on that part of the affidavit.
3. I make this affidavit in support of an application dated 28 October 2021 for leave to issue a subpoena to Person 56 to attend and give evidence in these proceedings.
Background
4. On 13 February 2019, the Court made orders in relation to the service of outlines of evidence. The orders included that the Respondents serve their outlines of evidence by 8 May 2019.
5. On 22 May 2019, the parties agreed to vary the timetable, with the effect that the Respondents' outlines were due to be served on 31 May 2019.
6. On 15 March 2021, the Respondents filed and served an application for leave to issue subpoenas to attend to give evidence to additional witnesses, including Person 56 (March Application). The March Application was supported by an affidavit sworn by me on 15 March 2021 (March Affidavit).
7. On 23 April 2021, Justice Besanko refused the Respondents leave to issue a subpoena to Person 56 to attend and give evidence in these proceedings.
Communication with Person 56
8. In the March Affidavit, I gave evidence that:
(a) As at the date of the March Affidavit, the Respondents (or their legal representatives) had not spoken to Person 56;
(b) that Dean Levitan, the solicitor with the day-to-day conduct of the matter on behalf of the Respondents, had made multiple attempts to speak with Person 56, including by contacting Person 56's legal representative, Sean Richter, in excess of eight times between February 2020 and the date of the March Affidavit, but that Person 56 had not agreed to speak to the Respondents or their legal representatives (see paragraph 29 of the March Affidavit); and
(c) the Respondents did not possess sufficient information at that time to enable them to serve an outline of the evidence they anticipate Person 56 would give.
9. The Applicant's oral evidence, and the evidence of the three Afghan Witnesses, emphasised to me the extent to which Person 56 would be able to give evidence about key matters in dispute in relation to the mission in Darwan on 11 September 2012 including:
(a) whether there were fighting aged males in the last compound set;
(b) whether there was an interpreter with the Applicant's patrol when they reached the last compound set;
(c) at about what time/point in the mission Person 56 and the interpreter left the patrol; and
(d) whether there was a steep embankment on the edge of the dry river bed closest to the helicopter landing zone.
10. As a result, following the evidence of the Applicant and the three Afghan Witnesses, I, together with other members of the Respondents' legal team, decided that a further attempt should be made to see if Person 56 would speak to the Respondents' legal representatives about the Darwan mission in particular. That is to say, it was determined that the Respondents would only seek to ascertain if Person 56 would speak to us about the Darwan mission, and no other mission or issue in dispute between the parties.
11. I am informed by Mr Levitan, and believe, that:
(a) From 3 August 2021, Mr Levitan made further attempts to arrange for the Respondents' legal representatives to speak with Person 56 directly about the mission in Darwan, including during telephone conversations with Mr Richter on 3 August 2021, 6 August 2021 and 26 August 2021.
(b) On 6 September 2021, Mr Richter informed Mr Levitan that Person 56 would be prepared to speak directly with the Respondents' legal representatives about the mission in Darwan.
(c) On 15 September 2021, the Respondents' legal representatives had a video conference with Person 56 and his legal representatives.
(d) On 5 October 2021, the Respondents' legal representatives had a second video conference with Person 56 and his legal representatives.
(e) On 26 October 2021, Mr Levitan received a signed statement of Person 56 setting out his evidence about the mission in Darwan. Person 56's signed statement is annexed hereto and marked PLB-1.
14 I note that the October Bartlett Affidavit was admitted on this application on a limited basis only, as evidence of what Mr Bartlett asserts are the reasons for seeking leave to issue a subpoena to Person 56 at this stage.
15 The tender bundle also included the subpoena issued by the applicant to Person 56, the documents produced by Person 56 over which no claim or only a partial claim of privilege has been made by the respondents and correspondence between the parties.
16 The respondents read two affidavits of Mr Bartlett dated 19 November 2021 (First November Bartlett Affidavit) and 25 November 2021 (Second November Bartlett Affidavit), deposing to the making and basis of the claims for legal professional privilege in respect to documents relevant to the notices to produce and the subpoena to Person 56.
Legal principles
17 There was no dispute between the parties that the documents sought are privileged, the issue is one of waiver.
18 The principles relevant to a claim for legal professional privilege were summarised in Roberts-Smith v Fairfax Media Publications Pty Limited (No 23) [2021] FCA 1460 at [37]-[46] and it is unnecessary to repeat them here. As with the application there considered, this application is governed by the common law: see for example Australian Securities and Investments Commission v Australian Lending Centre Pty Ltd (No 2) [2011] FCA 1057; (2011) 283 ALR 299 at [6]β[9].
19 Given the focus of this application, it is appropriate to expand upon the principles that are relevant to waiver of privilege.
20 In Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 (Mann), the plurality explained the rationale and approach at [28]-[29] as follows (citations omitted):
At common law, a person who would otherwise be entitled to the benefit of legal professional privilege may waive the privilege. It has been observed that "waiver" is a vague term, used in many senses, and that it often requires further definition according to the context. Legal professional privilege exists to protect the confidentiality of communications between lawyer and client. It is the client who is entitled to the benefit of such confidentiality, and who may relinquish that entitlement. It is inconsistency between the conduct of the client and maintenance of the confidentiality which effects a waiver of the privilegeβ¦
Waiver may be express or implied. Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. When an affirmative answer is given to such a question, it is sometimes said that waiver is "imputed by operation of law". This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege⦠What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large.
21 When considering whether a waiver of privilege has occurred, each case must be assessed on its own facts: Commissioner of Taxation v Rio Tinto Ltd [2006] FCAFC 86; (2006) 151 FCR 341 (Rio Tinto) at [45], [61]. As explained at [45]:
Where, as here, one party alleges that another has impliedly waived legal professional privilege, a court is bound to analyse the acts or omissions of the privilege holder that are said to be inconsistent with the maintenance of the privilege. In concluding that the Commissioner had waived the privilege in the eight contested documents, the docket judge in fact applied the "inconsistency" principle of Mann, as he was obliged to do: see Rio Tinto (2) at [20]. Plainly enough, the inquiry that it mandates focuses on the facts of the particular case. It follows that other cases in which implied waiver has been considered provide limited guidance unless they arise out of similar facts.
22 In DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 384; (2003) 127 FCR 499 (DSE), Allsop J (as his Honour then was) observed at [58] (emphasis in the original):
β¦the party entitled to the privilege makes an assertion (express or implied), or brings a case, which is either about the contents of the confidential communication or which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication.
23 And see Rio Tinto at [61]:
Both before and after Mann, the governing principle required a fact-based inquiry as to whether, in effect, the privilege holder had directly or indirectly put the contents of an otherwise privileged communication in issue in litigation, either in making a claim or by way of defenceβ¦
24 Inconsistency may arise if the privilege holder makes assertions about its state of mind and there are likely to have been confidential communications which affected that state of mind: Council of the New South Wales Bar Association v Archer [2008] NSWCA 164; (2008) 72 NSWLR 236 at [48]. The question, however, is not whether a party has put their state of mind in issue but whether or not the privilege holder made an assertion as part of their case that lays open the privileged documents to scrutiny, with the consequence that an inconsistency arises between the making of the assertion and the maintenance of privilege: Rio Tinto at [65].
25 Finally, in the circumstance where a party has claimed privilege over part of a document only, where there has been partial disclosure, the observations in AWB Ltd v Cole (No 5) [2006] FCA 1234; (2006) 155 FCR 30 (AWB (No 5)) at [164]-[165] are relevant:
[164] Turning to the scope of any imputed waiver, it is well established that a voluntary disclosure of privileged documents can result in a waiver of privilege over those documents and associated material. The test applied to determine the scope of any waiver of associated material is whether the material that the party has chosen to release from privilege represents the whole of the material relevant to the same issue or subject matter: Maurice at 482 and 484 per Gibbs CJ, 488 per Mason and Brennan JJ, and 498-499 per Dawson J.
[165] In Maurice, Gibbs CJ said (at 482):
β¦ Similarly, where a party disclosed a document which contained part only of a memorandum which dealt with a single subject-matter, and then read the document to the judge in the course of opening the case, it was held that privilege was waived as to the whole memorandum: Great Atlantic Insurance Co v Home Insurance Co [[1981] 1 WLR 529]. In that case Templeman LJ said:
β¦ the rule that privilege relating to a document which deals with one subject matter cannot be waived as to part and asserted as to the remainder is based on the possibility that any use of part of a document may be unfair or misleading, that the party who possesses the document is clearly not the person who can decide whether a partial disclosure is misleading or not, nor can the judge decide without hearing argument, nor can he hear argument unless the document is disclosed as a whole to the other side. Once disclosure has taken place by introducing part of the document into evidence or using it in court it cannot be erased.
The same test must be applied in deciding whether the use in legal proceedings of one document impliedly waives privilege in associated material. In Nea Karteria Maritime Co Ltd v Atlantic & Great Lakes Steamship Corporation [No 2] Mustill J dealt with this question and suggested the following test:
β¦ where a party is deploying in court material which would otherwise be privileged, the opposite party and the court must have an opportunity of satisfying themselves that what the party has chosen to release from privilege represents the whole of the material relevant to the issue in question. To allow an individual item to be plucked out of context would be to risk injustice through its real weight or meaning being misunderstood.
26 All that said, questions of waiver are matters of fact and degree: Osland v Secretary, Department of Justice [2008] HCA 37; (2008) 234 CLR 275 at [49]. The applicant bears the onus in establishing waiver: New South Wales v Betfair Pty Ltd [2009] FCAFC 160; (2009) 180 FCR 543 at [54].
Submissions
Applicant's submission
27 The applicant summarised the context in which this application arises, which relevantly includes that the respondents, on 28 October 2021, made a second application for leave to issue a subpoena to Person 56. The first application occurred before the hearing commenced and was refused in Roberts-Smith v Fairfax Media Publications Pty Limited (No 12) [2021] FCA 465 (Roberts-Smith (No 12)). The principal reason for the refusal was that the respondents were unable to provide any indication of the evidence that Person 56 would give: Roberts-Smith (No 12) at [53]-[54]. The applicant submitted that at that time the evidence from the respondents was that there had been repeated attempts to contact Person 56 but he had refused to speak to them. The applicant submitted that the evidence is that Person 56 was a member of the applicant's patrol in 2012, and in the second further amended defence, the respondents allege he was involved in the cover-up of the unlawful killing of Ali Jan by falsely alleging that Ali Jan was a spotter. He is also potentially caught by the allegation in the second further amended defence, that the applicant or a member of his patrol unlawfully killed an Afghan adolescent and covered up the killing by using a throwdown at Fasil on 5 November 2012. In that context, it was submitted that the respondents appear to have reached a deal with Person 56 to the effect that if Person 56 gives evidence in relation to Darwan, he will not be asked any questions that might incriminate him in other matters. It is submitted that the deal is the real reason this witness is sought to be called now and not because something new had been learnt from the evidence. That is, it was determined that the respondents would seek to ascertain if Person 56 would give evidence about the Darwan mission only and not any other issue in dispute between the parties. This is in a context where the applicant's evidence in relation to Darwan was known to the respondents before the hearing began and has not changed.
28 The applicant also highlighted the timing of this application, which was made after the applicant completed evidence in June 2021, and after the Afghan witnesses gave evidence in in July 2021.
29 It was submitted that the respondents on the application for leave to issue the subpoena will be required to explain the timing of the application and the circumstances in which it is made. To that end, the October Bartlett Affidavit, is said to be relevant. The applicant places particular reliance on [8]-[10] recited above which, the applicant submits, involves an assertion about the respondents' state of mind to approach Person 56 and to secure his agreement to give evidence on a limited basis in respect to Darwan. It was submitted that the relevant inconsistency giving rise to waiver has occurred by the respondents' disclosure of, and reliance upon, their reasoning process in Mr Bartlett's affidavit as an explanation as to why their application is being made at this stage of the proceedings. The respondents have, therefore, waived privilege over any confidential communications with their lawyers which are likely to have affected the respondents' state of mind or which are material to the formation of that state of mind, including communications that informed the respondents' disclosed reasoning process concerning the decision to approach Person 56 at this time. This submission is directed to Documents 1 and 2 of the First Objection Schedule.
30 The applicant submitted that privilege also has been waived by the respondents, producing two emails as a result of the October Bartlett Affidavit, and the voluntary production of the email chain which contains the partially redacted email of 1 September 2021.
31 In respect to the redacted email of 1 September 2021, the applicant submitted that Mr Bartlett deposes that the redacted portion is not necessary to properly understand the balance of the email that has been disclosed, but he has not suggested it relates to a different subject matter, which might provide a justifiable basis for severance. To deny the applicant access to this material would deprive him (and the Court) of the opportunity to be satisfied that the whole of the material relating to the scope of the arrangement or understanding has been disclosed, not just a portion of it.
32 The applicant submitted that the waiver by the respondents entitles them to any other documents described by the respondents in their objection schedules to the extent that those documents record such communications between the respondents and Person 56 in relation to the arrangement or understanding relating to Person 56's attendance at the hearing to give evidence or otherwise concern or touch upon the arrangement or understanding (with the latter phrase being emphasised). It was submitted that the respondents' election to waive privilege in respect of the existence of an arrangement or understanding means that it would be inconsistent and unfair to the applicant for the respondents to assert privilege in relation to other documents referring to or touching upon the same subject matter, citing Goldberg v Ng [1995] HCA 39; (1995) 185 CLR 83 at 96.
33 As to the redacted email of 5 August 2021, which was produced by Person 56 in answer to a subpoena, the applicant's submission is that waiver occurred when Mr Richter sent the email to Mr Reilly, and there was an express waiver in providing all but the redacted portion to the applicant.
Respondents' submission
34 The respondents do not accept that there has been a waiver to the extent claimed by the applicant. They submitted that in any event, the only document described in the objection schedules which concerns, or otherwise touches upon, the arrangement or understanding in relation to Person 56's attendance at the hearing to give evidence, is the email of 1 September 2021 in the First Objection Schedule (and documents 5 and 9 in the Third Objection Schedule which record the same communication), which has already been produced to the extent it falls within the description. It was initially submitted that the balance of the documents described in each of the objection schedules do not record communications between the respondents and Person 56 concerning the arrangement or understanding, nor do they "otherwise concern or touch upon the arrangement or understanding". However, in oral submissions the respondents accepted that if a broader view is taken, such that documents which simply mention or describe these matters may fall within scope, then Documents 1 and 2 would also be relevant. It was submitted that it depends on the meaning of "touch and concern".
35 As to Documents 1 and 2, it was submitted that no inconsistency arises between the October Bartlett Affidavit which notes that a decision was made to make a further attempt to speak to Person 56, and the maintenance of confidentiality in communications between the respondents and their lawyers. Paragraphs [9] and [10] of the October Bartlett Affidavit do not refer to, disclose or make any assertion about the contents of any confidential communication between the respondents and their lawyers, and the contents of those communications have not been put in issue. It does not disclose the reasons for the decision. It was also submitted that the argument proceeds on an incorrect construction of [9] and [10] of the October Bartlett Affidavit as [9] simply identifies the key topics in relation to Darwan that Person 56 could have been expected to give evidence upon and in [10], the reference to the evidence of the applicant and the three Afghan witnesses is to provide a temporal reference to the decision, not a causal one. Understood in this way, the only "state of mind" disclosed is the decision. The affidavit does not disclose the reasons for the decision, the advice given in relation to the decision, or the instructions given. The respondents' conduct in including only the fact of the decision in the affidavit is consistent with the maintenance of confidentiality in these matters and their communications with their lawyers. It was submitted that this is reinforced by [2] which makes it clear that it was not Mr Bartlett's or the respondents' intention to waive any legal professional privilege (and that to the extent there is any inadvertent waiver by reason of some part of the affidavit, the relevant portion is withdrawn).
36 As to Document 17, the email of 1 September 2021, it was submitted that the redacted part of the email refers to other confidential communications between the respondent's solicitor and Mr Richter, in respect of which a claim for legal professional privilege is maintained, and does not concern or touch upon the arrangement of understanding. The part of the email that is redacted is not required to enable a proper understanding of the part of the 1 September email that has been disclosed.
37 The respondents submitted that the only matters over which privilege has been waived are the communications relevant to understanding the limitations or relevant circumstances upon which Person 56 agreed to speak to the respondents, which are communications that pass between the respondents and Person 56 or his representatives. The respondents' internal consideration of how to get Person 56 to agree to give evidence, any proposals for so doing, legal advice to the respondents about any such options and the relative merits of different options, have not been waived.
38 As to the email of 5 August 2021, it contains confidential communications between the respondents and Person 56's lawyer, which he was not authorised to disclose.
Consideration
39 There are four issues to be determined: first, the submission directed to Documents 1 and 2 which is dependent on a consideration of the October Bartlett Affidavit; second, the balance of the redacted email of 1 September 2021; third, the balance of the redacted email of 5 August 2021; and fourth, if privilege has been waived over any other documents in the objection schedules which "concern or touch upon the arrangement or understanding" as to the basis on which Person 56 is to give evidence. As noted above at [7], the first three documents (Documents 1, 2 and 17) relate to the notice to produce dated 5 November 2021. The fourth document (Document 12) relates to the subpoena issued to Person 56.
40 I observe at the outset that the respondents have accepted that, as a result of the October Bartlett Affidavit, they have waived privilege in respect to two emails between Mr Richter and Mr Levitan. As a consequence, those emails were produced to the applicant. It is also accepted by the respondents that the production of Document 17 constitutes a voluntary waiver of privilege, in so much of that email as has been produced.
Documents 1 and 2
41 Documents 1 and 2 are identified in the First Objection Schedule as confidential email communications between the respondents and their lawyers made for the dominant purpose of providing legal advice in connection with the proceedings.
42 As is apparent from the submissions recited above, this application arises in a context where the documents sought are said to be relevant to the respondents' application for leave to issue a subpoena to Person 56 to give evidence, given the particular circumstances in which that application is made.
43 Those circumstances are accurately described by the applicant in his submission, to which no challenge was made. Of particular note is the timing of the application (being after the applicant and the Afghan witnesses have completed their evidence), that this is a second such application where the first was refused on 23 April 2021, in Roberts-Smith (No 12), and that it is apparent this new application is made in a context where some arrangement has been reached between the respondents and Person 56 as to the extent of the content of his evidence to be led by them. This is all in a context where the respondents were required to serve outlines of evidence for their witnesses by 31 May 2019.
44 Against that background it may readily be accepted that, as the respondents require leave to issue the subpoena, it will be incumbent on them, inter alia, to provide an explanation as to how the application has come about at this stage of the trial.
45 It is to that end that the October Bartlett Affidavit, which was filed by the respondents in support of their application for leave, is plainly directed.
46 There is a dispute between the parties as to the meaning to be attributed to the October Bartlett Affidavit, in particular [9] and [10]. Put succinctly, on the one hand, the applicant submitted that the respondents' reasoning process is provided in Mr Bartlett's affidavit as an explanation as to why their application is being made at this stage of the proceedings. On the other hand, the respondents submitted that those paragraphs refer only to the fact of the decision having been made and any reference to the applicant's and the Afghan witnesses' evidence is purely temporal.
47 I accept the applicant's interpretation. It accords with the natural meaning of the words, in the context in which they appear.
48 Paragraphs [9] and [10] are not to be considered in isolation, but rather, the affidavit must be read as a whole and in the context of the purpose for which this affidavit was filed. Even more obviously so here where [10] begins with the phrase "[a]s a result", which clearly refers to what was stated in the preceding paragraph. Based on a natural meaning of the words in [9] and [10], the respondents' submission that the references therein to the applicant and the Afghan witnesses' evidence are merely temporal, cannot be accepted.
49 Mr Bartlett has exposed his state of mind and reasoning process in [9], which led to the decision referred to in [10], that the respondents should make another attempt to speak to Person 56, but would only seek to ascertain if Person 56 would give evidence about the Darwan mission and no other issue in dispute, as an explanation for the timing of the application for leave. Mr Bartlett refers to his state of mind about the evidence, that the evidence "emphasised" to him what Person 56 would be able to give evidence about, and what was done as a result. I note that no explanation is provided as to what aspects about the evidence led to such awareness occurring at this stage of the proceeding. From [10], it is apparent that the respondents' legal team provided advice to the respondents that a further attempt should be made to see if Person 56 would talk to them about the Darwan mission in particular. The respondents then made a forensic decision to approach Person 56 only on that limited basis, which they acted on. The affidavit of Mr Bartlett, in particular [9] and [10], is then being deployed by the respondents to advance their application as to why leave to issue a subpoena to Person 56 should be granted at this late stage of the proceedings. It is being relied on in circumstances which invite scrutiny: DSE at [58]; Rio Tinto at [61]. Paragraphs [9] and [10] of Mr Bartlett's affidavit constitutes disclosure of the privileged communication between the respondents' legal team and the respondents.
50 In oral submissions, the respondents articulated their submission (in part) as follows:
β¦it is no different to the very common situation in litigation where a party either does something, that everything that is done in court β I mean, for example, I stand up and say I'm going to call Witness X. It is obvious, with respect, that that is being done usually having β as a result of the product of some legal thinking and some legal advice having gone into it. When a party says, "I want to do something," or "I'm going to do something," or "I did something," that doesn't effect a waiver and it doesn't mean that all of the advice and all of the thinking and all of the instructions which underlie whatever it is that has been done or whatever the decision is that has been communicated is β that there's a general waiver in relation to those matters.
51 Although as a general proposition that is correct, the analogy is inapt. Contrary to the respondents' submission, it is not just the fact of legal advice having been given, but content of that advice, is disclosed. The submission pays no regard to the terms of [9] and [10], nor the purpose for which the affidavit is relied on and the nature of the application. It also ignores the circumstances in which this application was made.
52 I note that in the circumstances, the respondent's reliance on [2] of the October Bartlett Affidavit, where Mr Bartlett states that he does not intend to waive any legal professional privilege, does not assist. What brings about waiver is inconsistency in conduct by the respondents, and where such inconsistency is established, privilege is waived, even though that consequence may not reflect the subjective intention of the party who has lost the privilege: Mann at [29]; Rio Tinto at [74]. I note in this context that despite [2] of Mr Bartlett's affidavit, in his affidavit of 19 November 2021, he accepts that his October affidavit waived privilege in respect to other documents (being two emails), and the documents were accordingly produced.
53 The respondents' First Objection Schedule, given the categories of documents sought by the notice to produce, reflects that Documents 1 and 2 record the communications between the respondents and their lawyers concerning the decision to approach Person 56 after the applicant and the Afghan witnesses had ceased giving their evidence. I note also that although the respondents submitted that there was no waiver of privilege, they did not suggest Documents 1 and 2 were not relevant to this submission, or that if privilege was waived, that Documents 1 and 2 are not the relevant documents to which access would be given.
54 I am satisfied there is an inconsistency between the content of [9] and [10] of Mr Bartlett's affidavit and the use to which it is to be put by the respondents, and the maintenance of their claim for privilege over Documents 1 and 2, such as to constitute an implied waiver of legal professional privilege.
55 As a consequence, the applicant should have access to the documents in categories 1, 2 and 3 of the notice to produce issued by the applicant on 5 November 2021, being Documents 1 and 2 identified in the First Objection Schedule.
Document 17 (Email of 1 September 2021)
56 This document comprises an email from the respondents' solicitor, Mr Levitan, to Mr Richter, lawyer for Person 56. The email contains redactions. In summary, as noted above, the applicant contended that there is an express waiver of privilege by the respondents and he is entitled to the remainder as it is associated material in which privilege has been impliedly waived. The respondents accept they have voluntarily waived privilege in respect of the unredacted material in this email. In the First November Bartlett Affidavit at [8], Mr Bartlett deposes:
The redacted part of the 1 September Email refers to other confidential communications between Mr Levitan and Mr Richter. The Respondents maintain a claim for legal professional privilege in respect of those other communications, and privilege is maintained over the redacted part of the 1 September Email in order to prevent a waiver of other communications. The part of the email that is redacted is not required to enable a proper understanding of the part of the 1 September Email that has been disclosed (or the 6 September 2021 response).
57 The test applied to determine the scope of any waiver of associated material is whether the material that the party has chosen to release from privilege represents the whole of the material relevant to the same issue or subject matter: AWB (No 5) at [164] citing Attorney-General (NT) v Maurice [1986] HCA 80; (1986) 161 CLR 475 at 482, 484, 488 and 498β499. That is, whether the production of the document impliedly waives privilege in associated material. I observe that Mr Bartlett does not suggest that the redacted passages relate to some other subject matter though it is said that the redacted passages do not concern or touch upon the arrangement with Person 56.
58 Moreover, in so far as the respondents depose that the redacted part of the email is not necessary to enable a proper understanding of the disclosed aspect, I note that in AWB (No 5), Young J observed at [167]:
AWB relied upon the way in which the principle was formulated by the Court of Appeal in British American Tobacco Australia Services Ltd v Cowell (2002) 7 VR 524 (at [121]):
A reference in one letter of advice to an earlier letter of advice does not expose the latter to scrutiny by the other party to litigation merely because legal professional privilege is waived in relation to the former: implied waiver is not so generous a doctrine. As we apprehend it, where legal professional privilege is waived in relation to one piece (or part) of advice, the privilege is impliedly waived in relation to another if β and only if β that other is necessary to a proper understanding of the first. As established by the High Court (at least since Mann v Carnell) the test in such cases is whether it would be "inconsistent" for a party to rely upon, and so to waive legal professional privilege in respect of, the one without also being taken to have waived privilege in respect of the other.
It is no doubt correct that a mere reference to the existence of legal advice in a disclosed document will not be regarded as a waiver of its contents, albeit a different conclusion would follow if the gist, substance or conclusion of the legal advice is voluntarily disclosed. But, with great respect to their Honours, the proposition concerning waiver of associated material is expressed too narrowly and in a way that is not consistent with the test propounded by the High Court in Maurice. The principle propounded by the Court of Appeal may work adequately enough in some circumstances, particularly where privilege is sought to be maintained over one part of a single piece of legal advice, but in other circumstances it will not give effect to the principles explained in Maurice.
59 The email of 1 September 2021, in redacted form, is in the following terms:
Dear Sean
XXXXXXX XXXXXXXXXXXXXX XXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXX XXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXX
XXXXXXXXXXX we understand that your client can give relevant evidence in relation to two missions the subject of these proceedings: (a) a mission to Darwan on 11 September 2012 (Darwan); and (b) a mission to Fasil on 5 November 2012 (Fasil). If your client agrees to speak with us about Darwan and agrees not oppose an application to call him as a witness, we undertake that we will adopt the following position if your client objects under s 128 of the Evidence Act 1995 (Cth) to giving particular evidence in relation to Fasil, or evidence on Fasil generally:
1. we agree not to oppose a submission by your client under s 128(1)(a) that the evidence may tend to prove that he has committed an offence against or arising under Australian law;
2. we agree not to oppose a submission by your client under s 128(2) that there are reasonable grounds for the objection; and
3. if the Court determines that there are reasonable grounds for such an objection, and your client does not willingly give the evidence with the protection of a certificate issued under s 128(3)(b)(i), we agree not to ask the Court to require your client to give the evidence under s 128(4) of the Evidence Act.
Please let me know if you would like to discuss any aspect of the above.
Kind regards
Dean
60 It records an agreement between the respondents and Person 56 as to the basis on which he would not oppose an application by the respondents to call him to give evidence.
61 The response from Mr Richter, lawyer for Person 56, emailed on 6 September 2021, was relevantly as follows:
I confirm that I have spoken with XXX and he is prepared to go forward on the basis as set out in your email of 1 September 2021, provided that your client does not object to a section 128 application in relation to all aspects of his Afghanistan service other than Darwan.
He is prepared to meet with you and/or your counsel, provided that it is outside of his working roster - he currently works 8 days on/8 days off and is currently working.
I will be available to speak by telephone tomorrow morning.
62 Having regard to what was voluntarily waived and given the context in which this issue arises, namely reliance by the respondents on the agreement with Person 56 at this time, to explain the circumstances of their application for leave to issue the subpoena, it would be inconsistent for privilege to be maintained over the remainder of the document.
Document 12 (Email of 5 August 2021)
63 This email is between Mr Richter and Mr Reilly, of the Department of Defence, dated 5 August 2021.
64 The respondents have redacted one sentence of the email. The basis for doing so is articulated in the Second November Bartlett Affidavit at [9(d)], as follows:
Part of document 12 discloses a confidential communication between the Respondents' solicitor, Mr Levitan, and Person 56's legal representative, Mr Richter, made for the dominant purpose of the Respondents being provided with professional legal services relating to these proceedings. The Respondents did not authorise Mr Richter to disclose the contents of that communication.
65 The email, inter alia, purports to be an explanation by Mr Richter to Mr Reilly as to what has been a recent contact by the respondents' solicitors, with the consequence they are now back to "square 1" because it is likely that Person 56 is to be subpoenaed.
66 Again, the legal issue is the same that is posed in respect to the email of 1 September 2021, discussed above, and is to be decided in the factual context already described. The redacted portion relates to a communication with the respondents, as is apparent from the passage recited above. I note that Mr Bartlett does not suggest that Mr Richter was informed that the communication was confidential.
67 I have inspected this document. The redacted material would fall within the scope of the waiver by the respondents, described in more detail below.
Remaining documents
68 The applicant submitted that the voluntary waiver referred to at [7] and [8] of the First November Bartlett Affidavit, constitutes an issue waiver, which extends to any other communication referred to in the objection schedules between the respondents and Person 56 concerning this arrangement or understanding. As a consequence, the imputed waiver covers all of the other documents in the objection schedules to the extent that those documents record such communications or otherwise concern or touch upon the arrangement or understanding. While not accepting the breadth of the waiver, the respondents initially contended that only Document 17 (the email of 1 September 2021) falls within that description, but it was accepted at the hearing that, depending on the meaning of "concern or touch upon", Documents 1 and 2 might also be within scope.
69 As noted above, the email of 1 September 2021 provided information as to the existence of the arrangement or understanding.
70 The same issue arises in respect to these documents, as addressed in respect to the email of 1 September 2021. It relates to the scope of the waiver.
71 In the circumstances, such waiver necessarily includes those documents that record such communications or otherwise concern or touch upon the arrangement or understanding. As noted above, the respondents originally contended that only the email of 1 September 2021 fell within that description. That reflects an unduly narrow interpretation of what documents might be said to "concern or touch upon" the terms of the agreement. It, in effect, confines it to the terms of the agreement. The concept of associated material, that is material concerning or touching on the agreement, is broader than merely the terms of the understanding or agreement. To restrict the scope of the waiver in the manner sought would enable the respondents who seek to rely on the existence of the understanding or agreement, and timing thereof, to obtain an unfair advantage, given that the applicant would be deprived of any opportunity to scrutinise the assertions.
72 In that context, since the application for leave was filed, the respondents have provided to the applicant two emails between Mr Richter and Mr Levitan when it became apparent privilege had been waived as a consequence of the October Bartlett Affidavit. Those emails are dated 26 February 2020 and 26 October 2020, which reflect that Person 56 was not prepared to give evidence. At the same time, the respondents provided to the applicant the email of 1 September 2021, voluntarily waiving privilege as to the terms of the understanding or arrangement.
73 Given the nature of the application, and the use to be made of the material already disclosed, the waiver goes beyond recording the terms of the agreement and includes the circumstances associated with its making. This would necessarily include documents reflecting on steps taken to broker the agreement and its timing (which includes earlier attempts to have Person 56 give evidence, even if unsuccessful). Such documents concern or touch upon the arrangement or understanding. In the circumstances of this case, such documents are associated with the existence and terms of the understanding or arrangement which underpins the timing of the application for leave.
74 It was necessary to inspect the documents to determine which, if any, fall within the scope of what has been waived. I am satisfied, as the respondents indicated, Documents 1, 2 and 17 fall within the description, although those documents have been addressed separately above. Inspecting the documents confirmed the conclusions referred to above. However, in addition, the email of 3 March 2021, being Document 3 in the First Objection Schedule which relates to category 7, also falls within the scope. It follows that privilege has also been waived in respect to that document.
Conclusion
75 For the reasons above, privilege has been waived in respect to Documents 1, 2 and 17 in the First Objection Schedule, as well as Document 12 in the Third Objection Schedule. I also consider that privilege has been waived in the email of 3 March 2021, which is Document 3 in the First Objection Schedule. Accordingly, I grant the applicant access to these documents.
I certify that the preceding seventy-five (75) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Abraham.
Associate:
Dated: 14 December 2021
SCHEDULE OF PARTIES
NSD 1485 of 2018
NSD 1486 of 2018
NSD 1487 of 2018
Respondents
Second Respondent: NICK MCKENZIE
Third Respondent: CHRIS MASTERS
Fourth Respondent: DAVID WROE
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AUSTRALIAN COMPETITION TRIBUNAL
Application by DBNGP (WA) Transmission Pty Ltd [2018] ACompT 1
Review from: Economic Regulation Authority of Western Australia
File number: ACT 9 of 2016
Tribunal: FOSTER J (DEPUTY PRESIDENT)
MR ROBIN DAVEY (MEMBER)
MR RODNEY SHOGREN (MEMBER)
Date of Determination: 16 July 2018
Catchwords: ENERGY AND RESOURCES β application for review of an access determination made by the Economic Regulation Authority of Western Australia (ERA) in respect of the Dampier to Bunbury natural gas pipeline for the 2016-2020 regulatory period β two grounds of review, namely, whether the ERA erred in its determination of a nominal after tax return on equity of 6.98%, resulting in a nominal after tax weighted average cost of capital (WACC) of 5.83% because it failed to make an appropriate adjustment to beta in the SL-CAPM in order to accommodate alleged low beta bias in the outputs of that model and whether the ERA erred in its determination of gamma viz the value of imputation credits at 0.40 for the purposes of r 87A of the National Gas Rules because it applied an incorrect utilisation rate (theta) in the relevant formula β no reviewable error found in the ERA's determination
Legislation: Acts Interpretation Act 1901 (Cth)
Acts Interpretation Act 1915 (SA)
Corporations Act 2001 (Cth) s 237(2)(d)
Interpretation Act 1984 (WA)
National Gas Access (WA) Act 2009 (WA), ss 3, 6B(1), 7, 9(1), Pt 3
National Gas Access (Western Australia) Law, ss 2, 2A, 8, 9, 10, 20, 27, 244, 245, 246, 248β251, 252, 258A, 259, 261
National Gas Law, ss 2, 26, 27, 28, 68C, 91, Ch 1 Pt 3, Ch 1 Pt 4, Ch 2 Pt 2, Ch 8 Pt 5, Ch 9 Pt 1 Div 2, Sch 2 cll 1, 7, 8, 9, 11, 12, 13
National Gas (South Australia) Act 2008 (SA)
National Gas Access (WA) (Part 3) Regulations 2009, s 4, Sch 1 cl 2(1)
National Gas Rules, rr 52, 64, Pt 9
Statutes Amendment (National Electricity and Gas LawsβLimited Merits Review) Act 2013 (SA)
Cases cited: Application by ActewAGL Distribution [2010] ACompT 4
Application by ActewAGL Distribution [2017] ACompT 2
Application by ATCO Gas Australia Pty Ltd [2016] ACompT 10
Application by ElectraNet Pty Limited (No 3) [2008] ACompT 3
Application by Energy Australia & Ors [2009] ACompT 8
Application by Envestra Limited [2011] ACompT 12
Application by Envestra Limited (No 2) [2012] ACompT 4
Application by SA Power Networks [2016] ACompT 11
Applications by Public Interest Advocacy Service Ltd and Ausgrid Distribution [2016] ACompT 1
Australian Competition and Consumer Commission v Australian Competition Tribunal (2016) 152 FCR 33
Australian Energy Regulator v Australian Competition Tribunal (No 2) (2017) 345 ALR 1; [2017] FCAFC 79
House v The King (1936) 55 CLR 499
Re: Application by ElectraNet Pty Limited (No 3) [2008] ACompT 3
SA Power Networks v Australian Competition Tribunal (No 2) [2018] FCAFC 3
Date of hearing: 13β16 February 2017
Date of last submissions: 3 April 2018
Registry: Western Australia
Category: Catchwords
Number of paragraphs: 362
Counsel for the Applicants: Mr PJ Brereton SC, Dr RCA Higgins and Mr TN Owen
Solicitor for the Applicants: Clayton Utz
Counsel for the Economic Regulation Authority of Western Australia: Mr NJ O'Bryan SC and Mr EM Heenan
Solicitor for the Economic Regulation Authority of Western Australia: Holman Fenwick Willan
IN THE AUSTRALIAN COMPETITION TRIBUNAL
ACT 9 of 2016
RE: APPLICATION UNDER SECTION 245 OF THE NATIONAL GAS ACCESS (WESTERN AUSTRALIA) LAW FOR A REVIEW OF THE DECISION MADE BY THE ECONOMIC REGULATION AUTHORITY OF WESTERN AUSTRALIA TO GIVE EFFECT TO ITS PROPOSED REVISIONS TO AN ACCESS ARRANGEMENT FOR THE DAMPIER TO BUNBURY NATURAL GAS PIPELINE, PURSUANT TO RULE 64 OF THE NATIONAL GAS RULES
APPLICANTS: DBNGP (WA) TRANSMISSION PTY LTD (ACN 081 609 190) ON ITS OWN BEHALF AND ON BEHALF OF DBNGP (WA) NOMINEES PTY LTD (ACN 081 609 289) AS TRUSTEE OF THE DBNGP WA PIPELINE TRUST, AND DBNGP (WA) NOMINEES PTY LTD (ACN 081 609 289) AS TRUSTEE OF THE DBNGP WA PIPELINE TRUST
TRIBUNAL: FOSTER J (DEPUTY PRESIDENT)
MR ROBIN DAVEY (MEMBER)
MR RODNEY SHOGREN (MEMBER)
DATE OF DETERMINATION: 16 July 2018
THE TRIBUNAL DETERMINES THAT:
1. The Application for Review the subject of leave granted to the applicants by the Tribunal on 13 February 2017 be dismissed.
2. The designated reviewable regulatory decision, being the final decision of the Economic Regulation Authority of Western Australian published on 30 June 2016 on Proposed Revisions to the Access Arrangement for the Dampier to Bunbury natural gas pipeline for the regulatory period 2016-2020, is affirmed.
TABLE OF CONTENTS
Introduction [1]
The Regulatory Process [16]
The Consultation Process [29]
The Relevant Legislative Background [42]
The Relevant Provisions [42]
The WA Act [42]
The NGL(WA) [47]
The NGR [79]
Relevant Authorities [95]
The Grounds of Review [124]
Ground 1 β The Owners' Challenge to the ROE Decision [141]
The Final Decision (ROE) [142]
The Owners' Submissions [196]
The ERA's Submissions [229]
Consideration [257]
Ground 2 β The Owners' Challenge to the Gamma Decision [297]
The Issue [297]
The Final Decision (Gamma) [306]
The Full Court's Decision in AER v ACT (No 2) [321]
Consideration [329]
The Leave Application [350]
Timing of the Application [352]
Serious issue to be heard and determined (s 248(a)) [353]
Materially preferable designated NGO decision (s 248(b)) [357]
Revenue threshold [358]
Conclusion [362]
REASONS FOR DETERMINATION
THE TRIBUNAL:
Introduction
1 On 30 June 2016, the Economic Regulation Authority of Western Australia (ERA) published its final decision and its reasons for that decision (the final decision) on Proposed Revisions to the Access Arrangement for the Dampier to Bunbury Natural Gas Pipeline (the pipeline) for the regulatory period 2016β2020 (the current regulatory period). 2016β2020 was the fourth regulatory period in respect of the pipeline which has been the subject of regulation by the ERA.
2 The final decision was made pursuant to the National Gas Law (NGL), as implemented in Western Australia by the National Gas Access (WA) Act 2009 (WA) (the WA Act), and the National Gas Rules (NGR), as enacted by the National Gas (South Australia) Act 2008 (SA) and as implemented in Western Australia by the WA Act. The NGR have the force of law in Western Australia (see s 26 of the National Gas Access (Western Australia) Law (NGL(WA)). In Western Australia, the underlying NGL as modified from time to time applies as the NGL(WA). The text of the NGL(WA) is set out in Schedule 1 to the WA Act. Section 9(1) of the WA Act provides that "National Gas Law" or "this law", when used in the NGL(WA) and in the National Gas Access (WA) (Part 3) Regulations (Regs), means the NGL(WA).
3 The final decision addressed an amended revised access arrangement proposal (the owners' amended proposal) which had been submitted to the ERA by the owners of the pipeline on 22 February 2016.
4 The owners of the pipeline are DBNGP (WA) Transmission Pty Ltd, acting on its own behalf and on behalf of DBNGP (WA) Nominees Pty Ltd as trustee of the DBNGP WA Pipeline Trust, and DBNGP (WA) Nominees Pty Ltd as trustee of the DBNGP WA Pipeline Trust. We shall refer to these corporations as "the owners".
5 On 21 July 2016, the owners filed an application for the grant of leave under s 245 of the NGL(WA) to apply to review the final decision (Review Application). That decision was a "reviewable regulatory decision" and a "full access arrangement decision" made by the ERA in relation to the pipeline. The final decision was made pursuant to r 64 of the NGR.
6 In their Review Application, the owners sought leave to review four matters.
7 On 13 October 2016, the owners informed the Tribunal that they did not wish to press their application in respect of two of those four matters viz ground (iii) (the Subsequent Costs (non-turbine reactive maintenance) ground) and ground (iv) (the Definition of the P 1 Reference Service ground).
8 After the abandonment of the grounds of review referred to at [7] above, there remained for determination by the Tribunal grounds (i) and (ii). Those grounds concern:
(a) The ERA's determination of a nominal after tax return on equity of 6.98%, resulting in a nominal after tax weighted average cost of capital (WACC) of 5.83% (the ROE decision); and
(b) The ERA's determination of a value for imputation credits (gamma) of 0.4 (the gamma decision).
9 In their Review Application, the owners explained their contentions in respect of the ROE decision in Annexure 1 to that Application and in respect of the gamma decision in Annexure 2 to that Application.
10 Immediately before the commencement of the hearing of the Review Application, which commenced at 10.15 am on 13 February 2017, the Tribunal directed that the owners have leave to apply to the Tribunal for a review of the ROE decision and the gamma decision. At the time when it made that direction, the Tribunal informed the parties that it would provide reasons for its decision to grant that leave as part of its Reasons for Determination which would be published in due course in support of its decision in respect of grounds (i) and (ii) raised by the owners in their Review Application.
11 The pipeline is Western Australia's key gas transmission pipeline, extending over some 1,539 km underground. It originates at a point immediately adjacent to the North West Shelf Joint Ventures Domestic Gas Plant on the Burrup Peninsula in the Pilbara region of Western Australia and passes through the Perth metropolitan area, Kwinana, Pinjarra and Wagerup, ultimately terminating at Main Line Valve 157 which is located at Clifton Road, north of Bunbury, in the south-west region of Western Australia.
12 The pipeline is an "old scheme covered pipeline", a "scheme pipeline" and a "covered pipeline" under the WA Act, the NGL(WA) and the NGR. It is also a "designated pipeline" within the definition of "designated pipeline" in s 2 of the NGL(WA) (see s 4 of the National Gas Access (WA) (Part 3) Regulations 2009 and cl 2(1) of Sch 1 to those Regulations).
13 Each of the owners is a "service provider" within the meaning of s 8 of the NGL(WA). This is because the owners own, control and operate a scheme pipeline.
14 The pipeline is an ERA pipeline within the meaning of that expression as defined in s 9(1) of the WA Act. For this reason, the ERA is designated as the relevant regulator (see the definition of "regulator" in s 9(1)).
15 Section 27 of the NGL(WA) prescribes the functions and powers of the ERA. The ERA is responsible for the economic regulation of pipeline services provided by service providers (such as the owners) by means of or in connection with a scheme pipeline. In particular, under Pt 9 of the NGR, the ERA is responsible for determining the total revenue for each regulatory year of an access arrangement period which the owners may earn for the provision by the owners of pipeline services through the pipeline.
The Regulatory Process
16 On 31 December 2014, the owners submitted to the ERA proposed revisions to the access arrangement for the pipeline (the owners' original proposal). That proposal was submitted to the ERA pursuant to r 52 of the NGR.
17 Under the NGR, the role of the ERA was to approve, or not approve, the proposed revised access arrangement contained in the owners' original proposal in accordance with the NGL(WA) and the NGR.
18 On 20 April 2015, the ERA published an issues paper in response to the owners' original proposal and, at the same time, invited submissions from interested parties. Some submissions were received.
19 On 22 December 2015, the ERA published its Draft Decision in relation to the owners' original proposal (draft decision). The draft decision was not to approve the owners' original proposal. In its draft decision, the ERA said that the owners had to make 74 amendments to their proposal before it would approve the access arrangement contained therein. At the same time, the ERA invited the owners to submit revisions to their original proposal and to do so by 22 February 2016.
20 On 22 February 2016, the owners submitted their amended proposal. At the same time, they also provided supporting information to the ERA.
21 The ERA then invited public submissions in respect of its draft decision and in respect of the owners' amended proposal. The closing date for such submissions was 22 March 2016. Three interested parties made submissions to the ERA as did the owners.
22 The ERA subsequently invited a further round of public submissions in relation to a matter which had not been considered in the draft decision. Further submissions were received from the owners and from one other interested party.
23 At pars 9β14 of its final decision, the ERA made the following remarks concerning the process which it had undertaken in dealing with the owners' application to have revisions made to the access arrangement in respect of the pipeline:
9. Section 28(1) and (2) of the NGL(WA) were substantially amended in 2013 to require the Authority to specify how the constituent components of this Final Decision related to each other and how the Authority has taken those interrelationships into account. Subsequent to these amendments, the NGL now anticipates that there may be more than one possible decision that will or is likely to contribute to the achievement of the NGO. In such cases, the Authority must make the decision that will or is likely to contribute to the achievement of the NGO to the greatest degree, and provide reasons.
10. The NGL(WA) does not prescribe how the Authority is to apply the requirements and, as a result, the Authority has used its regulatory judgement. The Authority has applied these requirements by determining total revenue and reference tariffs in accordance with the detailed requirements of the NGR.
11. The Authority's Final Decision is complex and many of the components of the decision are interrelated. The adoption of a value for a component has implications for other elements or values elsewhere in the decision. For example:
β’ the value of imputation credits (gamma) has an impact on the estimated cost of corporate income tax;
β’ the value of imputation credits (gamma) has an impact on the estimate of the return on equity, through the estimates of the market risk premium;
β’ the definition of the benchmark efficient entity has strong links to all aspects of the rate of return, including:
β the composition of the benchmark efficient sample;
β the relevant estimation methods, financial models and market data and other evidence used for estimating the return on equity and the return on debt;
β the gearing;
β beta;
β the credit rating; and
β the debt risk premium;
β’ the return on debt is considered in conjunction with the return on equity, to ensure consistency;
β’ the definition of the benchmark efficient entity also has implications for whether to revalue the RAB at each access arrangement revision;
β’ the service provider's governance arrangements and risk management will affect most aspects of the proposal, including capital and operating expenditure forecasts; and
β’ the approved demand forecasts will affect the calculation of reference tariffs.
12. In making its decision in accordance with the detailed requirements of the NGR and being mindful of any interrelationships between components, the Authority considers that it has made a Final Decision that will or is likely to contribute to the achievement of the NGO to the greatest degree. The Authority's assessment is set out in the following sections of this Final Decision.
13. After considering DBP's amended proposal and its supporting submissions, the submissions from other interested parties, and advice from the Authority's technical and economic advisors, the Authority's Final Decision is not to approve the amended proposal. The Authority's reasons for refusing to approve the amended proposal are set out in this Final Decision.
14. Under rule 64 of the NGR, when the Authority refuses to approve an access arrangement proposal, the Authority is required to itself propose revisions to the access arrangement and make a decision giving effect to its proposal within two months of its Final Decision.
24 The above remarks accurately capture the fundamental features of the regulatory task which the ERA was obliged to perform.
25 In the present case, as permitted by r 64(3) of the NGR, the ERA decided not to consult on its ultimate access arrangement proposal. Instead, the ERA, as part of the final decision, made a decision giving effect to its access arrangement proposed under r 64(4) of the NGR. That decision is a "reviewable regulatory decision" (see the definition in s 2 of the NGL(WA) and s 244 of the NGL(WA)). It is also a "designated reviewable regulatory decision" (see the definition in s 2 of the NGL(WA)).
26 Pursuant to r 64(6) of the NGR, the revisions to the access arrangement made by the ERA took effect from 1 July 2016.
27 The ERA included within the final decision its proposed revisions to the owners' amended proposal and its own revisions to the access arrangement.
28 Some minor corrections were made to the final decision on 20 July 2016. The form of the final decision under consideration in the present matter incorporates the revisions made on 20 July 2016.
The Consultation Process
29 On 19 August 2016, Middleton J, as President of the Tribunal, made a number of Directions in this matter. Direction 2 required the ERA to communicate to all third parties who had made submissions in relation to the determinations the subject of the present Review Application advising them of certain matters by 23 August 2016, with an invitation to recipients (or any of their respective members) to:
(e) indicate to the Tribunal that they wish to receive and/or comment on the proposal regarding Tribunal consultations referred to in paragraphs 12 and 13 below of these directions; and
(f) express an interest in being notified of and/or participating in the Tribunal consultations in this review in the event that they do not intervene in the Tribunal review,
by Monday 5 September 2016.
30 Directions 12 and 13 made by Middleton J on 19 August 2016 concerned the community consultation process and directed the parties to take a number of steps to assist the Tribunal in relation to community consultation.
31 On 23 August 2018, the ERA sent a letter to those parties to whom Direction 2 made on 19 August 2017 had been directed. That letter included notice that intervening parties were required to notify their intention to intervene and file applications for leave to intervene by 15 September 2016. That letter also included an invitation for interested parties to indicate, by 5 September 2016, whether they wished to receive notice of and/or comment on proposals regarding the Tribunal's public consultations and whether they were interested in being notified of and/or participating in the Tribunal's public consultation process in the event that they did not intervene in the Tribunal review.
32 The ERA's letter was sent to the following recipients:
(a) Catherine Rousch, Manager Regulatory Compliance, Alinta Energy;
(b) Prue Weaver, Marketing Manager Petroleum, BHP Billiton;
(c) Dominic Rodwell, Manager Gas β Business Development, CITIC Pacific Mining;
(d) Stephanie McDougall, Price Review Manager, United Energy & Multinet Gas;
(e) Julie Lane, Executive Assistant to General Manager Business Development, Wesfarmers Chemicals, Energy & Fertilisers; and
(f) Cameron Leckey, Principal Associate (CLE Town Planning & Design), Perron Developments.
33 By letter dated 31 August 2016, Wesfarmers Chemicals, Energy & Fertilisers advised the Tribunal that it:
β’ [wished] to receive and/or comment on proposals regarding the Tribunal's public consultations; and
β’ [expressed] an interest in being notified of and/or participating in the Tribunal's public consultations in the review in the event they do not intervene in the Tribunal review.
34 By letter dated 7 September 2016, CITIC Pacific Mining advised the Tribunal that it would like to:
β’ receive and/or comment on the proposal regarding Tribunal consultations referred to the directions; and
β’ Be notified of and/or participating in the Tribunal consultations in this review in the even that CPMM do not intervene in the Tribunal review.
35 By letter dated 12 September 2016, BHP Billiton Petroleum (Australia) Pty Ltd made the following request:
Notwithstanding the indication date of Monday, 5 September 2016, BHPB requests to receive/and or comment of proposal regarding the Tribunal's public consultations referred to above and expresses and interest in being notified or and/or participating in the Tribunal's public consultations in this review in the event that BHPB do not intervene in the Tribunal review.
36 No other responses to the ERA's letter were received.
37 The Tribunal then issued a formal invitation to consult in the following terms:
Re: ACT 9 of 2016: DBNGP WA Pipeline Trust and DBNGP (WA) Transmission Pty Ltd
Invitation to Consult
The Australian Competition Tribunal is inviting:
β’ users and prospective users of the Dampier Bunbury Natural Gas Pipeline services; and
β’ any user or consumer associations or user or consumer interest groups,
to consult with the Tribunal before it determines the application by the owner and operator of the pipeline to review a determination by the Economic Regulation Authority of Western Australia (the ERA) on the revenue they may earn from the operation of the pipeline from 1 January 2016 to 31 December 2020. You are being sent this invitation because you fall within the class of invitees referred to above.
Date, time and place
The public consultation forum will be held on Wednesday 7 December 2016, from 10.15 am to 5.00 pm in the Amenities Room, Level 2, at the Peter Durack Commonwealth Law Courts Building, 1 Victoria Avenue, Perth, Western Australia.
RSVP
To participate in the consultations you must provide the following information to the Tribunal Registry by email at [email protected] by 3.00 pm AWST on Thursday 1 December 2016.
β’ your contact details (including name, telephone number and email address);
β’ the details of any association or group that you represent;
β’ the topics you wish to address in your submission;
β’ if you are or represent an association or a group, the name and role of one nominated speaker and the names and roles of other members who will be attending; and
β’ whether you will be participating:
o as current and prospective users of the relevant services;
o as a representative of a user or consumer association;
o as a representative of a user or consumer interest group; or
o in some other capacity and, if so, what capacity.
Written submissions prior to registration deadline
In lieu of attendance, the Tribunal will accept written submissions that are provided to the Tribunal Registry by email at [email protected] in accordance with section 1.4 of the enclosed protocol and by no later than 3.00 pm AWST on Thursday 1 December 2016.
Further information
Enclosed you will find a copy of the Explanatory Guide for participants in the Tribunal's Public Consultation Forum and the Protocol for the Public Consultation. These documents will provide important information for participants in the public consultation.
The ERA's determination may be found on its website, www.erawa.com.au, together with the material it took into account in making its determination.
The application for review and submissions in support of it may be found on the Tribunal's website, www.competitiontribunal.gov.au together with the context of, and arrangements for, the consultations and matters that a participant may want to consider in preparing a presentation to the Tribunal.
Yours sincerely
Tim Luxton
Registrar
Australian Competition Tribunal
38 This invitation was emailed to the six individuals referred to at [32] above on 7 November 2016. On 10 November 2016, a formal invitation was issued to the following interest groups, via email:
(a) Luke Hoare, Principal Policy Advisor, Chamber of Commerce and Industry (WA);
(b) Reg Howard-Smith, Chief Executive, Chamber of Minerals and Energy of WA (Inc); and
(c) Chris Twomey, Director Social Policy, WA Council of Social Services.
39 In addition, a Notice in similar terms was posted on the Tribunal website. That Notice was publicly accessible. On 10 November 2016, Notices were published in both The West Australian and The Australian newspapers.
40 The Tribunal did not receive any registrations in response to its formal invitation to consult or in response to its public Notices by the registration deadline. Accordingly, the community consultation was cancelled by the Tribunal, as it was unnecessary in light of the above matters.
41 On or around 7 November 2016, a Notice was published on the Tribunal website in the following terms:
Community Consultation
In the matter of an application under section 245 of the National Gas Access (Western Australia) Law for a review of the decision made by the Economic Regulation Authority of Western Australia to give effect to its proposed revisions to an access arrangement for the Dampier to Bunbury Natural Gas Pipeline, pursuant to rule 64 of the National Gas Rules.
DBNGP WA Pipeline Trust and DBNGP (WA) Transmission Pty Ltd (ACT 9 of 2016)
As no registrations for the Public Consultation Forum in ACT 9 of 2016 were received by the Tribunal by 3.00 pm AWST on Thursday 1 December 2016, the Public Consultation Forum has now been cancelled by the Tribunal.
The Relevant Legislative Background
The Relevant Provisions
The WA Act
42 Section 3(2) of the WA Act provides that words and expressions used in the NGL(WA) (whether or not defined in s 9(1) of the WA Act) and in the WA Act have the same respective meanings in the WA Act as they have in the NGL(WA).
43 Section 3(3) of the WA Act provides that the provisions of s 3 of that Act do not apply to the extent that the context or subject matter otherwise indicates or requires.
44 Section 6B(1) of the WA Act provides that the Interpretation Act 1984 (WA) does not apply to the NGL(WA), to regulations under Pt 3 of the WA Act or to Rules under the NGL(WA) (ie the NGR).
45 Section 7 of the WA Act provides:
7. National Gas Access (Western Australia) Law
(1) The Western Australian National Gas Access Law text β
(a) applies as a law of Western Australia; and
(b) as so applying may be referred to as the National Gas Access (Western Australia) Law.
(2) In subsection (1) β
Western Australian National Gas Access Law text means the text that results from modifying the National Gas Law, as set out in the South Australian Act Schedule for the time being in force, to give effect to section 7A(3) and (4) and Schedule 1.
46 Section 9(3) provides that the Acts Interpretation Act 1915 (SA) and certain other South Australian Acts do not apply to the NGL as set out in the Schedule to the National Gas (South Australia) Act 2008 (SA) in its application with modifications, as a law of WA.
The NGL(WA)
47 The following definitions contained in s 2 of the NGL(WA) are relevant:
access arrangement means an arrangement setting out terms and conditions about access to pipeline services provided or to be provided by means of a pipeline;
access determination means a determination of the dispute resolution body under Chapter 6 Part 3 and includes a determination varied under Part 4 of that Chapter;
applicable access arrangement means a limited access arrangement or full access arrangement that has taken effect after being approved or made by the AER under the Rules and includes an applicable access arrangement as variedβ
(a) under the Rules; or
(b) by an access determination as provided by this Law or the Rules;
applicable access arrangement decision meansβ
(a) a full access arrangement decision; or
(b) a limited access arrangement decision;
covered pipeline means a pipelineβ
(a) to which a coverage determination applies; or
(b) deemed to be a covered pipeline by operation of section 126 or 127;
covered pipeline service provider means a service provider that provides or intends to provide pipeline services by means of a covered pipeline;
designated pipeline means a pipeline classified by the Regulations, or designated in the application Act of a participating jurisdiction, as a designated pipeline;
Noteβ
A light regulation determination cannot be made in respect of pipeline services provided by means of a designated pipeline: see sections 109 and 111.
designated reviewable regulatory decision means an applicable access arrangement decision (other than a full access arrangement decision that does not approve a full access arrangement);
draft Rule determination means a determination of the AEMC under section 308;
ERA means the Economic Regulation Authority established by section 4 of the Economic Regulation Authority Act 2003 of Western Australia;
final Rule determination means a determination of the AEMC under section 311;
full access arrangement means an access arrangement thatβ
(a) provides for price or revenue regulation as required by the Rules; and
(b) deals with all other matters for which the Rules require provision to be made in an access arrangement;
full access arrangement decision means a decision of the AER under the Rules thatβ
(a) approves or does not approve a full access arrangement or revisions to an applicable access arrangement submitted to the AER under section 132 or the Rules; or
(b) makes a full access arrangementβ
(i) in place of a full access arrangement the AER does not approve in that decision; or
(ii) because a service provider does not submit a full access arrangement in accordance with section 132 or the Rules;
(c) makes revisions to an access arrangementβ
(i) in place of revisions submitted to the AER under section 132 that the AER does not approve in that decision; or
(ii) because a service provider does not submit revisions to the AER under section 132;
national gas legislation meansβ
(a) the National Gas (South Australia) Act 2008 of South Australia and Regulations in force under that Act; and
(b) the National Gas (South Australia) Law; and
(c) the National Gas Access (Western Australia) Act 2008 of Western Australia; and
(d) the National Gas Access (Western Australia) Law within the meaning given in the National Gas Access (Western Australia) Act 2008 of Western Australia; and
(e) Regulations made under the National Gas Access (Western Australia) Act 2008 of Western Australia for the purposes of the National Gas Access (Western Australia) Law; and
(f) an Act of a participating jurisdiction (other than South Australia or Western Australia) that applies, as a law of that jurisdiction, any part ofβ
(i) the Regulations referred to in paragraph (a); or
(ii) the National Gas Law set out in the Schedule to the National Gas (South Australia) Act 2008 of South Australia; and
(g) the National Gas Law set out in the Schedule to the National Gas (South Australia) Act 2008 of South Australia as applied as a law of a participating jurisdiction (other than South Australia or Western Australia); and
(h) the Regulations referred to in paragraph (a) as applied as a law of a participating jurisdiction (other than South Australia or Western Australia);
national gas objective means the objective set out in section 23;
National Gas Rules or Rules meansβ
(a) the initial National Gas Rules; and
(b) Rules made by the AEMC under this Law, including Rules that amend or revokeβ
(i) the initial National Gas Rules; or
(ii) Rules made by it;
old access law means Schedule 1 to the Gas Pipelines Access (Western Australia) Act 1998 as in force from time to time before the commencement of section 30 of the National Gas Access (WA) Act 2009;
old scheme classification or determination means a classification or determination under section 10 or 11 of the old access law in force at any time before the repeal of the old access law;
old scheme distribution pipeline means a pipeline that was, at any time before the repeal of the old access lawβ
(a) a distribution pipeline as defined in that law; and
(b) a covered pipeline as defined in the Gas Code;
old scheme transmission pipeline means a pipeline that was, at any time before the repeal of the old access lawβ
(a) a transmission pipeline as defined in that law; and
(b) a covered pipeline as defined in the Gas Code;
pipeline meansβ
(a) a pipe or system of pipes for the haulage of natural gas, and any tanks, reservoirs, machinery or equipment directly attached to that pipe or system of pipes; or
(b) a proposed pipe or system of pipes for the haulage of natural gas, and any proposed tanks, reservoirs, machinery or equipment proposed to be directly attached to the proposed pipe or system of pipes; or
(c) a part of a pipe or system of pipes or proposed pipe or system of pipes referred to in paragraph (a) or (b),
but does not includeβ
(d) unless paragraph (e) applies, anything upstream of a prescribed exit flange on a pipeline conveying natural gas from a prescribed gas processing plant; or
(e) if a connection point upstream of an exit flange on such a pipeline is prescribed, anything upstream of that point; or
(f) a gathering system operated as part of an upstream producing operation; or
(g) any tanks, reservoirs, machinery or equipment used to remove or add components to or change natural gas (other than odourisation facilities) such as a gas processing plant; or
(h) anything downstream of a point on a pipeline from which a person takes natural gas for consumption purposes;
pipeline service meansβ
(a) a service provided by means of a pipeline, includingβ
(i) a haulage service (such as firm haulage, interruptible haulage, spot haulage and backhaul); and
(ii) a service providing for, or facilitating, the interconnection of pipelines; and
(b) a service ancillary to the provision of a service referred to in paragraph (a),
but does not include the production, sale or purchase of natural gas or processable gas;
price or revenue regulation means regulation ofβ
(a) the prices, charges or tariffs for pipeline services to be, or that are to be, provided; or
(b) the revenue to be, or that is to be, derived from the provision of pipeline services;
regulator has the meaning given to that term in section 9(1) of the National Gas Access (WA) Act 2009;
relevant Regulator has the same meaning as in section 2 of the old access law;
revenue and pricing principles means the principles set out in section 24;
reviewable regulatory decision has the meaning given by section 244;
scheme pipeline meansβ
(a) a covered pipeline; or
(b) an international pipeline to which a price regulation exemption applies;
service provider has the meaning given by section 8;
transmission pipeline means a pipeline that is classified in accordance with this Law or the Rules as a transmission pipeline and includes any extension to, or expansion of the capacity of, such a pipeline when it is a covered pipeline that, by operation of an applicable access arrangement or under this Law, is to be treated as part of the pipeline;
Noteβ
See also sections 18 and 19.
Tribunal means the Australian Competition Tribunal referred to in the Trade Practices Act 1974 of the Commonwealth and includes a member of the Tribunal or a Division of the Tribunal performing functions of the Tribunal;
48 Section 2A of the NGL(WA) provides:
2A. Meaning of AER modified
(1) In this Law, other than in the definition of AER in section 2, a reference to the AER is to be read as a reference to the regulator (whether the ERA or the AER) except to the extent that subsection (2) gives a different meaning.
(2) To the extent to which a reference to the AER is capable of being read as a reference to the Australian Energy Regulator established by section 44AE of the Trade Practices Act 1974 of the Commonwealth acting as the disputes resolution body, the term is to be read as having or including that meaning.
[Section 2A inserted by WA Act Sch. 1 cl. 4.]
49 In effect, for present purposes, pursuant to s 9(1) of the WA Act, the ERA is designated as the relevant regulator and references to the Australian Energy Regulator (AER) in the NGL(WA) and in the NGR should be read as references to the ERA.
50 Sections 8, 9 and 10 of the NGL(WA) provide:
8. Meaning of service provider
(1) A service provider is a person whoβ
(a) owns, controls or operates; or
(b) intends to own, control or operate,
a pipeline or scheme pipeline, or any part of a pipeline or scheme pipeline.
Noteβ
A service provider must not provide pipeline services by means of a scheme pipeline unless the service provider is a legal entity of a specified kind: See section 131, and section 169 where the scheme pipeline is an international pipeline to which a price regulation exemption applies.
(2) A gas market operator that controls or operates (without at the same time owning)β
(a) a pipeline or scheme pipeline; or
(b) a part of a pipeline or scheme pipeline,
is not to be taken to be a service provider for the purposes of this Law.
9. Passive owners of scheme pipelines deemed to provide or intend to provide pipeline services
(1) This section applies to a person who owns a scheme pipeline but does not provide or intend to provide pipeline services by means of that pipeline.
(2) The person is, for the purposes of this Law, deemed to provide or intend to provide pipeline services by means of that pipeline even if the person does not, in fact, do so.
10. Things done by 1 service provider to be treated as being done by all of service provider group
(1) This section applies ifβ
(a) more than 1 service provider (a service provider group) carries out a controlling pipeline activity in respect of a pipeline (or a part of a pipeline); and
(b) under this Law or the Rules a service provider is required or allowed to do a thing.
(2) A service provider of the service provider group (the complying service provider) may do that thing on behalf of the other service providers of the service provider group if the complying service provider has the written permission of all of the service providers of that group to do that thing on behalf of the service provider group.
(3) Unless this Law or the Rules otherwise provide, on the doing of a thing referred to in subsection (2) by a complying service provider, the service providers of the service provider group on whose behalf the complying service provider does that thing, must, for the purposes of this Law and the Rules, each be taken to have done the thing done by the complying service provider.
(4) This section does not apply to a thing required or allowed to be done under section 131 or Chapter 4 Part 2.
(5) In this sectionβ
controlling pipeline activity means own, control or operate.
51 Here, the owners are "service providers" within s 8 of the NGL(WA).
52 Section 20 of the NGL(WA) provides:
20. Interpretation generally
Schedule 2 to this Law applies to this Law, the Regulations and the Rules and any other statutory instrument made under this Law.
The "Regulations" referred to in s 20 are the regulations made under Pt 3 of the National Gas Access (WA) Act 2009 that apply as a law of Western Australia. As already noted, we shall refer to those Regulations as "the Regs".
53 Schedule 2 to the NGL(WA) contains detailed rules governing the interpretation of the NGL(WA), the NGR and the Regs.
54 Chapter 1, Pt 3 and Pt 4 of the NGL(WA) provide:
Part 3 β National gas objective and principles
Division 1 β National gas objective
23. National gas objective
The objective of this Law is to promote efficient investment in, and efficient operation and use of, natural gas services for the long term interests of consumers of natural gas with respect to price, quality, safety, reliability and security of supply of natural gas.
Division 2 β Revenue and pricing principles
24. Revenue and pricing principles
(1) The revenue and pricing principles are the principles set out in subsections (2) to (7).
(2) A service provider should be provided with a reasonable opportunity to recover at least the efficient costs the service provider incurs inβ
(a) providing reference services; and
(b) complying with a regulatory obligation or requirement or making a regulatory payment.
(3) A service provider should be provided with effective incentives in order to promote economic efficiency with respect to reference services the service provider provides. The economic efficiency that should be promoted includesβ
(a) efficient investment in, or in connection with, a pipeline with which the service provider provides reference services; and
(b) the efficient provision of pipeline services; and
(c) the efficient use of the pipeline.
(4) Regard should be had to the capital base with respect to a pipeline adoptedβ
(a) in any previousβ
(i) full access arrangement decision; or
(ii) decision of a relevant Regulator under section 2 of the Gas Code;
(b) in the Rules.
(5) A reference tariff should allow for a return commensurate with the regulatory and commercial risks involved in providing the reference service to which that tariff relates.
(6) Regard should be had to the economic costs and risks of the potential for under and over investment by a service provider in a pipeline with which the service provider provides pipeline services.
(7) Regard should be had to the economic costs and risks of the potential for under and over utilisation of a pipeline with which a service provider provides pipeline services.
Division 3 β MCE policy principles
25. MCE statements of policy principles
(1) Subject to this section, the MCE may issue a statement of policy principles in relation to any matters that are relevant to the exercise and performance by the AEMC of its functions and powers inβ
(a) making a Rule; or
(b) conducting a review under section 83.
(2) Before issuing a statement of policy principles, the MCE must be satisfied that the statement is consistent with the national gas objective.
(3) As soon as practicable after issuing a statement of policy principles, the MCE must give a copy of the statement to the AEMC.
(4) The AEMC must publish the statement in the South Australian Government Gazette and on its website as soon as practicable after it is given a copy of the statement.
Part 4 β Operation and effect of National Gas Rules
26. National Gas Rules to have force of law
The National Gas Rules have the force of law in this jurisdiction.
55 The National Gas Objective (NGO) is the ultimate goal or objective of the national gas regulatory scheme. The revenue and pricing principles (RPP) are set out in s 24. Those principles bind the ERA in its regulatory decision-making.
56 Sections 27 and 28 describe the functions and powers of the ERA and the manner in which it must exercise those functions and powers. In the NGL(WA), those sections refer to the AER but, as we already mentioned at [49] above, by reason of the operation of s 2A of the NGL and s 9(1) of the WA Act, those provisions are applied to the ERA for the purposes of the NGL(WA).
57 Section 28(1)(a) requires the ERA, in performing or exercising an ERA economic regulatory function or power under the NGL(WA), to perform or exercise that function or power in a manner that will, or is likely to, contribute to the achievement of the NGO and, amongst other things, if there are two or more possible designated reviewable regulatory decisions that will, or are likely to, contribute to the NGO, the ERA must make the decision that it is satisfied will, or is likely to, contribute to the NGO to the greatest degree and must specify its reasons for that conclusion.
58 Under s 28(2), the ERA must take into account the RPP when making an access determination relating to a rate or charge for a pipeline service and may take into account those principles when performing or exercising any other ERA economic regulatory function or power, if the ERA considers it appropriate to do so.
59 Section 68C of the NGL(WA) requires the ERA to keep a written record of "decision related matter". That section is in the following terms:
68C. Record of designated reviewable regulatory decisions
(1) The AER must, in making a designated reviewable regulatory decision, keep a written record of decision related matter.
(2) In this section β
decision related matter, in relation to a designated reviewable regulatory decision, means β
(a) the decision and the written record of it and any written reasons for it (including (if relevant) the reasons of the [ERA] for a decision of the [ERA] not to approve the access arrangement or proposed revisions to the applicable access arrangement (as the case may be)); and
(b) any document, proposal or information required or allowed under the Rules to be submitted as part of the process for the making of the decision; and
(c) any written submissions made to the [ERA] after the proposed access arrangement or proposed revisions to the applicable access arrangement (as the case may be) to which the decision relates were submitted to the [ERA] and before the decision was made; and
(d) any reports and materials (including (but not limited to) consultant reports, data sets, models or other documents) considered by the [ERA] in making the decision; and
(e) any draft of the decision that has been released for public consultation (including (if relevant) a draft of the reasons of the [ERA] for a decision of the [ERA] not to approve the access arrangement or proposed revisions to the applicable access arrangement (as the case may be)); and
(f) any submissions on the draft of the decision or the decision itself (including (if relevant) submissions on the draft of the reasons of the [ERA] for a decision of the [ERA] not to approve the access arrangement or proposed revisions to the applicable access arrangement (as the case may be)) considered by the[ERA]; and
(g) the transcript of any hearing (if any) conducted by the [ERA] for the purpose of making the decision.
[Section 68C inserted see SA Act No. 79 of 2013 s. 21 and WA Gazette 14 Mar 2014 p. 632.]
60 Chapter 2, Pt 2 of the NGL(WA) (s 69 to s 86) sets out the functions and powers of the Australian Energy Market Commission (AEMC), including its rule-making power.
61 Section 91 of the NGL(WA) provides:
Part 5βFunctions and powers of Tribunal
91. Functions and powers of Tribunal under this Law
(1) The Tribunal has the functions and powers conferred on it under Chapter 8 Part 5 and any Regulations made for the purposes of that Division.
(2) The Tribunal has power to do all things necessary or convenient to be done for or in connection with the performance of its functions.
62 References in s 91 to "the Tribunal" are references to the Australian Competition Tribunal.
63 Chapter 8, Pt 5 of the NGL(WA) (s 244 to s 270), sets out the principles which govern merits review and other non-judicial review of regulator decisions.
64 An application for review of a reviewable regulatory decision must be made in accordance with the requirements of s 245 of the NGL(WA).
65 Section 246 provides:
246. Grounds for review
(1) An application under section 245(1) may be made only on 1 or more of the following grounds:
(a) the original decision maker made an error of fact in the decision maker's findings of facts, and that error of fact was material to the making of the decision;
(b) the original decision maker made more than 1 error of fact in the decision maker's findings of facts, and those errors of fact, in combination, were material to the making of the decision;
(c) the exercise of the original decision maker's discretion was incorrect, having regard to all the circumstances;
(d) the original decision maker's decision was unreasonable, having regard to all the circumstances.
(1a) An application under section 245(1) that relates to a designated reviewable regulatory decision must also specify the manner in which a determination made by the Tribunal varying the designated reviewable regulatory decision, or setting aside the designated reviewable regulatory decision and a fresh decision being made by the AER following remission of the matter to the AER by the Tribunal, on the basis of 1 or more grounds raised in the application, either separately or collectively, would, or would be likely to, result in a materially preferable designated NGO decision.
(2) It is for the applicant to establish a ground listed in subsection (1) and the matter referred to in subsection (1a).
[Section 246 amended see SA Act No. 79 of 2013 s. 23 and WA Gazette 14 Mar 2014 p. 632.]
66 Sections 248 to 251 set out the principles which the Tribunal must apply in considering whether or not to grant leave as required under s 245.
67 Section 252 provides that an application under s 245(1) does not stay the operation of an applicable access arrangement decision approving or making an applicable access arrangement (see subs (a)(i)).
68 Section 258A of the NGL(WA) specifies the matters that may and may not be raised in a review in respect of one or more designated reviewable regulatory decisions. That section provides as follows:
258A. Matters that may and may not be raised in a review (designated reviewable regulatory decisions)
(1) This section applies to a designated reviewable regulatory decision.
(2) The AER, in a review of a decision to which this section applies, may β
(a) respond to any matter raised by the applicant or an intervener; and
(b) raise any other matter that relates to β
(i) a ground for review; or
(ii) a matter raised in support of a ground for review; or
(iii) a matter relevant to the issues to be considered under section 259(4a) and (4b).
(3) In a review of a decision to which this section applies, the following provisions apply in relation to a person or body, other than the AER (and so apply at all stages of the proceedings before the Tribunal):
(a) a covered pipeline service provider that provides the pipeline services to which the decision being reviewed applies may not raise in relation to the issue of whether a ground for review exists or has been made out any matter that was not raised and maintained by the provider in submissions to the AER before the decision was made;
(b) a covered pipeline service provider whose commercial interests are materially affected by the decision being reviewed may not raise in relation to the issue of whether a ground for review exists or has been made out any matter that was not raised and maintained by the provider in submissions to the AER before the decision was made;
(c) an affected or interested person or body (other than a provider under paragraph (a) or (b)) may not raise in relation to the issue of whether a ground for review exists or has been made out any matter that was not raised by the person or body in a submission to the AER before the decision was made;
(d) subject to paragraphs (a), (b) and (c) β
(i) the applicant, or an intervener who has raised a new ground for review under section 256, may raise any matter relevant to the issues to be considered under section 259(4a) and (4b); and
(ii) any person or body, other than the applicant or an intervener who has raised a new ground for review under section 256, may not raise any matter relevant to the issues to be considered under section 259(4a) and (4b) unless it is in response to a matter raised by β
(A) the AER under subsection (2)(b)(iii); or
(B) the applicant under subparagraph (i); or
(C) an intervener under subparagraph (i).
(4) For the purposes of subsection (3)(d) β
(a) a reference to an applicant includes a reference to a person or body who has applied to the Tribunal for leave to apply for a review under this Division; and
(b) a reference to an intervener includes a reference to a person or body who has applied to the Tribunal for leave to intervene in a review under this Division.
[Section 258A inserted see SA Act No. 79 of 2013 s. 29 and WA Gazette 14 Mar 2014 p. 632.]
69 The powers of the Tribunal in respect of merits review by it of designated reviewable regulatory decisions are set out in s 259. That section is in the following terms:
259. Tribunal must make determination
(1) If, following an application, the Tribunal grants leave in accordance with section 245, the Tribunal must make a determination in respect of the application.
Noteβ
See section 260 for the time limit within which the Tribunal must make its determination.
(2) Subject to subsections (4) and (4a), a determination under this section may β
(a) affirm the reviewable regulatory decision; or
(b) vary the reviewable regulatory decision; or
(c) set aside the reviewable regulatory decision and remit the matter back to the original decision maker to make the decision again in accordance with any direction or recommendation of the Tribunal.
(3) For the purposes of making a determination of the kind in subsection (2)(a) or (b), the Tribunal may perform all the functions and exercise all the powers of the original decision maker under this Law or the Rules.
(4) In deciding whether to remit a matter back to the original decision maker to make the decision again, other than in a case where the decision is a designated reviewable regulatory decision, the Tribunal must have regard to the nature and relative complexities ofβ
(a) the reviewable regulatory decision; and
(b) the matter the subject of the review.
(4a) In a case where the decision is a designated reviewable regulatory decision, the Tribunal may only make a determination β
(a) to vary the designated reviewable regulatory decision under subsection (2)(b); or
(b) to set aside the designated reviewable regulatory decision and remit the matter back to the AER under subsection (2)(c),
if β
(c) the Tribunal is satisfied that to do so will, or is likely to, result in a decision that is materially preferable to the designated reviewable regulatory decision in making a contribution to the achievement of the national gas objective (a materially preferable designated NGO decision) (and if the Tribunal is not so satisfied the Tribunal must affirm the decision); and
(d) in the case of a determination to vary the designated reviewable regulatory decisionβthe Tribunal is satisfied that to do so will not require the Tribunal to undertake an assessment of such complexity that the preferable course of action would be to set aside the decision and remit the matter to the AER to make the decision again.
(4b) In connection with the operation of subsection (4a) (and without limiting any other matter that may be relevant under this Law) β
(a) the Tribunal must consider how the constituent components of the designated reviewable regulatory decision interrelate with each other and with the matters raised as a ground for review; and
(b) without limiting paragraph (a), the Tribunal must take into account the revenue and pricing principles (in the same manner in which the AER is to take into account these principles under section 28); and
(c) the Tribunal must, in assessing the extent of contribution to the achievement of the national gas objective, consider the designated reviewable regulatory decision as a whole; and (d) the following matters must not, in themselves, determine the question about whether a materially preferable designated NGO decision exists:
(i) the establishment of a ground for review under section 246(1);
(ii) consequences for, or impacts on, the average annual regulated revenue of a covered pipeline service provider;
(iii) that the amount that is specified in or derived from the designated reviewable regulatory decision exceeds the amount specified in section 249(2).
(4c) If the Tribunal makes a determination under subsection (2)(b) or (c), the Tribunal must specify in its determination β
(a) the manner in which it has taken into account the interrelationship between the constituent components of the designated reviewable regulatory decision and how they relate to the matters raised as a ground for review as contemplated by subsection (4b)(a); and
(b) in the case of a determination to vary the designated reviewable regulatory decisionβthe reasons why it is proceeding to make the variation in view of the requirements of subsection (4a)(d).
(5) A determination by the Tribunal affirming, varying or setting aside the reviewable regulatory decision is, for the purposes of this Law (other than this Part), to be taken to be a decision of the original decision maker.
[Section 259 amended see SA Act No. 79 of 2013 s. 30 and WA Gazette 14 Mar 2014 p. 632.]
70 Section 261 of the NGL(WA) specifies the matters that are to be considered by the Tribunal in making its determination. That section is in the following terms:
261. Matters to be considered by Tribunal in making determination
(1) Subject to this section, the Tribunal, in acting under this Division in relation to a reviewable regulatory decision β
(a) must not consider any matter other than review related matter (and any matter arising as a result of consultation under paragraph (b)); and
(b) must, before making a determination that relates to a designated reviewable regulatory decision, take reasonable steps to consult with (in such manner as the Tribunal thinks appropriate) β
(i) users and prospective users of the pipeline services; and
(ii) any user or consumer associations or user or consumer interest groups,
that the Tribunal considers have an interest in the determination, other than a user or consumer association or a user or consumer interest group that is a party to the review.
(1) Subject to this section, the Tribunal, in reviewing a reviewable regulatory decision, must not consider any matter other than review related matter.
[(2) deleted]
(3) If in a review, other than a review that relates to a designated reviewable regulatory decision, the Tribunal is of the view that a ground of review has been made out, the Tribunal may allow new information or material to be submitted if the new information or materialβ
(a) would assist it on any aspect of the determination to be made; and
(b) was not unreasonably withheld fromβ
(i) in all cases, the original decision maker when the decision maker was making the reviewable regulatory decision; and
(ii) in the case of a reviewable regulatory decision that is a Ministerial coverage decision, the NCC when it was it making the NCC recommendation related to Ministerial coverage decision.
(3a) If in a review that relates to a designated reviewable regulatory decision the Tribunal is of the view that a ground for review has been made out, the Tribunal may, on application by a party to the review, allow new information or material to be submitted if the party can establish to the satisfaction of the Tribunal that the information or material β
(a) was publicly available or known to be publicly available to the AER when it was making the designated reviewable regulatory decision; or
(b) would assist the Tribunal on any aspect of the determination to be made and was not unreasonably withheld from the AER when it was making the designated reviewable regulatory decision,
and was (in the opinion of the Tribunal) information or material that the AER would reasonably have been expected to have considered when it was making the designated reviewable regulatory decision.
(3b) In addition, if in a review of a designated reviewable regulatory decision the Tribunal is of the view β
(a) that a ground for review has been made out; and
(b) that it would assist the Tribunal to obtain information or material under this subsection in order to determine whether a materially preferable designated NGO decision exists,
the Tribunal may, on its own initiative, take steps to obtain that information or material (including by seeking evidence from such persons as it thinks fit).
(3c) The action taken by a person acting in response to steps taken by the Tribunal under subsection (3b) must be limited to considering decision related matter under section 68C.
(3d) In addition, in the case of a review of a designated reviewable regulatory decision that is a decision to make a full access arrangement decision in place of an access arrangement that the AER did not approve, the Tribunal may consider the reasons of the AER for its decision not to approve the access arrangement or proposed revisions to the applicable access arrangement (as the case may be).
(4) Subject to this Law, for the purpose of subsection (3)(b) and (3a)(b), information or material not provided to the original decision maker, the NCC or the AER (as the case requires) following a request for that information or material by the original decision maker, the NCC or the AER under this Law or the Rules is to be taken to have been unreasonably withheld.
(5) Subsection (4) does not limit what may constitute an unreasonable withholding of information or material.
[(6) deleted]
(7) In this sectionβ
review related matter means β
(a) the application for review; and
(b) a notice raising new grounds for review filed by an intervener; and
(c) the submissions made to the Tribunal by the parties to the review; and
(d) β
(i) in the case of a designated reviewable regulatory decision β decision related matter under section 68C; or
(ii) in any other case β
(A) the reviewable regulatory decision and the written record of it and any written reasons for it; and
(B) any written submissions made to the original decision maker before the reviewable regulatory decision was made or the NCC before the making of an NCC recommendation; and
(C) any reports and materials relied on by the original decision maker in making the reviewable regulatory decision or the NCC in making an NCC recommendation; and
(D) any draft of the reviewable regulatory decision or NCC recommendation; and
(E) any submissions on β
β’ the draft of the reviewable regulatory decision or the reviewable regulatory decision itself considered by the original decision maker; or
β’ the draft of an NCC recommendation or the NCC recommendation itself considered by the NCC; and
(F) the transcript of any hearing (if any) conducted by the original decision maker for the purpose of making the reviewable regulatory decision; and
(e) any other matter properly before the Tribunal in connection with the relevant proceedings.
[Section 261 amended see SA Act No. 79 of 2013 s. 31 and WA Gazette 14 Mar 2014 p. 632.]
71 In the present case, the final decision is a designated reviewable regulatory decision so that s 261(7)(d)(i) applies (not s 261(7)(d)(ii)).
72 Chapter 9, Pt 1, Div 2 stipulates the tests for rule making by the AEMC. The AEMC may only make a Rule if it is satisfied that the Rule will or is likely to contribute to the achievement of the NGO.
73 Clause 1 of Sch 2 to the NGL(WA) provides:
1. Displacement of Schedule by contrary intention
(1) The application of this Schedule to this Law, the Regulations or other statutory instrument (other than the National Gas Rules) may be displaced, wholly or partly, by a contrary intention appearing in this Law or the Regulations or that statutory instrument.
(2) The application of this Schedule to the National Gas Rules (other than clauses 7, 12, 15, 17, 19 and 20, 23 to 26 and 31 to 44, 49, 52 and 53 of this Schedule) may be displaced, wholly or partly, by a contrary intention appearing in the National Gas Rules.
74 Clause 4 of Sch 2 is in the following terms:
4. Material that is, and is not, part of Law
(1) The heading to a Chapter, Part, Division or Subdivision into which this Law is divided is part of this Law.
(2) A Schedule to this Law is part of this Law.
(3) A heading to a section or subsection of this Law does not form part of this Law.
(4) A note at the foot of a provision of this Law does not form part of this Law.
(5) An example (being an example at the foot of a provision of this Law under the heading "Example" or "Examples") does not form part of this Law.
75 Clauses 7, 8 and 9 of Sch 2 to the WA Act are in the following terms:
7. Interpretation best achieving Law's purpose
(1) In the interpretation of a provision of this Law, the interpretation that will best achieve the purpose or object of this Law is to be preferred to any other interpretation.
(2) Subclause (1) applies whether or not the purpose is expressly stated in this Law.
8. Use of extrinsic material in interpretation
(1) In this clauseβ
Law extrinsic material means relevant material not forming part of this Law, including, for exampleβ
(a) material that is set out in the document containing the text of this Law as printed by authority of the Government Printer of South Australia; and
(b) a relevant report of a committee of the Legislative Council or House of Assembly of South Australia that was made to the Legislative Council or House of Assembly of South Australia before the provision was enacted; and
(c) an explanatory note or memorandum relating to the Bill that contained the provision, or any relevant document, that was laid before, or given to the members of, the Legislative Council or House of Assembly of South Australia by the member bringing in the Bill before the provision was enacted; and
(d) the speech made to the Legislative Council or House of Assembly of South Australia by the member in moving a motion that the Bill be read a second time; and
(e) material in the Votes and Proceedings of the Legislative Council or House of Assembly of South Australia or in any official record of debates in the Legislative Council or House of Assembly of South Australia; and
(f) a document that is declared by the Regulations to be a relevant document for the purposes of this clause;
ordinary meaning means the ordinary meaning conveyed by a provision having regard to its context in this Law and to the purpose of this Law;
Rule extrinsic material meansβ
(a) a draft Rule determination; or
(b) a final Rule determination; or
(c) any document (however described)β
(i) relied on by the AEMC in making a draft Rule determination or final Rule determination; or
(ii) adopted by the AEMC in making a draft Rule determination or final Rule determination.
(2) Subject to subclause (3), in the interpretation of a provision of this Law, consideration may be given to Law extrinsic material capable of assisting in the interpretationβ
(a) if the provision is ambiguous or obscure, to provide an interpretation of it; or
(b) if the ordinary meaning of the provision leads to a result that is manifestly absurd or is unreasonable, to provide an interpretation that avoids such a result; or
(c) in any other case, to confirm the interpretation conveyed by the ordinary meaning of the provision.
(3) Subject to subclause (4), in the interpretation of a provision of the Rules, consideration may be given to Law extrinsic material or Rule extrinsic material capable of assisting in the interpretationβ
(a) if the provision is ambiguous or obscure, to provide an interpretation of it; or
(b) if the ordinary meaning of the provision leads to a result that is manifestly absurd or is unreasonable, to provide an interpretation that avoids such a result; or
(c) in any other case, to confirm the interpretation conveyed by the ordinary meaning of the provision.
(4) In determining whether consideration should be given to Law extrinsic material or Rule extrinsic material, and in determining the weight to be given to Law extrinsic material or Rule extrinsic material, regard is to be had toβ
(a) the desirability of a provision being interpreted as having its ordinary meaning; and
(b) the undesirability of prolonging proceedings without compensating advantage; and
(c) other relevant matters.
9. Compliance with forms
(1) If a form is prescribed or approved by or for the purpose of this Law, strict compliance with the form is not necessary and substantial compliance is sufficient.
(2) If a form prescribed or approved by or for the purpose of this Law requiresβ
(a) the form to be completed in a specified way; or
(b) specified information or documents to be included in, attached to or given with the form; or
(c) the form, or information or documents included in, attached to or given with the form, to be verified in a specified way,
the form is not properly completed unless the requirement is complied with.
76 Clauses 11, 12 and 13 of Sch 2 provide:
11. Provisions relating to defined terms and gender and number
(1) If this Law defines a word or expression, other parts of speech and grammatical forms of the word or expression have corresponding meanings.
(2) Definitions in or applicable to this Law apply except so far as the context or subject matter otherwise indicates or requires.
(3) In this Law, words indicating a gender include each other gender.
(4) In this Lawβ
(a) words in the singular include the plural; and
(b) words in the plural include the singular.
12. Meaning of may and must etc
(1) In this Law, the word "may", or a similar word or expression, used in relation to a power indicates that the power may be exercised or not exercised, at discretion.
(2) In this Law, the word "must", or a similar word or expression, used in relation to a power indicates that the power is required to be exercised.
(3) This clause has effect despite any rule of construction to the contrary.
13. Words and expressions used in statutory instruments
(1) Words and expressions used in a statutory instrument have the same meanings as they have, from time to time, in this Law, or relevant provisions of this Law, under or for the purposes of which the instrument is made or in force.
(2) This clause has effect in relation to an instrument except so far as the contrary intention appears in the instrument.
77 References to "the Law" or "this Law" in cll 7, 8, 9, 11, 12 and 13 are references to the NGL(WA).
78 In summary, Sch 2 to the NGL(WA) requires that, unless displaced by a contrary intention appearing in the NGL(WA) or in the NGR (as may be appropriate), the following principles are to be applied to the interpretation of the NGL(WA), the NGR and the Regs:
(a) The interpretation that will best achieve the purpose or object of the NGL(WA) is to be preferred to any other interpretation. That purpose or object need not be expressly stated in the NGL(WA) (cl 7 of Sch 2 to the NGL(WA)).
(b) The NGO is the core or fundamental objective of the NGL(WA) and, as such, is to be regarded as within the expression "the purpose or object of the [NGL(WA)]".
(c) In the circumstances described in cl 8 of Sch 2 to the NGL(WA), resort may be had to the types of extrinsic material specified in cl 8 as an aid to the interpretation of a provision of the NGL(WA) or the NGR (as the case may be). Such resort can be had if:
(i) The relevant provision is ambiguous or obscure; or
(ii) The ordinary meaning of the provision leads to a result that is manifestly absurd or unreasonable (a result which should be avoided); or
(iii) To confirm the interpretation that is conveyed by the ordinary meaning of the provision
and the extrinsic material is capable of assisting in the interpretation. Subclause (4) of cl 8 must also be taken into account. That subclause is difficult to interpret. In our view, that subclause mandates that those charged with interpreting the NGL(WA) and the NGR must, when considering whether to have regard to extrinsic material, have regard to each of the three matters specified in subcl (4). A "relevant matter" within the meaning of cl 8(4)(c) is a matter which is to be determined by the decision maker to be relevant in an objective sense. If the decision maker does have regard to the three matters specified in subcl (4)(c), that person (or entity) must also have regard to those same three matters when determining the weight to be given to that extrinsic material.
(d) Clause 7 and cl 8 of Sch 2 do not authorise a wholesale redrafting of the relevant provisions. The quest is always to find the correct interpretation of those provisions, not to embark upon an exposition of the decision maker's view of what the provision should mean.
(e) In the NGL(WA), the meaning of "may" and "must" is as specified in cl 12 of Sch 2 to the NGL(WA) notwithstanding any rule of construction to the contrary.
(f) Except insofar as the contrary intention appears in a particular statutory instrument, words and expressions used in a statutory instrument made under the NGL(WA) have the same meaning as they have in the relevant provisions of the NGL(WA).
(g) The interpretation statutes of South Australia and Western Australia do not apply to the NGL(WA) or to the NGR. Nor does the Acts Interpretation Act 1901 (Cth). The essential governing principles for the interpretation of the NGL(WA) and the NGR are found in cll 7, 8, 11, 12 and 13 of Sch 2 to the NGL(WA). In our view, it does not assist the task of interpreting the NGL(WA) and the NGR for the Tribunal to resort to common law principles of statutory construction except (perhaps) as an aid to understanding how to interpret and apply the rules of interpretation laid down in Sch 2 to the NGL(WA).
The NGR
79 Rule 3 in Pt 1 (Preliminary) contains various definitions.
80 For present purposes, the following definitions are pertinent:
allowed rate of return see rule 87(1).
allowed rate of return objective see rule 87(3).
full access arrangement proposal means an access arrangement proposal consisting of, or relating to, a full access arrangement.
interest rate means:
(a) the most recent 1 month Bank Bill Swap Reference Rate mid rate determined by the Australian Financial Markets Association, as identified by AEMO on its website; or
(b) if the above rate ceases to exist, or that rate becomes, in AEMO's reasonable opinion, inappropriate, the interest rate determined and published by AEMO on its website.
rate of return guidelines means the guidelines made under rule 87.
81 Rule 8 describes in detail the standard consultative procedure which a decision maker must undertake if required to consult under the NGL(WA).
82 Part 8 (rr 40 to 68) of the NGR deals with access arrangements.
83 Rule 40 sets out the obligations which the ERA has in circumstances where it has no discretion under a particular provision of the NGL(WA), in circumstances where it has a limited discretion under that law and in circumstances where it has a full discretion under that law.
84 Rule 41 provides:
41 Access arrangement proposal to be approved in its entirety or not at all
(1) The AER's approval of an access arrangement proposal implies approval of every element of the proposal.
(2) It follows that, if the AER withholds its approval to any element of an access arrangement proposal, the proposal cannot be approved.
85 Rule 42 to r 44 address the requirements as to the provision of access arrangement information.
86 Rule 46 governs the procedure for a full access arrangement proposal (s 132 of the NGL(WA)).
87 Rule 48 specifies the requirements for full access arrangements.
88 Rule 62 is in the following terms:
62 Access arrangement final decision
(1) After considering the submissions made in response to the access arrangement draft decision within the time allowed in the notice, and any other matters the AER considers relevant, the AER must make an access arrangement final decision.
(2) An access arrangement final decision is a decision to approve, or to refuse to approve, an access arrangement proposal.
(3) If the access arrangement proposal has been revised since its original submission, the access arrangement final decision relates to the proposal as revised.
(4) An access arrangement final decision must include a statement of the reasons for the decision.
(5) When the AER makes an access arrangement final decision, it must:
(a) give a copy of the decision to the service provider; and
(b) publish the decision on the AERis website and make it available for inspection, during business hours, at the AER's public offices.
(6) If an access arrangement final decision approves an access arrangement proposal, the access arrangement, or the revision or variation, to which the decision relates, takes effect on a date fixed in the final decision or, if no date is so fixed, 10 business days after the date of the final decision.
Note:
In the case of an access arrangement revision proposal, this date may, but will not necessarily, be the revision commencement date fixed in the access arrangement.
(7) An access arrangement final decision must be made within 6 months of the date of receipt of the access arrangement proposal.
(8) The time limit fixed by subrule (7) cannot be extended by more than a further 2 months.
89 Part 9 (rr 69 to 99) of the NGR governs the regulation of price and revenue.
90 Rules 72 to 75 provide as follows:
72 Specific requirements for access arrangement information relevant to price and revenue regulation
(1) The access arrangement information for a full access arrangement proposal (other than an access arrangement variation proposal) must include the following:
(a) if the access arrangement period commences at the end of an earlier access arrangement period:
(i) capital expenditure (by asset class) over the earlier access arrangement period; and
(ii) operating expenditure (by category) over the earlier access arrangement period; and
(iii) usage of the pipeline over the earlier access arrangement period showing:
(A) for a distribution pipeline, minimum, maximum and average demand and, for a transmission pipeline, minimum, maximum and average demand for each receipt or delivery point; and
(B) for a distribution pipeline, customer numbers in total and by tariff class and, for a transmission pipeline, user numbers for each receipt or delivery point;
(b) how the capital base is arrived at and, if the access arrangement period commences at the end of an earlier access arrangement period, a demonstration of how the capital base increased or diminished over the previous access arrangement period;
(c) the projected capital base over the access arrangement period, including:
(i) a forecast of conforming capital expenditure for the period and the basis for the forecast; and
(ii) a forecast of depreciation for the period including a demonstration of how the forecast is derived on the basis of the proposed depreciation method;
(d) to the extent it is practicable to forecast pipeline capacity and utilisation of pipeline capacity over the access arrangement period, a forecast of pipeline capacity and utilisation of pipeline capacity over that period and the basis on which the forecast has been derived;
(e) a forecast of operating expenditure over the access arrangement period and the basis on which the forecast has been derived;
(f) the key performance indicators to be used by the service provider to support expenditure to be incurred over the access arrangement period;
(g) the proposed return on equity, return on debt and allowed rate of return, for each regulatory year of the access arrangement period, in accordance with rule 87, including any departure from the methodologies set out in the rate of return guidelines and the reasons for that departure;
(ga) the proposed formula (if any) that is to be applied in accordance with rule 87(12);
(h) the estimated cost of corporate income tax calculated in accordance with rule 87A, including the proposed value of imputation credits referred to in that rule;
(i) if an incentive mechanism operated for the previous access arrangement periodβthe proposed carry-over of increments for efficiency gains or decrements for efficiency losses in the previous access arrangement period and a demonstration of how allowance is to be made for any such increments or decrements;
(j) the proposed approach to the setting of tariffs including:
(i) the suggested basis of reference tariffs, including the method used to allocate costs and a demonstration of the relationship between costs and tariffs; and
(ii) a description of any pricing principles employed but not otherwise disclosed under this rule;
(k) the service provider's rationale for any proposed reference tariff variation mechanism;
(l) the service provider's rationale for any proposed incentive mechanism;
(m) the total revenue to be derived from pipeline services for each regulatory year of the access arrangement period.
(2) The access arrangement information for an access arrangement variation proposal related to a full access arrangement must include so much of the above information as is relevant to the proposal.
73 Basis on which financial information is to be provided
(1) Financial information must be provided on:
(a) a nominal basis; or
(b) a real basis; or
(c) some other recognised basis for dealing with the effects of inflation.
(2) The basis on which financial information is provided must be stated in the access arrangement information.
(3) All financial information must be provided, and all calculations made, consistently on the same basis.
74 Forecasts and estimates
(1) Information in the nature of a forecast or estimate must be supported by a statement of the basis of the forecast or estimate.
(2) A forecast or estimate:
(a) must be arrived at on a reasonable basis; and
(b) must represent the best forecast or estimate possible in the circumstances.
75 Inferred or derivative information
Information in the nature of an extrapolation or inference must be supported by the primary information on which the extrapolation or inference is based.
91 Rule 76 specifies that total revenue for each regulatory year is to be determined using the building block approach in which the building blocks set out in r 76 are deployed. That rule is in the following terms:
76 Total revenue
Total revenue is to be determined for each regulatory year of the access arrangement period using the building block approach in which the building blocks are:
(a) a return on the projected capital base for the year (See Divisions 4 and 5); and
(b) depreciation on the projected capital base for the year (See Division 6); and
(c) the estimated cost of corporate income tax for the year (See Division 5A); and
(d) increments or decrements for the year resulting from the operation of an incentive mechanism to encourage gains in efficiency (See Division 9); and
(e) a forecast of operating expenditure for the year (See Division 7).
92 Rules 77 tor 86 spell out the way in which the capital base and the projected capital base are to be determined for the purposes of r 76.
93 Rule 87 and r 87A of the NGR address the rate of return (r 87) and the estimated cost of corporate income tax (r 87A). We shall return to those rules when dealing with the specific grounds of review raised by the owners.
94 Rules 88 to 99 address other matters which are not relevant to the present Review Application.
Relevant Authorities
95 The owners made a number of submissions directed to some of the key concepts relevant to the issues in the present matter.
96 Those submissions were accepted as correct by the ERA. We will summarise these submissions in the paragraphs which follow. We will also refer to two decisions of the Full Court which were handed down after the hearing in this matter had concluded.
97 The NGO is defined in s 2 and s 23 of the NGL(WA). Rule 100 of the NGR provides that provisions of an access arrangement must be consistent with the NGO and the NGR and the procedures as in force when the terms and conditions of the access arrangement are determined or revised.
98 In Applications by Public Interest Advocacy Service Ltd and Ausgrid [2016] ACompT 1 (PIAC and Ausgrid) at [77], the Tribunal said:
The ultimate objective reflected in the NEO and NGO is to direct the manner in which the national electricity market and the national natural gas market are regulated, that is, in the long term interests of consumers of electricity and natural gas respectively with respect to the matters specified. The provisions proceed on the legislative premise that their long term interests are served through the promotion of efficient investment in, and efficient operation and use of, electricity and natural gas services. This promotion is to be done "for" the long term interests of consumers. It does not involve a balance as between efficient investment, operation and use on the one hand and the long term interest of consumers on the other. Rather, the necessary legislative premise is that the long term interests of consumers will be served by regulation that advances economic efficiency.
99 As noted at [56]β[58] above, s 28 provides that the ERA must perform its economic regulatory function or power in the manner set forth in that section.
100 Section 28(2) and (3) of the NGL(WA) provides:
(2) In addition, the AERβ
(a) must take into account the revenue and pricing principlesβ
(i) when exercising a discretion in approving or making those parts of an access arrangement relating to a reference tariff; or
(ii) when making an access determination relating to a rate or charge for a pipeline service; and
(b) may take into account the revenue and pricing principles when performing or exercising any other AER economic regulatory function or power, if the AER considers it appropriate to do so.
(3) For the purposes of subsection (2)(a)(ii), a reference to a "reference service" in the revenue and pricing principles must be read as a reference to a "pipeline service".
101 The RPP in s 24 are set out at [54] above.
102 Section 246(1a) of the NGL(WA) provides that, in any application for review under s 245(1), the applicant must specify the manner in which a determination made by the Tribunal would, or would be likely to, result in a materially preferable designated NGO decision.
103 In the decisions of Application by Energy Australia & Ors [2009] ACompT 8 (Energy Australia) and Re: Application by ElectraNet Pty Limited (No 3) [2008] ACompT 3 (ElectraNet No 3), the Tribunal considered the RPP and the inter-relationship between the NEO/NGO and the RPP. Those decisions, together with PIAC and Ausgrid, confirm that the NGO and the RPP are complementary, such that a decision which is inconsistent with the RPP cannot be a decision that will or is likely to contribute to the achievement of the NGO.
104 At [75]β[78] in Energy Australia, the Tribunal observed:
The principles in s 7A can be taken to be consistent with and to promote the objectives in s 7. The principles are themselves stated normatively in the form of what is intended to be achieved. They state that the price charged by a Network Service Provider ('NSP') for its service should allow a return commensurate with the regulatory and commercial risks involved in providing the service in the context that the NSP should be provided with a reasonable opportunity to recover at least the efficient costs it incurs and with effective incentives in order to promote economic efficiency with respect to the services it provides. Economic efficiency includes efficient investment in the system with which it provides services, efficient provision of services, and efficient use of the system.
It is well accepted in the literature of regulatory economics and in regulatory practice that all these efficiency objectives are in principle met by setting prices for services that allow the recovery of efficient costs, including the cost of capital commensurate with the riskiness of the investment in the assets (infrastructure or 'system', as the term is used in the NEL) used to provide services.
It might be asked why the NEL principles require that the regulated NSP be provided with the opportunity to recover at least its efficient costs. Why 'at least'? The issue of opportunity is critical to the answer. The regulatory framework does not guarantee recovery of costs, efficient or otherwise. Many events and circumstances, all characterised by various uncertainties, intervene between the ex ante regulatory setting of prices and the ex post assessment of whether costs were recovered. But if, as it were, the dice are loaded against the NSP at the outset by the regulator not providing the opportunity for it to recover its efficient costs (eg, by making insufficient provision for its operating costs or its cost of capital), then the NSP will not have the incentives to achieve the efficiency objectives, the achievement of which is the purpose of the regulatory regime.
Thus, given that the regulatory setting of prices is determined prior to ascertaining the actual operating environment that will prevail during the regulatory control period, the regulatory framework may be said to err on the side of allowing at least the recovery of efficient costs. This is in the context of no adjustment generally being made after the event for changed circumstances.
105 In similar vein, at [15] in ElectraNet No 3, the Tribunal said:
The national electricity objective provides the overarching economic objective for regulation under the Law: the promotion of efficient investment in the long term interests of consumers. Consumers will benefit in the long run if resources are used efficiently, i.e. resources are allocated to the delivery of goods and services in accordance with consumer preferences at least cost. As reflected in the revenue and pricing principles, this in turn requires prices to reflect the long run cost of supply and to support efficient investment, providing investors with a return which covers the opportunity cost of capital required to deliver the services.
106 In PIAC and Ausgrid, the Tribunal referred to "the collective significance" of the NEO and the NGO and the complementary RPP as explained in ElectraNet No 3 and Energy Australia. In PIAC and Ausgrid, the Tribunal considered that the amendments to the NGL effected by the Statutes Amendment (National Electricity and Gas LawsβLimited Merits Review) Act 2013 (SA) (LMR Act) did not change the meaning of the NGO or the RPP or their relationships. At [537], the Tribunal said:
It may be that the difference in views between the Networks NSW and the AER is semantic. The Tribunal, of course, accepts that there are matters of judgment about how the RPP (or a particular element of one of the principles) should be taken into account. It does not accept that, as perhaps the AER is saying, the NEO in its application may give rise to a result which means that a DNSP is not given a reasonable opportunity to recover at least its efficient costs in providing the direct control network services. As the Tribunal has sought to express in its Introductory remarks, it does not regard ss 7 and 7A as other than complementary so that the NEO may give rise to a reviewable regulatory decision which in fact is inconsistent with the RPP or one of the elements of the RPP.
107 Similarly, at [787], the Tribunal stated (relevantly):
β¦ As the Tribunal has discussed, the NEO and the RPP operate together. It is not the case that the NEO means that, where the long term interests of consumers is relevant, the RPP must be ignored or suppressed. The assumption in the regulatory scheme is that the long term interests of consumers is served by ensuring that monopoly infrastructure providers are permitted to recover at least the efficient costs of providing those services and, broadly speaking, the AER's role is to fix those efficient costs by reference to the proxy of the efficient costs of the competitive market. That is, of course, an oversimplification. β¦
108 We note that the LMR Act enacted reforms affecting the nature of the review to be undertaken by the Tribunal under Ch 8, Pt 5 of the NGL(WA) by limiting the Tribunal's power to vary or set aside a determination to circumstances where a substituted decision would, or would be likely to, better serve the NGO.
109 As emphasised by the ERA in its submissions, in order to succeed in its Review Application:
(a) The owners must establish that the ERA made an error of one of the four kinds stipulated in subpars (a) to (d) of s 246(1) of the NGL(WA) (s 246(1));
(b) Where, as in the present case, the application relates to a designated reviewable regulatory decision, the owners must identify how addressing any errors which it establishes by varying or set aside the decision would, or would be likely to, result in a "materially preferable designated NGO decision" (s 246(1)(a));
(c) The owners may not raise any "matter" (by way of evidence or submissions) that it did not raise and maintain in submissions to the ERA before the decision was made (s 258A(3)); and
(d) Unless the Tribunal is satisfied that a ground of review has been made out, subject to limited exceptions, the Tribunal must not consider any material other than that specified in s 261(1) of the NGL(WA), which material essentially comprises the material that was before the ERA and the parties' submissions to the Tribunal.
110 In Australian Energy Regulator v Australian Competition Tribunal (No 2) (2017) 345 ALR 1; [2017] FCAFC 79 (AER v ACT (No 2)), the Full Court considered applications for judicial review of PIAC and Ausgrid and three related matters. This judgment was delivered on 24 May 2017, after the hearing in the present matter had concluded. The Tribunal gave the parties an opportunity to file a Written Submission addressing the significance (if any) of that decision. Both parties availed themselves of that opportunityβthe owners by Written Submission dated 12 July 2017and the ERA by a responsive Written Submission dated 2 August 2017.
111 In introducing the matters before it, in AER v ACT (No 2) at 8β9 [8], the Full Court said:
As set out in the AER's written submissions, the AER's challenge to the Tribunal's determinations was directed principally to the following core concerns:
(a) The Tribunal had failed to undertake its review function lawfully by failing to properly construe and apply the grounds of review under s 71C of the NEL and s 246 of the NGL. Errors of this kind led the Tribunal to carry out reviews of a kind that were not authorised by the legislation.
(b) In one instance, the Tribunal purported to review a decision of a type that did not and could not fall within its jurisdiction. This related only to the fifth matter, NSD 420 of 2016, which, as we have said, involves JGN and the NGL and the NGR and is the subject of separate reasons published today.
(c) The Tribunal allowed the distribution network service providers and the covered pipeline service provider to raise, in relation to whether a ground of review existed, matters that were not raised and maintained by the service providers in submissions to the AER before the reviewable regulatory decisions were made, thus contravening the constraints imposed by s 71O(2) of the NEL and s 258(3) of the NGL.
(d) The Tribunal erred in its construction of new provisions in the NER and the NGR relating to the determination of the rate of return on capital, the value of imputation credits and the operating expenditure criteria.
(e) The Tribunal made other reviewable errors in making its decision, including adopting reasoning that was irrational, unreasonable and/or uncertain.
112 At 36 [139] in AER v ACT (No 2), the Full Court observed that, when considering an application for a review of the type under consideration in the present matter, the Tribunal does not start again. The Court said that, similarly, the limited form of administrative merits review under s 71C does not authorise the Tribunal to intervene on the basis of mere disagreement with the Regulator's decision. The Full Court also noted that, in a particular case, there may be overlap between the grounds upon which an application may be made to the Tribunal to review a decision of the Regulator and, consequently, the grounds upon which the Tribunal might act.
113 At 36 [141], the Full Court said that the ground of review described in s 71C(1)(c) which, in all material respects, is the same as the ground of review specified in s 246(1)(c) of the NGL(WA), should be understood as encompassing the words in House v The King (1936) 55 CLR 499 at 505: "If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him β¦ if he does not take into account some material consideration β¦". Material error of law causing an incorrect exercise of discretion would be included. The Full Court went on to say that failure properly to exercise the discretion based on inference from the character of the result as "unreasonable or plainly unjust" is available under subpar (c) of s 71C(1) (and s 246(1)(c)) and may also be available under subpar (d) of s 71C(1) (and s 246(1)) in circumstances where the incorrect exercise of the discretion has the consequence that the Regulator's decision is unreasonable.
114 At 36 [143], the Full Court said:
Having said that, in our opinion paragraph (d), that the AER's decision was unreasonable, having regard to all the circumstances, is not limited to Wednesbury unreasonableness and indeed, as made clear by Li at [68], Wednesbury unreasonableness is not the starting point for the standard of reasonableness nor should it be considered the end point.
115 At 37 [144], the Full Court explained the meaning of "discretion" when used in the relevant regulatory provisions. The Full Court said:
As to the word "discretion", we consider that in context this term does not extend to a choice by the AER between facts or opinions, which it has authority to decide, but primarily refers to express or implied statutory choices, where those assessments call for value judgments in respect of which there is room for reasonable differences of opinion, no particular opinion being uniquely right. The contrast is with an order the making of which is dictated by the application of a fixed rule to the facts on which its operation depends: Norbis v Norbis (1986) 161 CLR 513; 645 ALR 12; 10 Fam LR 819 at [4]. See also ACCC v ACT at [173].
116 The Full Court then went on to discuss the previous Full Court decision of Australian Competition and Consumer Commission v Australian Competition Tribunal (2016) 152 FCR 33 (ACCC v ACT).
117 At 73β74 [171]β[172] in ACCC v ACT, the Full Court considered a ground of review directed to errors in the Regulator's finding of facts. In that part of the Court's Reasons, the Court held that a choice between permitted methodologies for the calculation of total revenue mentioned in s 8.4 of the relevant code was not a finding of fact. The Court also held that it was not a fact finding error to base that choice upon one methodology rather than another. In In ACCC v ACT, the Full Court held that the relative weight to be given to the factors set out in the relevant statutory provision was a matter of discretion rather than a finding of fact which can be impugned as such.
118 At 37β38 [145] of AER v ACT (No 2), the Full Court observed that the previous Full Court in ACCC v ACT had stated that findings of fact may include a finding which was the opinion about the existence of a future fact or circumstance. The Court noted that the previous Full Court expressed the opinion that the expression "findings of fact" should be interpreted so as to encompass opinions formed by the primary decision maker based upon approaches to the assessment of facts and methodologies which it had chosen to apply. At the end of [145], the Full Court said:
β¦ In our opinion, an error in making a finding of fact would not always extend to an opinion about the existence of a future fact or circumstance but, for example, would include an error as to what the opinion of an expert was even where that opinion was about the existence of a future fact or circumstance.
119 The Full Court in AER v ACT (No 2) then expressed the following opinions (at 38β39 [146]β[150]):
As we have set out above, the AER submitted that when the Tribunal considered whether there was an "error of fact", the concept of "error" set a threshold that was not passed simply because there was material that could support a different finding of fact or simply because the Tribunal might, if it considered the material afresh, prefer to make a different finding of fact: DBNGP at [326] and WA Gas Networks at [22]. Thus far we agree.
The AER went on to submit that before a finding of fact could be characterised as erroneous, more must be established by a review applicant: such as the absence of evidence supporting the finding made. In our opinion, although it is correct to say that more must be established than that the Tribunal prefers to make a different finding of fact, it is not to be thought that "no evidence" is any more than an example of a finding of fact which is erroneous. It was in that context that Pfizer Pty Ltd v Birkett [1999] FCA 1778 at [11], relied on by the AER, was decided in relation to the admissibility of expert opinion evidence. We do not see that decision as being of any wider assistance in the construction of s 71C of the NEL (or s 246 of the NGL).
For example, we accept the submission on behalf of the electricity network respondents that the concept of 'findings of fact' encompasses more than 'primary' fact finding. In our opinion, findings of facts within s 71C would generally include inferences drawn from primary facts or conclusions drawn from primary facts. We would also observe that we would not regard 'evaluative judgment' as an appropriate discrimen for the purposes of s 71C. In our opinion, depending on the particular circumstances, 'findings of fact' may include such a finding even where it is based on an 'evaluative judgment'.
Considering the four available grounds in s 71C overall, and stating again that mere disagreement with the AER, whether as to facts or exercises of discretion or overall, is not a basis on which the Tribunal may intervene, it would in our opinion be strange as a matter of statutory construction if there were classes of material error on the part of the AER which the Tribunal discerned but which were beyond the Tribunal's reach and resulted in areas of decision-making immune from (limited) review. To conclude that there were some findings of fact or exercises of discretion which were not susceptible to review by the Tribunal for material error seems to us to be unlikely as a matter of the intention of the legislature. In our view the touchstone for s 71C material error is that the Tribunal may not act where there is no error and error is not made out by choosing one available fact or opinion over others. For example, the mere availability of a different inference from facts would not establish error within s 71C: the Tribunal must find that there was error in the AER's decision-making before it may intervene.
It is not, in our opinion, possible or desirable to attempt to bring any more precision to the concept of an error or errors of fact in the AER's findings of fact. The parties will assert or deny that such an error or errors was or were made and it will then be necessary for the Tribunal to evaluate the nature of that claimed error or those claimed errors. In doing so, in our opinion, the Tribunal should recognise the permissible field of choice which the legislature has given to the AER.
120 At 39β40 [152]β[159], the Full Court interpreted the expression "materially preferable NEO decision". The views expressed in these paragraphs are equally apt to be applied in respect of the same expression used in the NGL(WA) in relation to the NGO. The Full Court said:
As to the "materially preferable NEO decision", we accept the AER's submission that an implicit statutory premise is that a decision rectifying errors revealed by established grounds of review may not lead to a decision that is "materially preferable" to the decision made by the AER since, if the correction of errors revealed by established grounds of review necessarily resulted in a materially preferable NEO decision, then s 71P(2a) would have no work to do.
We construe the word "materially" in this context to mean not only that the error must be relevant or pertinent but that the future decision would be or would be likely to be preferable to an important degree or extent.
In our opinion the words "would, or would be likely to, result in" a materially preferable decision do not need lengthy explanation. The first permutation of the words, "would⦠result in" involves a conclusion on the part of the Tribunal at a high level of certainty, while the second permutation of the words, "would be likely to⦠result in" involves a conclusion on the part of the Tribunal at a lower level of certainty but requiring that the conclusion be "more likely than not".
We see the first permutation as more applicable where the result of the Tribunal's review is certain because the Tribunal has specifically varied the regulatory decision and the second permutation as more applicable where the Tribunal has set aside the regulatory decision and remit the matter back to the AER.
The identified mischief to which the amending legislation was directed was "cherry picking". We accept the submission on behalf of the Minister that whether there will be, or would be likely to be, a materially preferable decision to the decision in fact made by the regulator depends on an assessment of the decision as a whole, and a comparison of that decision with a putative alternative decision, either by the Tribunal or by the AER on remitter: it does not depend simply on an assessment of errors in individual components of the decision under review.
At a general level, we see no reviewable error on the part of the Tribunal in its consideration of this issue of a materially preferable NEO decision, at [31]-[49], [65]-[101], and [1176]-[1226]. Each of those paragraphs must be read in context, as expressly recognised in the submissions on behalf of the Minister.
In relation to PIAC's submission that s 16(1)(d) of the NEL is of present significance, we do not accept that submission. The submission was that s 16(1)(d) imposed a substantive obligation that sat atop, and confined, the discretions or judgements afforded to the AER under the NER and that this, in turn, had a consequential effect on the scope of the available grounds of review in the Tribunal, particularly s 71C(1)(c) and (d).
In our opinion, that provision requires, where there are 2 or more possible reviewable regulatory decisions that will or are likely to contribute to the achievement of the national electricity objective, the AER must make the decision that it is satisfied will or is likely to contribute to the achievement of that objective to the greatest degree. In our opinion, in so providing, the legislature is making express, perhaps unnecessarily, the content of what is preferable. The provision then goes on to require the AER to specify reasons as to the basis on which it is satisfied that the decision is the preferable reviewable regulatory decision.
121 After addressing the matters to which we have referred at [119]β[120] above, the Full Court went on to consider the particular grounds of review raised by the AER in the case before it.
122 At 145β173 [618]β[784], the Full Court examined several grounds of review directed to alleged errors made by the Tribunal in relation to the value of imputation credits (gamma). Much of what the Full Court said in this part of its Reasons is relevant to the present case and we shall return to discuss the observations of the Full Court when considering the issue of gamma.
123 In a further decision delivered on 18 January 2018 (SA Power Networks v Australian Competition Tribunal (No 2) [2018] FCAFC 3 (SAPN), the Full Court confirmed its reasoning in AER v ACT (No 2). It also reaffirmed the basis of its decision in relation to gamma in n AER v ACT (No 2) (at [52] to [57]). The parties to this application were also given an opportunity to make submissions as to the significance of SAPN for the present matter. The ERA availed itself of that opportunity and lodged a Written Submission dated 3 April 2018. The owners did not lodge any submission in response to that invitation.
The Grounds of Review
124 The owners rely upon two separate grounds of review although, unsurprisingly, they are inter-related.
125 First, the owners challenge the ROE decision. Second, the owners challenge the ERA's determination of a value for imputation credits (gamma) of 0.4.
126 According to the owners, their challenge to the ROE decision involves a relatively narrow, though significant, issue concerning the approach adopted by the ERA in the final decision toward the "downward bias" or "low beta bias" in estimates of the return on equity for low beta stocks derived from the Sharpe Lintner Capital Asset Pricing Model (SL-CAPM) which was the ERA's chosen model for determining the return on equity as part of the allowed rate of return under r 87 of the NGR.
127 The owners contended that the ERA's approach to estimating the return on equity (and consequently, the allowed rate of return) is erroneous and contrary to the requirements of r 87 of the NGR, primarily because of its treatment of downward bias (or "positive alpha") within its chosen model, the SL-CAPM.
128 The owners also argued that, in the final decision, the ERA took no account of, and made no adjustment for, the actual or potential bias in the SL-CAPM. Instead, the ERA derived a return on equity by an application of the SL-CAPM in its standard, theoretical form β absent any adjustment for actual or potential bias or underestimation.
129 Although the owners descended into great detail as to the circumstances in which the ERA came to make that decision and contended that a number of other errors were made in the reasoning process which led to the errors which we have identified at [126]β[128] above, nonetheless the critical errors are those identified in those paragraphs. The owners argued that they had made out several of the grounds specified in s 246(1) of the NGL(WA) in respect of those errors and were entitled to relief.
130 As to the owners' challenge to the ERA's decision in respect of gamma, the owners argued that the rules relating to gamma are essentially the same as between the NER and the NGR. They then submitted that the decisions of the Tribunal and of the AER, in relation to the equivalent provision in cl 6.5.3 of the NER which deals with gamma, are of immediate and direct relevance in considering the proper interpretation and application of r 87A of the NGR. In this regard, the owners relied upon PIAC and Ausgrid.
131 The owners argued that the ERA's determination that gamma should be 0.4 (being the mid-point of a range of gamma of 0.28 to 0.55) was based upon an incorrect construction and application of r 87 and r 87A of the NGR and the application of an erroneous conclusion arrived at by the ERA to the effect that its figure derived from tax statistics of 0.48 for gamma is a point estimate, and not an upper bound, for theta. Had the correct conclusion been applied, the figure from the tax statistics would have been 0.34.
132 In considering the asserted grounds of review, it must be remembered that there will often be no clear distinction between the available grounds of review specified in s 246(1) of the NGL(WA). The section, and the regime, permit overlap between the available grounds of error identified.
133 In Application by ATCO Gas Australia Pty Ltd [2016] ACompT 10 (ATCO Gas) at [47], the Tribunal said that:
(1) the line between the several available grounds for review is not necessarily always clear cut;
(2) there is no clear line between factual error, opinion, and discretionary judgment, as one may feed into the other;
(3) any such error or errors β if accepted by the Tribunal β may be a combination of error or errors of fact, wrongful exercise of discretion, and the outcome of an unreasonable decision.
134 In order to determine whether the ERA made an error of fact for the purposes of s 246(1)(a) and (b) of the NGL(WA), the Tribunal must:
(a) ascertain the precise conclusion of fact made by the ERA;
(b) determine whether, within that conclusion, there is a finding of fact (or facts) that can properly be said to be erroneous (of erroneous in combination); and
(c) if the finding or fact (or combination of facts) was erroneous, determine whether the error was material to the making of the decision,
(see ATCO Gas at [34]β[37]).
135 The phrase "finding of fact" should be interpreted broadly to be meaningful in relation to the function of the ERA under review. Findings of fact may concern the existence of a present or historical fact, being an event or circumstance. However, "findings of facts" do not include the making of choices between permitted methodologies. This was the clear view of the Full Court in ACCC v ACT and, although to some extent possibly qualified in some respects in AER v ACT (No 2), seems to be nonetheless a correct statement of principle.
136 In Application by ActewAGL Distribution [2010] ACompT 4 at [34], the Tribunal considered the meaning of a "discretionary decision". At [34], the Tribunal said:
β¦ It is most commonly applied to decision making which involves essentially a weighing up of relevant facts. First the decision maker finds the facts. Then the decision maker undertakes a weighing up process which involves taking into account considerations that are found to be relevant, assessing the weight to be given to those considerations so assessed and determining what, as a result of that process, is the right result. β¦
137 In ATCO Gas, the Tribunal described certain classes of decision that may attract the conclusion that there had been an incorrect exercise of discretion in the following way (at [39]):
[Decisions]:
(1) based upon a misconstruction or misapplication of relevant principles, methodologies or factors required to be considered by the NGL or NGR;
(2) affected by a failure to have regard to a mandatory relevant factor prescribed by the NGL or the NGR;
(3) affected by the regulator taking into account factors which are extraneous to those relevant under the NGL or NGR; or
(4) affected by a failure to take into account a relevant submission.
[will involve an incorrect exercise of discretion.]
138 An incorrect exercise of discretion as a ground of review is not available merely because the Tribunal would exercise a discretion in a different way. If the ERA has exercised its discretion correctly, in accordance with correct principles, and if the particular exercise of discretion was open to it within the framework of the NGL, then it is not for the Tribunal to substitute a decision which it might prefer on the material before the decision maker (see ATCO Gas at [41] and Application by Envestra Limited (No 2) [2012] ACompT 4 (Envestra) at [36]).
139 In Envestra at [51]β[54], the Tribunal explained the ground of review of "unreasonableness" in the following way:
The concept of unreasonableness goes beyond Wednesbury unreasonableness but is still limited. There must be logical error or irrationality in the decision. To make out this ground, the AER's decision must not be justified by reference to its stated reasons. In ACCC v ACT, the Full Court stated at [178]:
The concept of 'unreasonableness' imports want of reason. That is to say the particular discretion exercised by the [regulator] is not justified by reference to its stated reasons. There may be an error in logic or some discontinuity or non sequitur in the reasoning. It may be that the decision has an element of arbitrariness about it because there is an absence of reason to explain the discretionary choices made by the [regulator] in arriving at its conclusion.
The Tribunal repeated and applied this statement in ElectraNet (No 3) at [65] and in EnergyAustralia at [66]-[67].
In ActewAGL, the Tribunal said that a decision will be unreasonable if it is arbitrary or capricious. It said at [35]:
It is, we think, neither possible nor necessary to give an exhaustive definition of what is an unreasonable decision. At one extreme a decision that is arbitrary or capricious will plainly be unreasonable. At the other extreme, it will not be sufficient merely to reach a different decision to the first instance decision maker; in many areas reasonable persons can perfectly reasonably come to opposite conclusions.
A decision which is not determined by reference to the applicable criteria in the NGL or the NGR is likely to be unreasonable in all the circumstances: Energy Australia at [68]. A failure to take into account a matter which is required to be considered or consideration of a matter which is irrelevant may also give rise to a decision which is unreasonable: ActewAGL at [35].
140 In similar vein, in ATCO Gas at [43]β[46], the Tribunal said:
For the unreasonableness ground in s 246(1)(d) of the NGL to be established, it must involve logical error or irrationality in the decision, and the decision must not be justified by reference to its stated reasons. A decision will be unreasonable if there is an absence of reason to explain the discretionary choices made by the ERA in arriving at its conclusions.
It is not possible to give an exhaustive definition of what constitutes an unreasonable decision. However, at one end of the spectrum, an arbitrary or capricious decision will be unreasonable, but at the other end of the spectrum, it is not sufficient merely to reach a different view to the original decision maker.
A decision which is not determined by reference to the applicable criteria in the NGL or the NGR is likely to be unreasonable in all the circumstances. A failure to take into account a matter which is required to be considered, or consideration of a matter which is irrelevant, may also constitute unreasonableness.
The unreasonableness ground in s 246(1)(d) and the incorrect exercise of discretion ground in s 246(1)(c) overlap to a certain extent. For example, if the reasons for a decision contain logical error or an unexplained discretionary choice made in reaching a conclusion, then the decision is likely to be unreasonable.
Ground 1 β The Owners' Challenge to the ROE Decision
141 Rule 87 and r 87A of the NGR provide:
87 Rate of return
(1) Subject to rule 82(3), the return on the projected capital base for each regulatory year of the access arrangement period is to be calculated by applying a rate of return that is determined in accordance with this rule 87 (the allowed rate of return).
(2) The allowed rate of return is to be determined such that it achieves the allowed rate of return objective.
(3) The allowed rate of return objective is that the rate of return for a service provider is to be commensurate with the efficient financing costs of a benchmark efficient entity with a similar degree of risk as that which applies to the service provider in respect of the provision of reference services (the allowed rate of return objective).
(4) Subject to subrule (2), the allowed rate of return for a regulatory year is to be:
(a) a weighted average of the return on equity for the access arrangement period in which that regulatory year occurs (as estimated under subrule (6)) and the return on debt for that regulatory year (as estimated under subrule (8)); and
(b) determined on a nominal vanilla basis that is consistent with the estimate of the value of imputation credits referred to in rule 87A.
(5) In determining the allowed rate of return, regard must be had to:
(a) relevant estimation methods, financial models, market data and other evidence;
(b) the desirability of using an approach that leads to the consistent application of any estimates of financial parameters that are relevant to the estimates of, and that are common to, the return on equity and the return on debt; and
(c) any interrelationships between estimates of financial parameters that are relevant to the estimates of the return on equity and the return on debt.
Return on equity
(6) The return on equity for an access arrangement period is to be estimated such that it contributes to the achievement of the allowed rate of return objective.
(7) In estimating the return on equity under subrule (6), regard must be had to the prevailing conditions in the market for equity funds.
Return on debt
(8) The return on debt for a regulatory year is to be estimated such that it contributes to the achievement of the allowed rate of return objective.
(9) The return on debt may be estimated using a methodology which results in either:
(a) the return on debt for each regulatory year in the access arrangement period being the same; or
(b) the return on debt (and consequently the allowed rate of return) being, or potentially being, different for different regulatory years in the access arrangement period.
(10) Subject to subrule (8), the methodology adopted to estimate the return on debt may, without limitation, be designed to result in the return on debt reflecting:
(a) the return that would be required by debt investors in a benchmark efficient entity if it raised debt at the time or shortly before the time when the AER's decision on the access arrangement for that access arrangement period is made;
(b) the average return that would have been required by debt investors in a benchmark efficient entity if it raised debt over an historical period prior to the commencement of a regulatory year in the access arrangement period; or
(c) some combination of the returns referred to in subrules (a) and (b).
(11) In estimating the return on debt under subrule (8), regard must be had to the following factors:
(a) the desirability of minimising any difference between the return on debt and the return on debt of a benchmark efficient entity referred to in the allowed rate of return objective;
(b) the interrelationship between the return on equity and the return on debt;
(c) the incentives that the return on debt may provide in relation to capital expenditure over the access arrangement period, including as to the timing of any capital expenditure; and
(d) any impacts (including in relation to the costs of servicing debt across access arrangement periods) on a benchmark efficient entity referred to in the allowed rate of return objective that could arise as a result of changing the methodology that is used to estimate the return on debt from one access arrangement period to the next.
(12) If the return on debt is to be estimated using a methodology of the type referred to in subrule (9)(b) then a resulting change to the service provider's total revenue must be effected through the automatic application of a formula that is specified in the decision on the access arrangement for that access arrangement period.
Rate of return guidelines
(13) The AER must, in accordance with the rate of return consultative procedure, make and publish guidelines (the rate of return guidelines).
(14) The rate of return guidelines must set out:
(a) the methodologies that the AER proposes to use in estimating the allowed rate of return, including how those methodologies are proposed to result in the determination of a return on equity and a return on debt in a way that is consistent with the allowed rate of return objective; and
(b) the estimation methods, financial models, market data and other evidence the AER proposes to take into account in estimating the return on equity, the return on debt and the value of imputation credits referred to in rule 87A.
(15) There must be rate of return guidelines in force at all times after the date on which the AER first publishes the rate of return guidelines under these rules.
(16) The AER must, in accordance with the rate of return consultative procedure, review the rate of return guidelines:
(a) at intervals not exceeding three years, with the first interval starting from the date that the first rate of return guidelines are published under these rules; and
(b) at the same time as it reviews the Rate of Return Guidelines under clauses 6.5.2 and 6A.6.2 of the National Electricity Rules.
(17) The AER may, from time to time and in accordance with the rate of return consultative procedure, amend or replace the rate of return guidelines.
(18) The rate of return guidelines are not mandatory (and so do not bind the AER or anyone else) but, if the AER makes a decision in relation to the rate of return (including in an access arrangement draft decision or an access arrangement final decision) that is not in accordance with them, the AER must state, in its reasons for the decision, the reasons for departing from the guidelines.
(19) If the rate of return guidelines indicate that there may be a change of regulatory approach by the decision maker in future decisions, the guidelines should also (if practicable) indicate how transitional issues are to be dealt with.
Division 5A
87A Estimated cost of corporate income tax
(1) The estimated cost of corporate income tax of a service provider for each regulatory year of an access arrangement period (ETCt) is to be estimated in accordance with the following formula:
ETCt = (ETIt Γ rt) (1 β Ξ³)
Where
ETIt is an estimate of the taxable income for that regulatory year that would be earned by a benchmark efficient entity as a result of the provision of reference services if such an entity, rather than the service provider, operated the business of the service provider;
rt is the expected statutory income tax rate for that regulatory year as determined by the AER; and
Ξ³ is the value of imputation credits.
The Final Decision (ROE)
142 The final decision comprises 483 pages together with a number of Appendices.
143 At pp 69 to 247 (pars 206 to 1,182), the ERA addressed the concept of Total Revenue for the purposes of rr 72 to 87A.
144 At pp 69 to 75 (pars 206 to 222), the ERA set out the detail provided in the owners' various proposals and the ERA's various responses concerning the Revenue Building Blocks.
145 At pp 73 to 75 (pars 219 to 222), the ERA said:
Considerations of the Authority
The Authority's Final Decision on DBP's Total Revenue requirement is documented in the following sections.
β’ Operating Expenditure;
β’ Opening Capital Base;
β’ Projected Capital Base;
β’ Rate of Return;
β’ Gamma;
β’ Depreciation;
β’ Taxation;
β’ Incentive Mechanism; and
β’ Allocation of Total Revenue between Reference Services and Other Services
As a result of the Authority's assessment of DBP's proposed total revenue building blocks as per rule 76 of the NGR, set out in detail below, the Authority has not approved DBP's proposed total revenue for the fourth access arrangement (AA4) period. The Authority's Final Decision for approved total revenue by building block in real and nominal dollars is set out in Table 7 and Table 8 respectively.
Figure 3 compares DBP's proposed revenue building blocks with the building blocks approved in the Authority's Final Decision.
Figure 4 compares DBP's proposed revenue building blocks with the building blocks approved in the Authority's Final Decision. The key changes relate to the inflationary gain and return on capital base (reflecting a reduction in forecast inflation and increase in the real rate of return) and taxation (reflecting an adjustment to the opening tax asset base).
146 Table 8 reproduced at par 220 of the final decision is the Total Revenue Building Blocks in nominal dollars, not real dollars as described in that paragraph.
147 It is apparent from the information contained in those paragraphs of the final decision that the quantum of the ERA's approved Revenue Building Blocks ($1,844.53 million in nominal dollars) was an increase over the quantum assessed in the ERA's draft decision ($1,762.18 million in nominal dollars) but a decrease over the amount claimed by the owners ($2,210.04 million).
148 The Rate of Return determination made by the ERA is referred to in summary form at pp 218 to 222 (pars 1058 to 1070) of the final decision and also in Appendix 4 Rate of Return to that decision.
149 At pp 218 to 220 (pars 1058 to 1066), the ERA said:
In its Draft Decision the Authority did not accept DBP's approach for estimating the rate of return and determined its own numbers.
The Draft Decision noted that, as provided in the Final Decision on Proposed Revisions to the Access Arrangement for the Mid-West and South-West Gas Distribution Systems (hereafter, the ATCO GDS Final Decision) published as amended on 10 September 2015, [Economic Regulatory Authority, Final Decision on Final Decision on Proposed Revisions to the Access Arrangement for the Mid-West and South-West Gas Distribution Systems, as amended 10 September 2015] the Authority had recently modified its approach to estimating the return on debt and the return on equity as outlined in the Authority's Rate of Return Guidelines [Economic Regulation Authority, Rate of Return Guidelines, 16 December 2013].
The Authority considered that the modified approach aligned with the regulatory requirements for the rate of return as specified in the National Gas Law (NGL) and National Gas Rules (NGR). The Authority considered DBP's proposal for estimating the rate of return, but was not convinced that it met the requirements of either the NGL or the NGR.
The detailed reasoning for the Authority's Draft Decision is set out in Appendix 4 and is summarised below. The Authority:
β’ continued to estimate the rate of return based on the debt proportion of total capital β the gearing - for the benchmark efficient entity of 60 per cent;
β’ with regard to the estimate of the return on equity:
- retained the Sharpe Lintner Capital Asset Pricing Model (SL-CAPM) as the primary relevant model for estimating the return on equity;
- utilised information from other relevant models β including the Black Capital Asset Pricing Model (Black-CAPM) and the Dividend Growth Model (DGM) β to establish the value of parameters in the Sharpe Lintner CAPM;
- estimated the risk free rate parameter for input to the Sharpe Lintner CAPM from Commonwealth Government Securities, based on a 5 year term to maturity;
- estimated a range for the 5 year forward looking Market Risk Premium (MRP) based on historic excess return data and the DGM, in recognition that it fluctuates in response to prevailing conditions;
- drew on a range of forward looking information to establish the point value of the MRP; and
- estimated the beta parameter based a benchmark sample of Australian firms with similar characteristics to the benchmark efficient entity.
β’ with regard to the estimate of the return on debt:
- continued to estimate the cost of debt as the sum of the risk free rate, relevant Debt Risk Premium (DRP), and relevant debt raising and hedging transactions costs;
- estimated the risk free rate from the bank bill swap rate with the same term as the regulatory period, that is, 5 years;
- adopted a hybrid trailing average approach to estimating the return on debt, with the risk free rate estimated once, just prior to the regulatory period, and the DRP estimated using an equally weighted 10 year trailing average;
- estimated the DRP based on a BBB band credit rating, for a term of 10 years, using the Authority's enhanced bond yield approach that included international bonds issued by domestic entities (and for estimates of the DRP prior to the proposed averaging period, utilise the Reserve Bank of Australia's credit spread data for the BBB band); and
- annually updated the estimate of the DRP using a set of specified automatic formulas.
The Authority's resulting indicative estimate for the overall post tax nominal rate of return for its Final Decision, for the 2016 calendar year, was 6.02 per cent:
β’ the indicative expected 5 year return on equity was 7.28 per cent, estimated as at 2 April 2015;
β’ the indicative estimate for the return on debt for the 2016 calendar year was 5.172 per cent, estimated as at 2 April 2015.
This rate of return was applied from 1 January 2016 to 31 December 2020 in the tariff modelling for the Draft Decision, in order to estimate indicative tariffs for the Draft Decision.
The Draft Decision noted the indicative estimate of the rate return on debt, would be updated in the Final Decision to account for DBP's nominated averaging period for the 2016 estimate. The overall method for determining that revised calendar year 2016 estimate would follow that for the indicative estimate set out in the Draft Decision. The resulting estimated rate of return for 2016 would be applied in the tariff modelling for the Final Decision for 2016 to 2020.
The Draft Decision noted the 2017 to 2020 rates of return would then be progressively annually updated through the remaining years of AA4. The resulting revised rate of return would be included in the relevant tariff variations which occur in each calendar year.
The Draft Decision noted the process for implementing the annual update would be as follows:
β’ For each annual update for 2017, 2018, 2019 and 2020, the Authority would estimate the updated DRP following the relevant annual averaging period, recalculate the rate of return, and then notify DBP of the outcomes as soon as practicable. This would allow DBP to check the rate of return estimate, prior to its incorporation in the proposed annual tariff variation to occur on 1 January in each year.
β’ Following that notification, DBP would be required to respond on any issues as soon as practicable, in order to allow the updated DRP and rate of return estimates to be finalised prior to submission by DBP of its proposed annual tariff variation.
β’ In the event that there was a disagreement on the DRP annual update estimate, the Authority would work with DBP to ensure that any misapplication of the automatic formulas in Appendix 4G of the Draft Decision were corrected in a timely manner.
150 As a result of the reasoning and determinations summarised in those paragraphs, the ERA required an amendment to the owners' amended proposal in respect of the Rate of Return.
151 The owners did not accept the ERA's proposed amendment. The ERA then determined its own numbers which it then recorded in Table 71 on p 221 of the final decision. That table is in the following form:
152 The line items under challenge by Ground 1 of the owners' grounds of review are the 0.7 figure for equity beta and the second last and third last line items in Table 71.
153 In addition, it is worth noting at this point that the second ground of review (the gamma ground) relates to the fourth last line item in Table 71, with particular reference to the figure in the last column (0.40).
154 The detailed reasoning of the ERA in relation to its ROE decision is found in Appendix 4. Appendix 4 is itself a lengthy document (233 pages).
155 At pp 2 to 10 (pars 7 to 42) of Appendix 4, the ERA summarised the terms of the owners' original proposal in respect of the rate of return. At pars 41 and 42 of Appendix 4, the ERA said:
In revisions to the Access Arrangement, DBP proposed an allowed post tax nominal rate of return for the benchmark efficient entity of 8.36 per cent (as at 30 September 2014).
With debt gearing of 60 per cent, DBP's proposed nominal rate of return was a weighted average of:
β’ a return on equity of 11.71 per cent; and
β’ a return on debt of 6.13 per cent.
156 At pp 10 to 13 (pars 43 to 60), the ERA described its response to the owners' original proposal as reflected in its draft decision.
157 At pp 11 to 12 (pars 51 to 53), the ERA said:
The following conclusions were reached in relation to the approach for estimating the return on equity in the Draft Decision for DBP:
β’ The SL-CAPM should be utilised to estimate the return on equity.
β’ The Fama French three factor model is not relevant and as such, this model should not be used for the purpose of estimating a return on equity.
β’ The Black CAPM is relevant for the purpose of estimating a return on equity. However, given it is not reliable and practical to estimate a robust return on equity using this model, the model will not be used directly, but only to inform the point estimate of the equity beta from within its range for input to the SL-CAPM.
β’ The DGM is a relevant model for informing the market return on equity and also the forward looking MRP.
β’ Other information such as historical data on equity risk premium; surveys of market risk and other equity analysts' estimates are also relevant for the purpose of estimating the MRP and the market return on equity. This other material should be used as a cross check for the return on equity.
Given that the only robust model for estimating the return on equity in the Australian context is the SL-CAPM, the Authority did not see any current need for data sourced from the SIRCA SPPR database, as suggested by DBP [DBNGP Transmission Pty Ltd, Proposed Revisions DBNGP Access Arrangement, 2016 β 2020, Rate of Return, Supporting Submission: 12, 31 December 2014, p. 55]. The SPPR database was required by DBP to form long time series of predictions for the model adequacy test [This need for a long time series was considered one of the weaknesses of the model adequacy test (Appendix 4B), one which can be circumnavigated by various approaches to cross-validation (Appendix 4Bi)]. As need for the model adequacy test was rejected, then so too was need for the SPPR database.
The Authority remained of the view that its reasons for adopting the SL-CAPM are sound. The Authority considered that its application of the SL-CAPM meets the requirements of the NGR, and the allowed rate of return objective.
β’ The Authority did not agree with DBP's submission that it had not taken all of the relevant information into consideration with respect to its estimate of the return on equity. The Authority was of the view that all of the issues raised by DBP and its consultants were considered in the Draft Decision.
β’ The Authority also disagreed with DBP's estimates of the rate of return on equity. The Authority conducted significant research into the rate of return and cross checked its estimate across various sources. The Authority's estimate for the rate of return was in line with other industry estimates.
β’ The Authority considered that the estimated return on equity adopted in the Draft Decision was commensurate with the equity costs incurred by a benchmark efficient entity with a similar degree of risk as DBP with respect to the provision of reference services. The Authority therefore considered that the estimated rate of return meets the allowed rate of return objective and the requirements of the NGR and NGL.
158 The reference to "DGM" in par 51 is a reference to the Dividend Growth Model.
159 It is clear from the ERA's references to its draft decision in Appendix 4 that the ERA had considered other models, information and material and was of the opinion that the only robust model for estimating the return on equity in the Australian context is the SL-CAPM.
160 At pp 14 to 32 (pars 61 to 156) of Appendix 4, the ERA recorded the substance of the owners' response to its draft decision. Its references to the owners' response in these passages included references to the owners' response by way of further submissions (see, in particular, pp 30 to 32 (pars 146 to 156)).
161 At pp 15 to 16 (pars 69 to 78) of Appendix 4, the ERA summarised the owners' responses in the following terms (references to 'betastar' being references to an algebraic formula adjustment propounded by the owners):
Return on equity
In response to the Draft Decision, DBP submits only a slightly amended approach to estimating the return on equity, as compared to that put forward in its initial proposal.
First, DBP updates its range of outcomes for the return on equity from its model adequacy test. This delivers a so-called 'unbiased' betastar range of 1.00 (25th percentile) to 1.70 (99th percentile), around a mean of 1.15 [A footnote to this sentence stated that DBP have revised slightly the betastar estimates to reflect a change in the benchmark efficient entity sample set. The revised sample set reflects the omission of Envestra and HDF, which are now both delisted from the ASX DBP states (DBP, Proposed Revisions DBNGP Access Arrangement 2016 β 2020 Access Arrangement Period Supporting Submission: 56, 24 February 2016, p. 97): We note in Appendix 4A(ii) that the ERA has dropped Envestra and HDF from its original sample set as they are now dead stocks. We are unclear as to why it did not do this at its last estimation; Envestra was trading until September 2014, but HDF ceased trading in November 2012, a year before the ERA undertook the beta calculations in its Guidelines. The ERA has not explained this change in stance.].
Second, the resulting range for the return on equity, when the betastar range is applied within the SL-CAPM, is between 9.9 per cent and 14.82 per cent. This result builds on DBP's estimate of the 10 year risk free rate, of 2.87 per cent, and its estimate of the Market Risk Premium (MRP) of 7.03 per cent.
Third, DBP also utilises information from the return on debt to derive the final range of the return on equity, drawing on the insights of Merton. DBP considers that this ensures consistency between the return on debt and the return on equity. Based on its analysis, DBP argues that the range of the return on equity should be between 10.61 per cent and 11.06 per cent. This range is narrower, lying entirely within the range given by the betastar estimates. DBP then takes the midpoint estimate of the narrower range, which is 10.84 per cent, to be the best estimate of the return on equity.
In arriving at this position, DBP considers that two issues are central to the differences between DBP and the Authority, which are reflected in their respective approaches to the return on equity.
First, DBP is of the view that the Authority has not made a proper assessment of its betastar approach. DBP contends that the Authority had based its conclusions on superficial reasoning and irrelevant evidence, while ignoring relevant evidence. DBP submits that the Authority fails to make a proper application of the evidence which itself had produced in relation to the identification or quantification of bias within the SL-CAPM.
Second, DBP argues that the Authority did not test whether the outcome of its SL-CAPM approach to estimating the return on equity meets Rule 87(5). DBP, on the other hand, considers that it does this through the use of its model adequacy test. DBP also contends that the need to test outcomes as well as inputs is a fundamental aspect of the regulatory framework in the NGL and NGR.
DBP maintains substantially the same approach to determining the return on equity in its initial Access Arrangement Proposal; that is, the application of its 'model adequacy test'. DBP considers that this tests the outputs of models, and whether they give rise to a range of unbiased outcomes; such that the model results then neither systematically overstate nor understate actual returns.
DBP notes that one of the amendments from the Authority requires the DBP to implement the SL-CAPM using the five-year risk-free rate and a beta of 0.7, along with the estimate of the MRP. DBP argues that the first two could be done, but not the third. This problem arises because the Authority's estimate of the MRP changes at each regulatory decision, based upon how it interprets a number of "forward looking" indicator variables. DBP considers that the Draft Decision fails to outline the ERA's methodology for quantifying the correlation between changes in these variables and the change in the MRP.
DBP's reasons for rejecting the Authority's views on relevant asset valuation models
DBP submits that the Authority accepts that the Black CAPM, dividend growth model (DGM) and SL-CAPM are relevant in principle, as it does. However, a key difference arises with respect to the Fama-French model (FFM); DBP considers it to be relevant in-principle (based on the advice of CEG) but the Authority does not.
162 At p 17 (par 83), the ERA recorded the owners' submission that the notion that the SL-CAPM is biased downwards is hardly a new idea, noting that the ERA accepted that this downward bias exists when it chose 0.7 for beta, while specifically acknowledging that it was doing so in order to address the issue of bias. In the same paragraph, the ERA noted the owners' submission that the model adequacy test utilised by the ERA produced results that no-one else had found suggesting that the ERA's view was contrary to more than 40 years of empirical finance.
163 The ERA acknowledged that the owners had submitted that there was a need for an empirical test of outputs. The ERA also understood that the owners had submitted that there was no proper basis for the ERA's rejection of the model adequacy test.
164 At p 26 (pars 124 to 126), the ERA recorded the owners' submissions in the following terms:
Reasons for maintaining betastar
DBP considers that the Authority's approach, given a finding of downward bias for low beta stocks in the SL-CAPM, is completely irrational. DBP argues that [DBP, Proposed Revisions DBNGP Access Arrangement 2016 β 2020 Access Arrangement Period Supporting Submission: 56, 24 February 2016, p. 55]:
β¦ the ERA is acknowledging that bias exists, acknowledging that different models can supply information which might help overcome the bias, but then explicitly rejecting any information from those models in order to solve the bias problem in order to satisfy itself that it is not deviating from the SL-CAPM in any material way.
DBP is of the view that its betastar adjustment is transparent and can be easily followed by any observer [DBP, Proposed Revisions DBNGP Access Arrangement 2016 β 2020 Access Arrangement Period Supporting Submission: 56, 24 February 2016, p. 55].
DBP agrees with the Authority's view that there are no literature or empirical studies which use a betastar approach. DBP accepts that it fails to provide a single reference to support its view that betastar is well established, or at least follows any standard economic or statistical theories. However, DBP argues that [DBP, Proposed Revisions DBNGP Access Arrangement 2016 β 2020 Access Arrangement Period Supporting Submission: 56, 24 February 2016, p. 55]:
This, however, is not surprising; in the ordinary course of events, if the Black CAPM passed a test like the model adequacy test but the SL-CAPM did not, one would simply have used the Black CAPM. However, betastar was adopted so as to minimise departure from the Guidelines.
165 At p 28 (pars 134 to 137), the ERA recorded the following:
Beta
In its response to the Authority's Draft Decision in relation to the estimates of equity beta, DBP submitted that it has no issue with the estimation of beta as undertaken by the Authority [DBP, Proposed Revisions DBNGP Access Arrangement 2016 β 2020 Access Arrangement Period Supporting Submission: 56, 24 February 2016, p. 63].
However, DBP considered that there are two issues in respect of the Authority's beta, including: (i) The estimate of beta the Authority has used of 0.7 produces a result which is not consistent with the approach it has used in the past, because it has failed to take into consideration the changes in its beta estimation; and (ii) a potential issue concerning the efficiency of the market portfolio.
First, DBP argued that as the confidence interval around beta has shifted upwards, the Authority's choice of beta has not changed [DBP, Proposed Revisions DBNGP Access Arrangement 2016 β 2020 Access Arrangement Period Supporting Submission: 56, 24 February 2016, p. 64]. DBP considered that systematic risk is measured relative to the market and one would expect change as either the actual risks facing the firm changed or risks in the market changed. DBP was of the view that a consistent regulator would also choose a point two basis points below the upper end of the same confidence interval to address the same bias issue. As such, DBP argued that doing so would require the Authority to adopt the estimate of equity beta of 0.79 [DBP, Proposed Revisions DBNGP Access Arrangement 2016 β 2020 Access Arrangement Period Supporting Submission: 56, 24 February 2016, p. 64].
Second, DBP submitted that if the market portfolio is inefficient, then the SL-CAPM fails to hold, and the conclusions the Authority has drawn in respect of beta are wrong. DBP argued that, more importantly, DBP concluded that [DBP, Proposed Revisions DBNGP Access Arrangement 2016 β 2020 Access Arrangement Period Supporting Submission: 56, 24 February 2016, p. 66]:
DBP is to show that the predictions made by an SL-CAPM predicated on an inefficient market portfolio are downward-biased estimators of the actual returns made firms with (imperfectly measured) systematic risk similar to (likewise imperfectly measured) systematic risk exposure to the benchmark efficient firm, whilst the Black CAPM does not produce downward-biased estimators.
166 At pp 32 to 189 (pars 157 to 189), the ERA explained its reasoning in respect of the Rate of Return which it proposed to adopt for the purposes of its final decision.
167 At pp 32 to 33 (par 157), the ERA said that it did not accept the owners' proposed approach for estimating the rate of return, as that approach does not comply with the regulatory requirements for the rate of return as specified in the NGL and NGR. The ERA said that, in evaluating the owners' amended proposal, it had drawn on previous positions set out in the Rate of Return Guidelines, prior decisions, the draft decision and the owners' response to the draft decision.
168 The ERA commenced its consideration of the issue of Return on Equity at p 50 (par 240). At pp 50 to 52 (pars 240 to 244), the ERA said:
Return on equity
In line with the requirements of NGR 87(5), the Authority evaluated the relevance of a broad range of material for estimating the return on equity in the Rate of Return Guidelines, covering relevant estimation methods, financial models, market data and other evidence [A footnote to this sentence referred to the Australian Energy Market Commission, Rule Determination: National Gas Amendment (Price and Revenue Regulation of Gas Services) Rule 2012, 29 November 2013, p. 36].
The Rate of Return Guidelines set out that the Authority will utilise a five step approach for estimating the return on equity. The five steps are summarised in Figure 2 below.
In applying this approach, the Authority has assessed a wide range of material, and identified relevant models for the return on equity, as well as a range of other relevant information. For this Final Decision, the Authority has had regard to and given weight to relevant material, according to its merits, seeking to fully achieve the requirements of the allowed rate of return objective.
204 The Authority considers that the term:
- 'approach' refers to the overall framework or method for estimating the return on equity, which combines the relevant estimation methods, financial models, market data and other evidence;
- 'estimation material' refers to any of the relevant estimation methods, financial models, market data and other evidence that contribute the 'approach'; and
- 'estimation method' relates primarily to the estimation of the parameters of financial models, or to the technique employed within that model to deliver an output.
The Authority in the Rate of Return Guidelines determined that only a subset of the material evaluated at that time could be considered relevant in the Australian context, given the allowed rate of return objective. The Authority remains of the view that:
Rate of return estimate materials β the estimation methods, financial models, market data and other evidence β would need to be broadly consistent with the requirements of the NGL, the NGO, the NGR and the allowed rate of return objective to be considered relevant. Some estimation materials may perform better on some requirements and less well on others, and yet may still be considered relevant. Accordingly, the assessment is whether, on balance, estimation materials are consistent with the requirements of the NGL, the NGO, the NGR and the allowed rate of return objective.
Nevertheless, estimation materials would need to pass a threshold of adequacy to be considered relevant. To the extent that estimation materials failed the adequacy threshold, then they would be rejected. This rejection would be consistent with the AEMC's purpose for the guidelines [Australian Energy Market Commission, Rule Determination, National Gas Amendment (Price and Revenue Regulation of Gas Services) Rule 2012, 29 November, p. 58]:
In order for the guidelines to have some purpose and value at the time of the regulatory determination or access arrangement process, they must have some weight to narrow the debate.
Once over the threshold for adequacy, then, as noted, any particular estimation material may meet the requirements of the NGL, the NGO, the NGR and the allowed rate of return objective to a greater or lesser degree. With this in mind, the criteria would then be used as a means to articulate the Authority's evaluation of the estimation materials, in terms of how they performed in meeting the requirements of the NGL, the NGO, the NGR and the allowed rate of return objective. In this way, the criteria are intended to assist transparency around its exercise of judgement [Economic Regulation Authority, Explanatory Statement for the Rate of Return Guidelines, 16 December 2013, p. 12].
In that context, the following analysis provides the Authority's determination for this Final Decision of the return on equity for the DBNGP benchmark efficient entity. The Authority considers that the estimate is consistent with delivering an outcome that meets the allowed rate of return objective, as well as the NGL and NGR more broadly [The allowed rate of return objective is set out at NGR 87(3):
The allowed rate of return objective is that the rate of return for a service provider is to be commensurate with the efficient financing costs of a benchmark efficient entity with a similar degree of risk as that which applies to the service provider in respect of the provision of reference services].
169 The ERA then moved through the steps depicted in Figure 2 which is set out at p 51 (par 242) and explained its approach at each of those steps.
170 After referring to the Rate of Return Guidelines, the ERA then moved to consider the approach which it had adopted in its draft decision.
171 At pp 55 to 56 (pars 252 to 255) of Appendix 4, the ERA recorded its opinion, reflected in its draft decision, that the SL-CAPM and the Black CAPM are both relevant models for estimating the return on equity. However, the ERA took the view that it was not appropriate for it to regard the Black CAPM as suitable for use directly for estimating the return on equity. The ERA concluded that the owners' proposed betastar method had significant empirical flaws. These flaws were summarised at pp 55 to 56 (par 253) as follows:
β’ the zero beta portfolio is sensitive to the data set used, highly variable through time with a wide standard error, and is therefore not robust [Economic Regulation Authority, Draft Decision on Proposed Revisions to the Access Arrangement for the Dampier to Bunbury Natural Gas Pipeline, 22 December 2016, Appendix 4, p. 45];
- DBP's estimates β which use a single average estimate of zero beta premium β disguise the significant instability of the Black CAPM model;
- DBP's model adequacy test is selective in its interpretation of the Black CAPM model;
β’ the betastar approach does not produce sensible results [Economic Regulation Authority, Draft Decision on Proposed Revisions to the Access Arrangement for the Dampier to Bunbury Natural Gas Pipeline, 22 December 2016, Appendix 4, p. 45.];
- the indicative overall market return on equity for a long period, estimated at the time of the Draft Decision, was approximately 10.83 per cent, [Economic Regulatory Authority, Final Decision on Proposed Revisions to the Access Arrangement for the Mid-West and South-West Gas Distribution Systems, as amended 10 September 2015, p. 255] which is lower than DBP's estimated return for low asset beta entities such as the DBP;
- DBP is therefore suggesting that its return on equity is more risky than the market as a whole;
- but this is not sensible on conceptual grounds.
172 In addition, the ERA did not accept the owners' model adequacy test for the reasons set out at p 56 (par 254) of Appendix 4. Those reasons were:
β’ relying on the historical data alone β as DBP does β for testing the relative adequacy of the Authority's approach, is erroneous;
β’ other forward looking information needs to be taken into account, as the Authority does in its approach to estimating the return on equity;
β’ it follows that DBP's model adequacy approach does not actually test the Authority's approach in using the SL-CAPM for estimating the return on equity;
β’ DBP in essence compares two models that are not robust in the Australian context (the Black CAPM and FFM) with another method that is not relied on either β an ex post SL-CAPM with an MRP that is based on historic data only.
173 The ERA then moved on to address the owners' response to the ERA's draft decision. It noted that the owners continued to seek to apply its model adequacy test to determine the relevance of models for the return on equity. On this occasion, the owners tested the outputs of three models β the SL-CAPM, the FFM and the Black CAPM β in terms of their ability to predict actual (ex post) market outcomes. The ERA noted that the owners had submitted that only the outcomes of the Black CAPM provide for unbiased estimates of the return on equity whereas the results from the other two models are considered to be biased and hence poor forecast predictors.
174 As noted by the ERA, the owners then transformed the two percentile Black CAPM outcomes into "betastar" estimates, for use in the SL-CAPM, as a means to estimate an unbiased range for the return on equity. The ERA noted that the owners narrowed the return on equity range using the so-called "Merton framework" cross check method, before choosing the mid-point as the resulting return on equity.
175 At p 57 (pars 260 to 262) of Appendix 4, the ERA said:
Consequently, the core of DBP's proposal relates to the model adequacy test, the associated inference that only the Black CAPM leads to unbiased results for the return on equity, and the use of the betastar transformation so as to implement the results of the Black CAPM within the framework of the SL-CAPM. DBP's claims with regard to the Merton framework cross check method are also key to its estimate.
The Authority considers these four elements of DBP's response in turn regarding the return on equity in what follows.
Further evaluation of DBP's model adequacy test and application of betastar
The Authority has significant concerns β both conceptual and empirical β with DBP's model adequacy test and betastar transformation. The following two sections set out the Authority's reasoning regarding DBP's proposed approach from these conceptual and empirical perspectives.
176 Over the ensuing 30 pages or so, the ERA considered, in great detail, the conceptual and empirical elements of the owners' suggested approach.
177 At p 61 (par 278), the ERA concluded that there were significant issues with the construct of the owners' model adequacy test. The ERA observed that no method tests the ERA's actual implementation of the SL-CAPM and that all methods seek, erroneously, to compare expected returns with ex post actual returns.
178 The ERA then moved on to consider the question of whether there was bias in the performance of the SL-CAPM or merely an anomaly.
179 At pp 61 to 66 (pars 279 to 299), the ERA said:
Bias or anomaly?
DBP's model adequacy test is intended to uncover 'bias' in the performance of the SL-CAPM. DBP then makes an adjustment to the beta in the SL-CAPM, as a means to counter the perceived bias. That 'betastar' adjustment is based on the Black CAPM, and is of the form [DBP, Proposed Revisions DBNGP Access Arrangement, 2016 β 2020 Regulatory Period, Rate of Return, Supporting Submission: 12, 31 December 2014, p. 68]:
However, it is not the beta in the SL-CAPM that is biased. As noted by Pink Lake in its evaluation of the statistical properties of the SL-CAPM and the Black CAPM [Pink Lake Analytics, Statistical Advice to ERA on DBP Submission 56, May 2016, p. 4]:
Upon review it is clear that the positions of the ERA and DBP are divergent. The Authority derives an RoE calculation from the Henry [Henry, O.T., Estimating π½: An update, April 2014] statistical version of the Sharpe-Lintner Capital Asset Pricing Model (SL CAPM). The statistical model itself is valid β in predicting the data it minimises the squared error difference between observations and model predictions. Furthermore, the model includes a free intercept term in excess of the risk-free rate (πΌ), so for its class of models (i.e., linear models with a single predictor) it provides an unbiased estimate of π½, the measure of an asset's exposure to systematic risk in the market. The ERA then omits the πΌ estimate of abnormal returns from the Henry model in its implementation of the Sharpe-Lintner CAPM, deeming these abnormal returns as not reflective of the systematic risk in market prices that is faced by benchmark efficient firmsβ¦
In contrast, DBP implements the Black CAPM model by first estimating a zero-beta premium (ZBP). Effectively, this ZBP estimate is a measure of the abnormal returns in excess of the risk-free rate. As such, although the Black CAPM is marginally biased in terms of its predictions (as it does not include a free intercept term) this bias is statistically insignificant. Where DBP and the Authority differ in their positions is that DBP include the full weight of the ZBP, as a de facto measure of abnormal returns in their RoE calculationβ¦
Pink Lake has set out very clearly the mathematical underpinnings of the two modelling approaches, so these are not reproduced here [Pink Lake Analytics, Statistical Advice to ERA on DBP Submission 56, May 2016, p. 4]. Pink Lake's evaluation confirms that the Authority's estimate of the SL-CAPM beta is not biased. However, by loading the betastar adjustment into the SL-CAPM beta, DBP biases the estimate of beta in its estimate. At the same time, in so doing, DBP imports all of the deficiencies of its Black CAPM into the resulting SL-CAPM estimate.
It is clear that DBP is mistakenly comparing one form of model (a model of ex-post actual returns β the Black CAPM with a full intercept term, where the zero beta return captures all ex-post anomalies) with another form of model (a model of ex-ante expected returns β the SL-CAPM with no Ξ± intercept included). As Partington and Satchell observe [Partington, G. and Satchell, S., Report to the ERA: The Cost of Equity and Asset Pricing Models, May 2016, p. 34.]:
We need to be clear what unbiased means. If it means that the DBP Black CAPM estimates, when subject to a model adequacy test as proposed by DBP, are such that the model adequacy test is not rejected, then they are generally unbiased, at least with respect to the beta sorted portfolios.
However, this view of unbiasedness then gets translated into a view that the regulator who uses the SL CAPM is providing investors with approximately 4% per annum less compensation. This treats low beta ex-post returns as equilibrium returns. Here and elsewhere in the document we take the view that the [SL-CAPM] low beta anomaly is indeed an anomaly. The correct regulatory return would be more sensibly based on subtracting the intercept term from [ex post SL-CAPM] returns, not adjusting the slope and certainly not treating the Black CAPM (unbiased) returns as fair compensation. The more so since the SL CAPM industry portfolios also pass the unbiasedness test.
It follows that if there is any 'bias' arising in the Authority's estimate, that bias occurs with the Authority's omission of the Ξ± intercept term from its statistical estimation process. DBP in essence agrees with this point [DBP, Proposed Revisions DBNGP Access Arrangement 2016 β 2020 Access Arrangement Period Supporting Submission: 56, 24 February 2016, p. 51].
β¦the only theoretical difference between the SL-CAPM and the Black CAPM lies not in beta, but on the intercept... The practical effect of this theoretical change is to shift the intercept of the security market line upwards, and thus lessen its slope. This, in turn, makes the expected returns of low beta stocks higher and of high beta stocks lower than predicted by the SL-CAPM.
This is important when considering the bias adjustments made by the ERA and DBP (through its betastar model). The ERA, motivating the "theory" of the Black CAPM, changes beta, using a higher level of beta than the mean value it obtains from its own regressions. However, the theoretical change from the SL-CAPM to the Black CAPM has nothing whatsoever with beta, it is a shift of the intercept.
Pink Lake also recognises that the 'low beta bias' issue relates to the interpretation of the intercept in the SL-CAPM estimation process. Pink Lake points out that this makes the whole model adequacy exercise redundant, in so far as it is testing for beta bias [Pink Lake Analytics, Statistical Advice to ERA on DBP Submission 56, May 2016, p. 4]:
For the Authority, the statistical model employed is already an optimally fitting model under reasonable model assumptions. Hence, there is no reason to undertake further the model validation proposed by DBP when adopting the Authority's position. In contrast, DBP propose to apply the model validation to the RoE calculation itself. As the DBP RoE calculation is essentially the same as their statistical model, then it is self-evident that their RoE calculation does not exhibit significant model bias. Similarly, it is self-evident that the Authority's RoE calculation does exhibit model bias, as it deliberately excludes the abnormal return component estimated in the Henry model in excess of the risk-free rate. Both the Henry model and the Black CAPM are valid, depending on the position being adopted. The question of which position to accept - either the Authority's or DBP's - is therefore not a statistical question, but a question of economics, and one that falls outside the scope and expertise of this consultancy.
Consequently, the Authority now recognises that there is no justification for changing the value of beta in the SL-CAPM. The further implication is clear: DBP, by adjusting beta, is introducing a highly significant bias into the beta estimate in its implementation of the SL-CAPM. The Authority considers DBP's approach to be in error on this ground.
The case for an alpha adjustment
Having examined the implications of DBP's arguments with regard to the bias in the SL-CAPM, and rejected the case for any adjustment to beta in the SL-CAPM, the Authority now turns to consider whether there is any case to adjust for Ξ± in the estimates derived from the model tests.
The Authority considers that there is little compelling evidence about the degree to which the Ξ± intercept term, or even part of it, should be included.
A positive intercept in tests of the SL-CAPM does not automatically imply that the Black CAPM applies. Positive intercepts (Ξ±) in ex-post outcomes are not automatically estimates of a zero beta premium [Partington, G. and Satchell, S., Report to the ERA: The Cost of Equity and Asset Pricing Models, May 2016, p. 17].
The theory of the SL-CAPM does not include the Ξ± term. Rather, the presence of positive (or indeed, a negative value of) Ξ± relates to differences (so-called 'anomalies') between the required (or expected or equilibrium) returns and realised returns [Refer paragraph 265 for the links between required, expected and equilibrium returns]. The Authority seeks to ensure that investors in the benchmark efficient entity obtain the required return, consistent with NGR 87 (see paragraph 264). As Partington and Satchell observe [Partington, G. and Satchell, S., Report to the ERA: The Cost of Equity and Asset Pricing Models, May 2016, p. 7]:
When prices are in equilibrium this required return is equal to the expected return, but there is no guarantee that expectations will be realised, or that prices are always in equilibrium. If there were a guarantee that expectations would be realised then the asset would have no risk.
Consistent with that view, the Ξ± intercept in observed returns should be subtracted in its entirety, in order to establish the required forward looking equilibrium returns [Partington, G. and Satchell, S., Report to the ERA: The Cost of Equity and Asset Pricing Models, May 2016, p. 15:
This usual argument for the Black CAPM is based on the premise that actual returns are equal to equilibrium returns on average and thus a positive intercept in tests of the SL CAPM are assumed to be driven by the SL CAPM underestimating (overestimating) realised returns for low (high) beta stocks. An alternative premise is that the results are a consequence of actual returns outperforming (underperforming) equilibrium returns for low (high) beta stocks. In the parlance of funds management such outperformance is expressed as alpha. Thus low beta stocks have positive alphas. In this case an estimate of the equilibrium return is obtained by subtracting alpha from the actual return. Whether the resulting return is then higher or lower than the regulated return is an open question and will depend upon the magnitude of alpha.
For similar reasons, this subtraction of the intercept term was employed by Henry, in estimating beta, and indeed the same subtraction is adopted by the Authority in its updated estimates of beta for input to the SL-CAPM [It is noted that the alphas in tests of the SL-CAPM, based on beta portfolio sorts, are not identical to the intercept term identified in the Henry-style beta estimation process. Nevertheless, they originate from the same source β that is, from anomalous returns observed in the ex post outcomes]. That is, the intercept in excess of the risk free rate is ignored, forcing the SL-CAPM security market line through the origin, consistent with the theory of the SL-CAPM.
The Authority considers that there is no justification to 'add back in' any alpha from the observed returns to the SL-CAPM, where those are simply differences, ex-post, as compared to the ex-ante required returns.
At the same time, the Authority is not convinced there is any empirical evidence at the current time to justify an adjustment to the SL-CAPM for expected alpha for the benchmark efficient entity. As noted above at paragraph 265, theory suggests that if such an expectation was widespread among investors, it would be bid away as part of a movement toward equilibrium asset pricing.
To examine this, the Authority turns to DBP's own model adequacy test results (even though, for the reasons stated above, the Authority does not consider the model adequacy approach a valid rationale for rejecting the SL-CAPM). DBP's own estimates indicate that, based on industry sorts, the model adequacy tests conducted by DBP tends to support the SL-CAPM. DBP tests two versions of the SL-CAPM β a vanilla version and an 'ERA' version, where it takes the 95th percentile beta of beta for each industry β in two tables in Appendix D of its initial proposal [DBP explain this as follows (DBP, Proposed Revisions DBNGP Access Arrangement, 2016 β 2020 Regulatory Period, Rate of Return, Supporting Submission: 12, 31 December 2014, Appendix D, p. 14):
The results of tests of the SL-CAPM that use industry returns appear in Table 7 below while the results of tests of the ERA's version of the SL-CAPM, which uses the 95th percentile of an estimate of the distribution of an OLS estimator for beta rather than an estimate of the mean of the distribution (the OLS point estimate), appear in Table 8]. As noted by Partington and Satchell [Partington, G. and Satchell, S., Report to the ERA: The Cost of Equity and Asset Pricing Models, May 2016, p. 21]:
Tables 7 and 8 from DBP [2015]β¦ provide statistics for the mean forecast error for the SL CAPM by industry. The description in DBP's text says that the results of the ERA's version of the SL CAPM are in Table 8, whereas according to the title on Table 7 it gives the ERA's version of the SL CAPM. We think the latter is correct, but fortunately, the labelling is of no real consequence as there is relatively little difference in the nature of the results between the two tables.
The results in Tables 7 and 8 generally are supportive of the SL CAPM. Across the 104 tests in the two tables significant bias is only observed with respect to 3 industries. These are retailing, pharmaceuticals and utilities, which provide six results significant at the 5% level. With the exception of retailing, these results are only significant for Method B. In short there is very little evidence of significant bias and the number of significant results is approximately the number expected by chance. With a type 1 error of 5% we would expect 5.2 of the 104 hypotheses to be rejected even if the null is true. Thus finding only 6 rejections suggests to us that the SL CAPM is supported by these testing procedures.
The Authority agrees with Partington and Satchell that the evidence in these tables is supportive of the SL-CAPM. This is particularly the case for method A, which is the more relevant test (method B does not test any form of expected return, as noted above). DBP dismisses this, on the basis that the industry tests are of low power. However, it is notable that DBP's argument relates to the β in the Authority's view β discredited method B [DBP, Proposed Revisions DBNGP Access Arrangement, 2016 β 2020 Regulatory Period, Rate of Return, Supporting Submission: 12, 31 December 2014, Appendix D, p. 14]:
The low power of the tests is illustrated by the fact that a Method B test of the null hypothesis that the ERA's version of the SL-CAPM provides an unbiased estimator of the return required on a portfolio of utilities is unable to reject at the five percent level the null despite the mean forecast error associated with the estimator being 0.557 percent per month.
The Authority therefore is not convinced that there is strong evidence from DBP's analysis to reject the standard theoretical form of the SL-CAPM.
The Authority now considers, given these insights, that there is inadequate evidence, at this time, to justify departure from an ex-ante alpha estimate of zero in its implementation of the SL-CAPM:
β’ a positive intercept in tests of the SL-CAPM does not automatically imply that the Black CAPM applies;
β’ the theory of the SL-CAPM does not include the Ξ± term; rather, the presence of positive (or indeed, a negative value of) Ξ± relates to anomalies; and
β’ DBP's own estimates indicate that, based on industry sorts, the model adequacy tests conducted by DBP tend to support the SL-CAPM.
On this basis, the resulting implementation of the SL-CAPM becomes consistent with the theoretical form of the SL-CAPM: ex-ante, the SL-CAPM security market line is expected to pass through the zero intercept on the y axis. If positive alpha was expected ex-ante, prices would be expected to adjust to restore equilibrium and an expectation of zero alpha (refer to paragraph 265 above for this rationale).
The corollary is that while the theoretical insights of the Black CAPM are relevant β for example, for informing the theoretical position of the efficient market portfolio on the frontier in mean variance space in the absence of a riskless asset β the thorough exploration of this issue by the Authority identifies that the empirical estimate of the zero beta return, adopted by DBP, contains a large measure of anomalous alpha, and hence overestimates the required return. It is therefore not fit for purpose for estimating the return on equity for the benchmark efficient entity
180 For the reasons discussed by the ERA in the passages which we have extracted at [179] above, the ERA expressed its views at p 65 (par 297) of Appendix 4 in the following terms:
The Authority now considers, given these insights, that there is inadequate evidence, at this time, to justify departure from an ex-ante alpha estimate of zero in its implementation of the SL-CAPM:
β’ a positive intercept in tests of the SL-CAPM does not automatically imply that the Black CAPM applies;
β’ the theory of the SL-CAPM does not include the Ξ± term; rather, the presence of positive (or indeed, a negative value of) Ξ± relates to anomalies; and
β’ DBP's own estimates indicate that, based on industry sorts, the model adequacy tests conducted by DBP tend to support the SL-CAPM.
181 The ERA then moved on to discuss the relative acceptability of the SL-CAPM and the Black CAPM.
182 This discussion led to the conclusions expressed at p 69 (par 308) that it was reasonable for the ERA to use the SL-CAPM and that the Black CAPM could not be relied upon.
183 The ERA then moved on to discuss empirical elements of the owners' return on equity estimates.
184 After referring to a number of reports and items in the financial literature (at pp 69 to 84 of Appendix 4 (pars 309 to 369), at pp 85 to 86 (pars 370 to 382) the ERA said:
On that basis, DBP acknowledges that there is a reversal of ranking of the Fama French model and the CAPM when the method of portfolio formation changes.
Partington and Satchell note that the SL CAPM does not fare particularly well in the Kan, Robotti and Shanken tests, although the Inter temporal CAPM is a clear winner. Their view is that the results of Kan, Robotti and Shanken show the difficulty of all attempts to fit asset pricing models to realised returns, including the work of NERA/HoustonKemp [Partington, G. and Satchell, S., Report to the ERA: The Cost of Equity and Asset Pricing Models, May 2016, p. 28].
The Authority notes the sensitivity of model performance ex post to model specification and portfolio formation. This flags further caution with regard to the findings of DBP, as their work is based on a beta sort, rather than an industry sort.
On balance, the Authority considers that there are still many unsolved issues in relation to the estimates of the zero beta premium. As such, the Authority considers that DBP's estimates β which use a single estimate of zero beta premium β disguises the significant instability in the model. Therefore, the Authority does not consider that DBP's model adequacy test is empirically true to the Black CAPM model.
The Authority notes that the unresolved issues in relation to the estimates of the zero beta premium may explain why the Black CAPM has never seen widespread adoption by financial practitioners.
DBP's model adequacy test produces nonsensical outcomes
The Authority notes that based on the findings from its model adequacy test, DBP is of the view that the bias in its Sharpe Lintner CAPM analysis is not only statistically significant, but economically significant as well, with a mean forecast error of around four percentage points per annum. DBP considers that this means that a regulator using the Authority's approach to setting prices would provide investors with returns that are four percentage points lower than they could be earning by facing similar levels of systematic risk elsewhere in the economy [DBP, Proposed Revisions DBNGP Access Arrangement, 2016 β 2020 Regulatory Period, Rate of Return, Supporting Submission: 12, 31 December 2014, p. 60].
The implication of DBP's finding is that the expected return on equity for low beta assets, such as the ATCO GDS, the GGP and the DBNGP, needs to be increased by 4 percentage points, based on DBP's analysis and conclusion. For example, DBP argues that the expected return for DBP or ATCO (a low asset beta) using historical data on DBP's model adequacy test should be 11.28 per cent.
The Authority notes that the market return on equity for a long period is approximately 10.3 per cent [See the section 'Lower bound of the MRP range' below for the Authority's estimate of the long run historic return on the market], which is lower than DBP's estimated return for low asset betas such as DBP and ATCO. DBP is therefore suggesting that its return on equity is more risky than the market as a whole. The Authority does not consider that this view is sound.
There is conceptual support for the equity beta of an infrastructure network benchmark efficient entity being less than 1:
β’ business risk β which may be disaggregated into intrinsic (economic) risk and operational risk β is the primary driver of systematic risk, and this risk is low for the benchmark efficient entity relative to the market average;
β’ despite relatively high financial leverage, the benchmark efficient entity does not have high financial risk β rather it is the intrinsic risk of the firm which is the key driver of systematic risk.
McKenzie and Partington endorse the view that the equity beta is likely to be below 1, concluding that there is [McKenzie, Partington, Report to the AER: Estimation of the Equity Beta (Conceptual and Regulatory Issues) for a Gas Regulatory Process in 2012, April 2012, p. 15]:
β¦evidence to suggest that the theoretical beta of the benchmark firm is very low. While it is difficult to provide a point estimate of beta, based on these considerations, it is hard to think of an industry that is more insulated from the business cycle due to inelastic demand and a fixed component to their pricing structure. In this case, one would expect the beta to be among the lowest possible and this conclusion would apply equally irrespective as to whether the benchmark firm is a regulated energy network or a regulated gas transmission pipeline.
The Authority noted these views in its Draft Decision and considered that the reasoning is relevant. This provided further support for the Authority's view that DBP's model adequacy test produces a nonsensical results.
DBP took issue with this point, submitting the Authority has ignored standard errors, has failed to take account of the expected return on debt for high risk firms in portfolio 9, and has overlooked that the return on equity can be below the return on debt for long periods [DBP, Proposed Revisions DBNGP Access Arrangement 2016 β 2020 Access Arrangement Period Supporting Submission: 56, 24 February 2016, p. 42]. However, the fact that the return on equity can be below the return on debt, ex post, simply amplifies the point that 'no rational investor invests in shares expecting decades of negative real returns ex ante, or expecting that bonds will outperform equities, yet these were actual outcomes. Thus differences between ex ante expectations and ex post outcomes are a major problem for tests of asset pricing models' [Partington, G. and Satchell, S., Report to the ERA: The Cost of Equity and Asset Pricing Models, May 2016, p. 7]. The Authority remains of the view that the outcomes for portfolio 9 highlight the extreme empirical problems of DBP's approach.
On balance, the Authority remains of the view that the findings of DBP's analysis are not robust and the approach produces nonsensical outcomes.
185 The ERA then moved on to consider cross validation issues and the question of consistency between debt and equity.
186 At pp 93 to 96 (pars 425 to 443) of Appendix 4 the ERA expressed its conclusions with respect to relevant models and information produced to it. The ERA said that it had significant concerns with the owners' estimate for the return on equity β both conceptual and empirical. In particular, the ERA expressed the view that:
(a) the model adequacy test approach, which sought to evaluate the forecasting power of various models of the return on equity, was not appropriate for the purpose of estimating the return on equity for regulatory purposes;
(b) the 'betastar' method (which was intended to transform the results of the Black CAPM into the SL-CAPM) was fraught with conceptual and empirical problems and could not be relied upon to meet the requirements of the NGL (WA) and the NGR because it:
(i) introduced a full quantum of ex post anomalous returns into the SL-CAPM beta term;
(ii) thereby introducing an adjustment for beta in the SL-CAPM which perversely introduced significant bias into what is an unbiased beta estimate; and
(iii) is ill-posed in mathematical terms (that is, is increasingly distorted) as the ZBP/MRP ratio approaches 1, raising serious questions about the veracity of the resulting return on equity;
(c) based on the Black CAPM, the owners' proposals suffered from the fact that estimates of the zero-beta return are unstable and cannot be relied upon in the Australian context. As a consequence, the ERA was not convinced that the Black CAPM is an acceptable pricing model for estimating the return on equity, given that the empirical implementation of the Black CAPM:
(i) is not robust. In contrast to the risk-free rate, the expected return on the zero beta asset is unobservable and there is no apparent consensus on methods for estimating this return;
(ii) relies upon average zero beta return estimated over more than 20 years of data, which typically results in estimates of the zero beta return, and the imputed zero beta premium, being less reflective of prevailing market conditions than the risk free rate estimates utilised in the SL-CAPM; and
(iii) is not widely used in practice. There is little evidence that other regulators, academics or market practitioners used the Black CAPM to estimate the return on equity.
187 At pp 95 to 96 (pars 437 to 443), the ERA said:
The Authority acknowledges that there is much debate about whether an adjustment needs to be made to the SL-CAPM. This was recognised by the Authority in the Guidelines and Draft Decision, with reference to the theoretical properties of Black CAPM. However, analysis since, by the Authority and its consultants, in response to DBP, has made the Authority concerned that it would likely be making a greater error by making an adjustment to the SL-CAPM β through alpha β than by making no adjustment. The Authority is not convinced such an adjustment would meet the allowed rate of return objective, or the requirements of the NGO or the RPP.
Accordingly, the Authority has determined to retain the use of the 'vanilla' SL-CAPM for this Final Decision, with the beta parameter based on the central, best estimate. Further, in light of the foregoing, no adjustment is made for alpha.
The Authority is satisfied that the resulting return on equity derived using the SL-CAPM is consistent with the allowed rate of return objective, and with the other requirements of the NGL and NGR. The Authority considers that the resulting SL-CAPM estimate for the return on equity:
β’ is reflective of economic and finance principles and market information;
β’ is fit for purpose, which is reflected in its broad acceptance in the finance industry as a means for estimating the cost of capital;
β’ can be implemented in accordance with good practice;
β’ is parsimonious, is not unduly sensitive to errors in inputs or arbitrary filtering, and is therefore difficult to game;
β’ uses input data that is credible and verifiable, comparable and timely and clearly sourced;
β’ is sufficiently flexible to allow for changing market conditions and new information to be reflected in regulatory outcomes, as appropriate.
In summary, the Authority determines the following for the purpose of estimating a return on equity in this Final Decision:
β’ The SL-CAPM will be utilised to estimate the return on equity.
β’ The Fama French (three factor) Model is not relevant and will not be used for the purpose of estimating a return on equity.
β’ The Black CAPM is relevant for informing the theory of the return on equity.
- However, given it is not reliable and practical to estimate a robust return on equity using this model, the model will not be used directly.
- Neither is it used indirectly. It is only used now to inform the theory of the return on equity.
- A revised consideration of the theoretical implications of the model makes clear that no adjustment to equity beta is appropriate. In addition, the Authority considers that there is no compelling evidence to apply an alpha adjustment to the return on equity determined by the vanilla CAPM, as a means to account for 'low beta bias' observed in ex post returns, at the current time.
β’ The DGM is a relevant model for informing the market return on equity and also the forward looking MRP.
β’ Other information such as historical data on equity risk premium; surveys of market risk and other equity analysts' estimates are also relevant for the purpose of estimating the MRP and the market return on equity. In addition, DBP's primary cross-check method is also accepted. This other material will be used as a cross check for the return on equity.
The Authority remains of the view that its reasons for adopting the SL-CAPM are sound. The Authority considers that its application of the SL-CAPM meets the requirements of the NGL and NGR, including the allowed rate of return objective.
Accordingly, the Authority considers that the estimated return on equity adopted in this Final Decision is commensurate with the equity costs incurred by a benchmark efficient entity with a similar degree of risk as DBP with respect to the provision of reference services. The Authority therefore considers that the estimated rate of return meets the allowed rate of return objectives and the requirements of the NGR and NGL.
In line with the requirements of NGR 87(5), the Authority has evaluated the relevance of a broad range of material for estimating the return on equity, covering relevant estimation methods, financial models, market data and other evidence for this Final Decision.
188 At pp 97 to 98 (pars 446 to 458) of Appendix 4, the ERA set out its reasoning as to why it had come to the view in the final decision that its estimate of the equity beta for use in the SL-CAPM is not biased. Those paragraphs are in the following terms:
Estimate of the equity beta
Following further evaluation of DBP's betastar claims, set out above, the Authority has determined that its estimate of the equity beta for use in the SL-CAPM is not biased. Accordingly, the Authority has determined that it will not adjust beta in determining the return on equity for this Final Decision. The task then is to determine the best, central estimate of beta.
Under the CAPM, the total risk of an asset is divided into systematic and non-systematic risk. Systematic risk is a function of broad macroeconomic factors (such as economic growth rates) that affect all assets and cannot be eliminated by diversification of the investor's asset portfolio.
The key insight of the CAPM is that the contribution of an asset to the systematic risk of a portfolio of assets is the correct measure of the asset's risk (known as beta risk), over and above the return on a risk free asset.
In contrast, non-systematic risk relates to the attributes of a particular asset. The CAPM recognises this risk can be managed by portfolio diversification. Therefore, the investor in an asset does not require compensation for this risk.
In the CAPM, the equity beta value is a scaling factor applied to the market risk premium, to reflect the relative systematic risk for the return to equity of the firm in question, as compared to the systematic risk for all assets. Two types of risks are generally considered to determine a value of equity beta for a particular firm: (i) the type of business, and associated capital assets, that the firm operates; and (ii) the amount of financial leverage (gearing) employed by the firm.
In the Rate of Return Guidelines, the Authority considered that empirical evidence provides the best means to inform its judgment for equity beta [Economic Regulation Authority, Explanatory Statement for the Rate of Return Guidelines: Meeting the Requirements of the National Gas Rules, December 2013, p. 161].
However, as discussed above (paragraphs 378 to 380, there is conceptual support for the equity beta of an infrastructure network benchmark efficient entity being less than 1 [See for example Australian Energy Regulator, Draft Decision Jemena (NSW), Attachment 3: Rate of return, November 2014, p. 3-235]. The Authority noted these views in the Draft Decision and considered that the reasoning is relevant [In the Draft Decision, the Authority noted DBP's view that model adequacy tests suggest that application of the SL-CAPM is not estimating what low beta firms 'actually earn for their equity investors' (Dampier Bunbury Pipeline, DBP Submission to ATCO Draft Decision, 7 January 2015, p. 3). However, the Authority considers that the evidence provided by DBP does not accord with the well accepted theoretical underpinnings of the CAPM, in that it suggests that as beta (systematic risk) declines, the equity risk premium increases. This raises significant issues for the DBP empirical analysis, and the underlying quality of the data that is used for that analysis. Similarly, the Authority considers that the points made by the ENA also refer to the same matters (Energy Networks Association, WA ERA Draft Decision for ATCO Gas ENA Response, 12 January 2015, p. 4). In particular, the evidence on the performance of SL-CAPM for low beta stocks evaluated by the ENA's consultant NERA utilises the same SIRCA database which is used by DBP (see NERA Economic Consulting, Estimates of the zero-beta premium, June 2013, p. 15). Furthermore, as a related point, the Authority does not consider that the four estimates cited by ENA are robust in the Australian context. At the current time, the Authority remains of the view that the conceptual foundation of the CAPM supports the estimates of the return on equity set out in this Final Decision.].
Nonetheless, the conceptual analysis does not provide sufficient grounds to establish the point value of the equity beta. To inform its decision on the point value, the Authority conducted a detailed empirical estimation of the required equity beta as part of the development of the Rate of Return Guidelines [Econometric analysis of beta was conducted in: Economic Regulation Authority, Explanatory Statement for the Rate of Return Guidelines, December 2013, Chapter 12. Justification and explanation for econometric techniques was provided in Economic Regulation Authority, Appendices to the Explanatory Statement for the Rate of Return Guidelines, December 2013, Appendix 17, 22 and 23].
In its Guidelines, the Authority evaluated the following issues in relation to the estimates of equity beta; including:
β’ the level of imprecision for any empirically estimated value of the equity beta [Economic Regulation Authority, Explanatory Statement for the Rate of Return Guidelines, 16 December 2013, p. 162.];
β’ a range of other issues, including those relating to sampling and instability; and
β’ that it was inappropriate to include overseas businesses in the comparator sample which was used to estimate the required equity beta of the benchmark efficient entity [Economic Regulation Authority, Explanatory Statement for the Rate of Return Guidelines, December 2013, p. 188].
The Authority noted in the Guidelines that it would update its estimate of beta at the time of each access arrangement decision [Economic Regulation Authority, Explanatory Statement for the Rate of Return Guidelines, 16 December 2013, p. 197].
For this Final Decision, the Authority will continue to estimate beta in the way that was set out in the Guidelines, albeit updated. Given the decision not to adjust beta β as set out in 'Step 1 β Identifying relevant materials' above β the Authority adopts the best, central estimate of beta.
The Authority notes that DBP states that it has no issue with the Authority's revised estimates for beta that were set out in the Draft Decision [DBP, Proposed Revisions DBNGP Access Arrangement 2016 β 2020 Access Arrangement Period Supporting Submission: 56, 24 February 2016, p. 63]:
In respect of beta, DBP has no issue with the estimation of beta as undertaken by the ERA; when we use five years of weekly, end-of-the-week returns, we obtain roughly the same results the ERA does.
The Authority therefore takes DBP's broad acceptance of the beta material set out in the Draft Decision, apart from a number of issues which it raised in its response to the Draft Decision. For example [ibid]:
We do, however, have two issues in respect to beta:
(a) The estimate of beta the ERA has used of 0.7 produces a result which is not consistent with the approach it has used in the past, because it has failed to take into consideration the changes in its beta estimation.
(b) The second relates to a potential issue concerning the efficiency of the market portfolio.
189 At pp 99 to 100 (pars 459 to 466), the ERA set out its response to the submissions made by the owners in respect of beta. The ERA said:
First, the issue raised by DBP that the Authority's Draft Decision estimate of beta, of 0.7, was not consistent with the approach used in the past, refers to the Authority's previous practice of adjusting beta for so-called low beta bias. However, the Authority indicated in the Rate of Return Guidelines that it would review the evidence for beta adjustment [Economic Regulation Authority, Explanatory Statement for the Rate of Return Guidelines, 16 December 2013, p. 162]. On the basis of the review set out in this Final Decision, the Authority now considers that there is no evidence to support it making an adjustment to beta. Accordingly, the Authority adopts the central, best estimate of beta for this Final Decision. DBP's point has no bearing on the central, best estimate, as no adjustment is being made. Accordingly, it is not considered further.
However, relevant to that central estimate, DBP raises the issue of a structural break in the estimate of beta, around late 2014, for rolling three year betas, and for five-yearly betas in April 2012 (value-weighted portfolios) and September 2013 (equal weighted portfolios) [DBP, Proposed Revisions DBNGP Access Arrangement 2016 β 2020 Access Arrangement Period Supporting Submission: 56, 24 February 2016, p. 65]. DBP contends that [DBP, Proposed Revisions DBNGP Access Arrangement 2016 β 2020 Access Arrangement Period Supporting Submission: 56, 24 February 2016, p. 64]:
The changing confidence interval in the ERA's own analysis points to a deeper issue in respect of beta. That is, beta appears to be changing, and changing substantially, over the past twelve months. Figure 5 provides a comparison of rolling three and five-year betas over the past several years.
However, it is not exactly clear what DBP's point is [ibid]:
Both beta calculations give roughly similar results until around the end of October 2014. From the end of that date, both begin to trend upwards (as do the ERA's results), but the three-year betas trend upwards much more sharply. For a value-weighted portfolio, the mean beta estimate, before an adjustment for bias (like the ERA's choice of 0.7 is around 0.95) and, as CEG points out, the lower bound of the 95 percent confidence interval for a three-year beta is, at present, above the bias-adjusted figure that the ERA uses for beta.
The Authority takes the point that the beta is changing, and that there is then a question of the appropriate averaging period. The Authority notes conflicting views on this topic. For example, SFG submitted to the Authority that it considers it 'implausible' that equity beta estimates could change over a two year period [ATCO Gas Australia, ATCO Gas Australia's Response to the ERA's Draft Decision, 22 December 2014, Appendix 9.1, p. 9]. However, the rolling beta estimates produced by the Authority in the Guidelines convinced it that, for individual firms, the relative sensitivity to systematic risk can vary quite dramatically [Only HDF falls outside the estimated range]. The Authority has no reason to believe that this does not reflect a re-rating by the market of the respective firms, in terms of risk relative to the market.
Therefore, the Authority considers there is no issue with the fact that the measure of beta does change over time β that is exactly why it undertook, in the Rate of Return Guidelines, to update its estimate of the beta just prior to its Final Decision [Economic Regulation Authority, Explanatory Statement for the Rate of Return Guidelines, 16 December 2013, p. 197]. That said, the Authority considers that five years provides an appropriate estimation period which smooths out short term fluctuations in beta. The Authority does not consider it appropriate to depart from its current practice, of placing emphasis on the five year estimates, simply because the data suggests that a higher estimate of beta could be obtained by using a shorter averaging period. Nonetheless, the Authority notes that information.
Second, the Authority dealt with the issue of the efficiency of the market portfolio at paragraph 324 to 326 above.
DBP also argued that the Authority's approach to selecting beta based on confidence intervals is flawed. DBP argued that [DBP, Proposed Revisions DBNGP Access Arrangement 2016 β 2020 Regulatory Period Supporting Submission: 60 Response to Australian Competition Tribunal Decisions, 22 March 2016, pp. 8-9]:
In essence, confidence intervals tell one something about the precision of a parameter estimate (such as of beta) within a given model. However, it tells one nothing about the performance of that model itself. A model can perform very poorly but still have very precisely estimated parameters. The issue of low-beta bias is not a problem in the estimation of beta per-se. As DAA point out, that can be improved simply by increasing sample size. The issue is rather that the outputs of the model produce results which are systematically wrong; too low where the beta of a stock is below one and too high when the beta of a stock is above one.
However, the Authority does not accept DBP's point here, for the reasons set out under 'Step 1' above. DBP is wrong to criticise the Authority's beta estimates on a basis that is, at its essence, a point about model adequacy. The Authority has rejected DBP's 'model adequacy test' approach to estimating the return on equity. However, the Authority notes that DBP considers that 'the issue of low-beta bias is not a problem in the estimation of beta per-se'.
190 At pp 100 to 103 (pars 467 to 478) of Appendix 4, the ERA set out its updated estimates of beta for the purposes of its final decision. In those paragraphs, the ERA said:
The Authority's updated estimates of beta for this Final Decision
The following Table 1 reports a range of estimates of Australian infrastructure betas from various sources, with an emphasis on the most relevant and recent.
Source: The AER's Draft Decision for ActweAGL Distribution Determination, Table 3-55, page 3-262 and the ERA's 2015 study (Economic Regulation Authority, Draft Decision on Proposed Revisions to the Access Arrangement for the Dampier to Bunbury Natural Gas Pipeline, 22 December 2016, Appendix 4Aii, p. 233 β 234.
The detail of the Authority's 2015 study set out in the table was reported at Appendix 4Aii of the Draft Decision.
The Authority noted in the Draft Decision it considered that the 95 per cent confidence interval for the beta estimate was 0.3 to 0.8 [Economic Regulation Authority, Draft Decision on Proposed Revisions to the Access Arrangement for the Dampier to Bunbury Natural Gas Pipeline, 22 December 2016, Appendix 4, p. 52]. The Authority then determined a point estimate for beta at 0.7, allowing for some adjustment towards the top end of the range to account for the theory underpinning the Black CAPM.
DBP contends that the Authority's approach to calculating averages has the effect of artificially lowering the range for beta and does not accord with the Henry approach considered by the Tribunal. DBP states [ibid]:
Specifically, the ERA makes four estimates for the individual firms and then two different portfolio estimates. The upper and lower bounds of 0.81 and 0.41 (respectively) are formed by averaging across the six upper bounds of confidence intervals for the LAD regression estimates and the six lower bounds of the LAD regression estimates (the LAD estimates exhibit the widest range - see DDA4 Table 29, page 194). By contrast, Henry (2014) does not mix portfolio and individual estimates in this way, and reports his ranges as the minimum and maximum of the confidence intervals for each set of regressions, rather than the averages across lower and upper bounds.
Three of the four firms examined by the ERA (APA, AST and SKI) give similar results to the portfolio results, generally, but one (DUET) gives results which are substantially below the other three firms, and the portfolios. By forming the averages in the way that it has, the ERA has effectively given disproportionate weight to DUET, and has dragged down its averages accordingly.
The Authority accepts these points in principle, rather than substance (there are issues with the numbers DBP quotes, and its subsequent inferences). The Authority takes account of those points in what follows.
The Authority's 2016 estimates
For this Final Decision, the Authority had Pink Lake Analytics further update the beta estimates for this Final Decision, in part to address the data issues that had been raised by HoustonKemp [Pink Lake Analytics, Variance of the ZBP estimator, June 2016, Appendix G, p. 59]. The detailed results are reported at Appendix 4A, with a key table reproduced here (Table 2).
Drawing on the results reported in Appendix 4A, the Authority considers that a 95 per cent confidence interval range of equity beta using the most recent data is from 0.479 and 0.870 based on the portfolio results (see Appendix 4A, Table 21 and Table 22). The central estimate given by the average of the portfolios is 0.699. The Authority notes that portfolio estimates have a narrower range than the individual assets.
Based on its own analysis and the other evidence before it, together with the recognition that estimates of equity beta from empirical studies exhibit a high level of imprecision, the Authority is of the view that the point estimate of equity beta of 0.7 (rounded) provides a conservative and appropriate central best estimate for beta for use in the SL-CAPM.
Conclusions with regard to equity beta
Based on the above considerations, the Authority is of the view that available Australian estimates of equity beta are reliable and that the estimates from these studies should be used to determine an appropriate equity beta for a network service provider.
The Authority considers that available estimates of equity beta in Australia, including Henry's studies and the Authority's own analyses, as presented in Table 1 and Table 2 above, as well as submission material from DBP, indicate a best equity beta estimate of (a rounded) 0.7. Rounding the estimate to one significant figure accounts for the acknowledged imprecision of the estimate.
That estimate gives greatest weight to the Authority's 2016 estimates of equity beta β using data for the most recent 5 years.
On balance, the Authority remains of the view that it is appropriate to account for a range of evidence in its determination of the equity beta point estimate. Based on its considerations outlined above, the Authority has determined to adopt the estimate of equity beta of 0.7 for this Final Decision for the DBNGP.
191 The conclusions expressed by the ERA at pp 100 to 103 (pars 467 to 478) were supported by detailed calculations in Appendix 4A. Appendix 4A reported updated estimates for beta for use in the SL-CAPM. The ERA noted (at p 190 (par 915)) that the ERA engaged Pink Lake Analytics to assist with its analysis.
192 At p 193 (par 930) of Appendix 4A, the ERA produced Table 20. That Table was in the following form:
193 At p 193 (pars 930 to 931) of Appendix 4A, the ERA said:
Table 20 reports estimates of each firm's beta across the different regression methodologies, with a data set from June 2011 to May 2016. Equally-weighted and value-weighted portfolios are also reported.
The point estimate of π½ for purposes of the Authority's RoE evaluation is taken fro the mean π½, averaged across the two weighted portfolios and the OLS, LAD, MM and T-S estimators. This results in a π½ = 0.699, rounded to π½ = 0.7 (Table 20)
194 In order to establish Ground 1, the owners must satisfy the Tribunal that the ERA has committed a reviewable error within the meaning of s 246 of the NGL(WA) and that, if that ground is made good any likely reconsidered decision would, or would be likely to, result in a material preferable designated NGO decision.
195 We now move to consider the owners' arguments in relation to Ground 1.
The Owners' Submissions
196 The owners submitted that they were low equity beta corporations. That is, investments in them would be considered low risk by the financial markets.
197 The owners also submitted that it is well accepted in financial literature that the application of a "pure" or "vanilla" SL-CAPM will produce a "downward bias" or "low beta bias" in estimates of the return on equity for low beta stocks derived from the SL-CAPM.
198 The owners argued that, in those circumstances, it was incumbent upon the ERA to take account of and make an adjustment for that actual or potential bias in the outcomes produced by the SL-CAPM.
199 It is common ground that the ERA applied the SL-CAPM in its pure form and made no adjustment of the kind for which the owners contended.
200 The owners submitted that the ERA committed reviewable error when it failed to make such an adjustment.
201 The owners furnished the Tribunal with very detailed Written Submissions in support of Ground 1. In addition, it addressed the Tribunal orally for some time on the same point. In the paragraphs which follow in this section, we will endeavour to encapsulate the essence of those submissions. Subject to the need to protect legitimate confidentiality claims, those submissions will be available in the Tribunal's file should recourse to them in the future be necessary.
202 The owners submitted that the ERA's decision in respect of the allowed rate of return (as to which, see r 87(1) to (7) of the NGR) represents a significant departure from the approach previously adopted by the ERA. The owners also submitted that the ERA's approach in the final decision diverges materially from the approach of the AER which was considered by the Tribunal in PIAC and Ausgrid. In that case, the Tribunal endorsed an approach which used the SL-CAPM but selected the upper end of the derived range for beta in order to account for the potential for underestimation.
203 The owners noted that, in the final decision, the ERA selected the "central, best estimate" for beta produced by the SL-CAPM (having separately acknowledged that beta had increased significantly between the date of its ROR Guidelines of 2013 and the final decision in mid-2016) on the basis that:
(a) any bias in the SL-CAPM is not due to a bias in beta but is instead due to the fact that low beta stocks have "positive alpha" and the SL-CAPM omits the Ξ± intercept term which records actual alpha, applicable to observe returns;
but that
(b) there was insufficient evidence, at this time, to justify an adjustment to the SL-CAPM for expected alpha.
204 The owners accepted that the proposition referred to at [203(a)] above may be accepted as correct in general terms but that there was reviewable error in the second proposition.
205 The owners claimed that the Tribunal should set aside the ERA's decision in relation to the return on equity because of the error described at [203(b)] above and remit that decision to the ERA to make it again in accordance with any direction or recommendation of the Tribunal. The owners did not put forward a specific solution to the problems created by the alleged error committed by the ERA.
206 Rule 87 was introduced into the NGR in 2013.
207 Previously, the equivalent to r 87 required that the return on equity be determined using "a well accepted financial model such as the SL-CAPM". Those words were removed when the new r 87 was promulgated. Regard must now be had to relevant estimation methods, financial models, market data and other evidence. This approach was confirmed by the Tribunal in PIAC and Ausgrid at [650]β[651].
208 The owners' submissions and the final decision referred in detail to the history of the interactions between the owners and the ERA in relation to the access determination under consideration here.
209 The owners pointed out that, in its ROR Guidelines and in its draft decision, the ERA had suggested an appropriate equity beta was 0.7. Ultimately, in its final decision, the ERA used 0.7. The owners also pointed out that the reasons which underpinned the selection of 0.7 as the appropriate equity beta changed between the time when the ROR Guidelines were first formulated and the date of the final decision.
210 That submission is correct.
211 In the Explanatory Statement to the Rate of Return Guidelines promulgated by the ERA, the ERA described in its simplest form the components of the SL-CAPM as follows:
212 For the purposes of its ROR Guidelines, the ERA had formed the view that, of the various models used for the calculation of the return on equity, only the SL-CAPM is relevant for forming the ERA's estimate of the prevailing view of equity for the regulated firm. The ERA considered that other models were not relevant within the Australian context at the current time, at least without some new developments in terms of the theoretical foundations or in the empirical evidence. This was a view which the ERA maintained throughout the regulatory process in the present case. That approach was not criticised by the owners.
213 As submitted by the owners, however, the ROR Guidelines and the explanatory documents published with them contained acknowledgements from the ERA of the existence of actual or potential downward bias in the SL-CAPM for low beta stocks and of the need to adjust for it. In those documents, the ERA purported to make such an adjustment by determining a range for beta of 0.5β0.7 and then selecting a beta from the top end of that range (0.7). This method of adjusting for the alleged bias was, according to the owners, well accepted by June 2016.
214 By the time of the draft decision, the ERA had derived a different range for equity beta. At p 57 (par 250) of Appendix 4 to the draft decision, the ERA said that it considered that a value of 0.8 would be excessive for a gas distribution network such as the pipeline here, with its highly diversified demand base. Its selection of 0.7 was not the top of that range but rather "towards the top" of that range. That range was 0.3 to 0.8.
215 Ultimately, in the final decision, the range for equity beta had again increased. By mid-2016, the 95% confidence interval range for equity beta, using the most recent data, was between 0.479 and 0.870. The central point estimate given by the average of the portfolios which fed into that range for equity beta was 0.6999. In its final decision, the ERA chose to round that central point estimate up to 0.7 and to use that equity beta in the SL-CAPM.
216 The essential error in the approach of the ERA is said by the owners to have been its failure to make any adjustment for the well-accepted proposition that outcomes from the application of the pure SL-CAPM contain a downwards bias in respect of low equity beta stocks. As submitted by the owners, this was a departure from the approach previously taken by the ERA in its ROR Guidelines and also in its draft decision which involved selecting an equity beta at the top or very near to the top of the range under consideration.
217 The owners submitted that it was accepted by both parties that it was not mandatory for the ERA to apply its own guidelines when making its final decision. It was also accepted by both parties that the rule of thumb which efficiently adjusted equity beta by selecting as the appropriate equity beta the top figure in the derived range, an approach which had been adopted in both the ROR Guidelines and in the draft decision, was a rough and ready way of accommodating the actual or potential downwards bias in the outcomes produced by the SL-CAPM in respect of low equity beta stocks.
218 In their submissions, the owners referred in some detail to the empirical work which they had carried out designed to demonstrate that the output of the application of a pure or vanilla SL-CAPM systematically underestimated equity betas for low income stocks when a comparison is made between the actual performance of those stocks over a period of time and the assumptions contained in the SL-CAPM designed to reflect the investors' expectations with respect to returns on their investments in such stocks. We pause to note that it is not necessary for us to delve into the work in this regard that was carried out by the owners and submitted to the ERA as the owners did not contend before us that the ERA's decision not to accept the validity of the work which the owners had done and the approach which then deployed that work did not constitute relevant error. In addition, the owners did not press before us that the betastar adjustment which was the subject of submissions to the ERA should be accepted by us as the correct, proper or only way of addressing the problem of what, in the language of the submissions, came to be called low beta bias.
219 The same may be said of the ERA's rejection of the Black CAPM which records a zero beta premium, something which is not found in the pure or vanilla SL-CAPM and which serves to, in effect, overcome the low beta bias or the high beta bias by what is sometimes called the flattening the security market line. The owners accepted that, in the pure or vanilla SL-CAPM and in the Black CAPM, the equity beta is the same. As we have already mentioned, in the Black CAPM there is a zero risk premium, which is identified by the symbol Ξ± in the formula. Making an adjustment to alpha, so the argument ran, is one way of addressing the problem caused by actual or potential low beta bias. There is no alpha in the pure or vanilla SL-CAPM but there is an alpha in the Black CAPM.
220 During oral argument, the owners accepted that applying the betastar model in effect adjusted the SL-CAPM model relevantly so as to make the result the same as the result that would have been achieved had the Black CAPM model been applied. The owners went on to submit that, over a long period of time, the Black CAPM (or empirical model) performed without bias whereas the SL-CAPM did not. Nonetheless, the owners accepted that it was open to the ERA not to apply the Black CAPM model in the present case. Indeed, they accepted that they were not "taking on that model head on" but rather were seeking to replicate the impact of the model, had it been applied, in the present case.
221 The owners submitted that the ERA committed an error when it declined to use historical data in informing the required rate of return. The submission was that the only reliable way of checking the validity of the SL-CAPM was to compare the assumptions made in that model with the results achieved in fact.
222 The owners also submitted that the ERA committed an error by using an unadjusted SL-CAPM and effectively setting alpha to zero. The owners submitted that this led to a biased outcome and was unjustifiably inconsistent with the previous approaches taken by the ERA.
223 During their oral submissions, the owners (correctly) accepted that, when they used the expression "a low beta bias", they meant to describe the circumstance that the outputs derived through the SL-CAPM will produce returns that are too low for firms that have a low equity beta. It is the outcome which will be biased downwards. It is not the beta integer itself that will be biased.
224 The owners relied upon the reasoning in PIAC and Ausgrid in which the Tribunal held that it did not consider that the regulator in that case (the AER) made an error of fact by selecting the SL-CAPM as its foundation model. It arrived at that holding being fully aware of the shortcomings of the SL-CAPM and after a detailed analysis of the relevant underpinnings. Ultimately, the Tribunal also held that no error was made by the AER in selecting the upper point of the range (in that case, 0.7) for the equity beta to be deployed in the SL-CAPM. In the end, the Tribunal accepted that in PIAC and Ausgrid there was evidence of a low beta bias but concluded that the way that the AER had responded to that low beta bias did not reveal error.
225 The owners submitted that the ERA had committed an error when it proceeded to derive the figure for equity beta without making some appropriate adjustment for the alleged low beta bias. The source of that error was the ERA's acceptance that, on the evidence before it, there was no proven alleged bias. The owners submitted that that was illogical when proper regard was had to historical data and appropriate model testing. The owners accepted that one cannot investigate and establish the validity of actual expectations. However, they submitted that the way that models are tested in the world of finance is to test them by reference to outcomes ex post. This was a legitimate approach and one which was permitted by r 87 of the NGR.
226 In the present case, the owners did not go so far as to submit that the use of the SL-CAPM, in and of itself, constituted an error on the part of the ERA. The complaint was that, if that model was to be used, it needed to be adjusted to take account of the accepted low beta bias. The owners submitted that the use of the SL-CAPM without adjustment will inevitably produce a return that does not meet the RPP under the NGL(WA).
227 The owners submitted that even the expert retained by the ERA (Pink Lake) expressed the opinion that it would be a legitimate exercise of regulatory discretion for the ERA to have selected the top of the range of equity betas when ultimately making its decision because both it and other regulators had taken that rough and ready approach in the past. However, the owners accepted that making this kind of adjustment to the output of the SL-CAPM was indeed "rough and ready".
228 Senior Counsel for the owners summarised the owners' submissions in support of Ground 1 at Transcript pp 61β63. In essence, those submissions were:
(a) There was no evidence before the ERA that, in the real world of finance, the SL-CAPM is consistently deployed in its pure theoretical form;
(b) The SL-CAPM is built on unrealistic assumptions in the sense that they involve expectations of rates of return which are generally not those which are actually achieved;
(c) There is a long and widely held view that the SL-CAPM performs poorly in empirical testing;
(d) There is a long and widely held view that the SL-CAPM tends to underestimate returns for low risk or low beta stocks. In the past, and including in the ROR Guidelines and in the draft decision in the present case, the ERA has sought to accommodate this low beta bias phenomenon by selecting beta from the high end of the derived range;
(e) The Pink Lake Report obtained by the ERA and upon which it relied did support the proposition that addressing low beta bias by selecting a beta from the high end of the derived range is not necessarily the most principled way of dealing with the phenomenon. That is because low beta bias does not mean that estimations of beta are biased downwards. It simply means that the results or outcomes or outputs produced by the SL-CAPM are biased downwards in that returns are too low for low beta stocks;
(f) In light of the above matters, the RPP and r 87 of the NGR require the ERA to address the problem of low beta bias in some way. It cannot do nothing. To do so is to commit error. It must make an adjustment to the inputs of the SL-CAPM either by adopting the rough and ready approach reflected in its own guidelines or by adjusting alpha;
(g) Taking no action to adjust for low beta bias was an error. The problem had to be addressed. The only two ways that immediately come to mind are through an alpha adjustment or by reverting to the common practice of adopting a beta from the high end of the derived range for equity beta;
(h) The ERA committed reviewable error by not making some adjustment. In particular, it preferred theory over reality. The returns may be equilibrium returns insofar as the model is concerned but they will be inadequate when assessed against reality;
(i) The NGR do not mandate that the return on equity must be the equilibrium returns identified by the pure form of the SL-CAPM. That may once have been the case, but, since 2013, with the relevant rule amendments, that is certainly not the case any longer; and
(j) Here, the ERA has failed, one way or another, to deal with low beta bias with the consequence that the return on equity that has been derived is likely to be insufficient to generate or to attract an efficient level of investment in the network with a further consequence that the ERA has failed to allow a rate of return that achieves the allowed rate of return objective within r 87.
The ERA's Submissions
229 The ERA made detailed Written Submissions and oral submissions to the Tribunal. In the succeeding paragraphs, we will endeavour to summarise those submissions.
230 The ERA submitted that in determining the "allowed rate of return" (as to which, see r 87(4) and r 87(3) of the NGR) regard must be had to:
(a) relevant estimation methods, financial models, market data and other evidence;
(b) the desirability of using an approach that leads to the consistent application of any estimates of financial parameters that are relevant to the estimates of, and that are common to, the return on equity and the return on debt; and
(c) any interrelationships between estimates of financial parameters that are relevant to the estimates of the return on equity and the return on debt.
231 The ERA argued that the return on equity for an access arrangement period is to be estimated such that it contributes to the achievement of the allowed rate of return objective (as to which, see r 87(3)). In estimating the return on equity under r 87(6), regard must be had to the prevailing conditions in the market for equity funds (r 87(7)).
232 At [715] in PIAC and Ausgrid, the Tribunal made a number of observations as to the true interpretation of a rule in the NER which is equivalent to r 87(5). In particular, it addressed remarks to the correct application of the equivalent rule to r 87(5)(a). The Tribunal said:
The relevant textual features, in the view of the Tribunal, are the breadth and generality of the words "relevant estimation methods, financial models, market data and other evidence". They do not suggest a prescriptive obligation to consider particular methods, models or data. If that were intended, one would expect it to be more prescribed. Rather, it is left to the AER to decide what is "relevant" and a dispute about relevance is not itself a basis for asserting error of the character now asserted. In fact, the AER did have regard β in the sense of considering β the material put forward by the Network Applicants. The same reasoning suggests that the obligation to "have regard to" certain material is to consider it and to give it such weight as the AER decides. Again, if a more sophisticated obligation were intended, it is likely it would have been differently expressed. The main contextual matter indicating the nature of the obligation is the regulatory framework where the RoR Objective is as set out above. It, too, indicates that the requirement to have regard to certain material is not prescriptive in the sense argued for by the Network Applicants. The RoR Objective is the general umbrella concept which the prescribed process is to serve; it would not serve it by requiring particular weight to be given to particular materials. That conclusion is also supported by the AEMC's views referred to, which indicate that it is left to the AER as the regulator to decide within the relevant Rules how it arrives at a rate of return which is robust and sensible and best achieves the RoR Objective.
233 After referring to the ROR Guidelines, the owners' proposals and the ERA's draft decision, the ERA made brief submissions as to the import of its final decision. In particular, it submitted (correctly) that it had concluded in its final decision that the owners' model adequacy test had conceptual and empirical flaws and was not suitable for assessing the ability of various models of the return on equity to estimate the prevailing return on equity required by investors. The ERA also concluded that the owners' proposed betastar transformation was unsuitable and determined to use the SL-CAPM as the primary means of estimating the return on equity.
234 The ERA submitted that, in the course of evaluating the owners' proposals, it also reached the view that there was little evidence that its estimate of beta in the SL-CAPM led to a biased outcome. Even if an adjustment could be justified, the ERA considered that it should be applied to the intercept term in the SL-CAPM, thereby taking account of the alpha term arising in ex post tests of the model. However, it was not convinced that there was adequate evidence to justify such an adjustment.
235 The ERA then noted that, for the above reasons, it had determined to use the "vanilla" SL-CAPM, with the beta parameter based on the central best estimate (0.6999) with no adjustment made for alpha.
236 The result was that the ERA determined an indicative nominal after tax return on equity of 6.98% giving a nominal after tax WACC of 5.83%.
237 The ERA submitted that there were three prongs to the owners' challenge to the final decision in respect of ROE. The ERA submitted that, according to the owners, it made errors of fact that were material to the making of its decision, and/or exercised its discretion incorrectly, by:
(a) rejecting the owners' use of historical data to test the outcomes produced by asset pricing models against actual returns on equity;
(b) using an unadjusted SL-CAPM (with any estimation alpha ignored or set to zero); and
(c) misconstruing the "industry's portfolios" used by the owners as part of their model adequacy test.
238 The ERA submitted that it had not rejected the use of historical data in principle. Rather, so it submitted, it rejected the owners' methods which had been applied to that data, by its model adequacy test and betastar adjustment, because there were too many flaws in those methods to be able confidently to rely upon them.
239 The ERA noted in its Written Submissions that, in reaching its decision to reject the owners' proposed use of historical data, the ERA considered the submissions lodged by the owners and others and relied upon advice from its own experts (including, in particular, the views of Pink Lake Analytics and Professors Partington and Satchell).
240 We pause to note at this point that the owners do not advance a case to the effect that the ERA committed an error or errors by not accepting the owners' approach to historical data. In particular, the owners do not argue before the Tribunal that the ERA's rejection of its betastar approach was, in and of itself, a reviewable error (see, in particular, the concession made by Senior Counsel for the owners at Transcript p 83 ll 29β34).
241 The ERA submitted that, in the final decision, it had recognised the importance of having regard to observable historical data in determining the return on equity. The ERA used peer reviewed and published historical return data, forward looking data and other relevant models (such as the Dividend Growth Model) when considering the alternative methods for estimating the market risk premium (MRP). However, as submitted by the ERA, the ERA was not convinced that the approach advanced by the owners provided an effective test of how well a model estimates investor expectations in the ex ante. The ERA considered that the owners' approach placed undue reliance on testing asset pricing models using ex post realised returns.
242 The ERA then made a number of submissions addressing well known issues associated with using expected returns to test asset pricing models.
243 The ERA submitted that actual returns can never be a proxy for expected returns because such a proposition is conceptually unsound. The ERA rejected the notion that differences between actual and expected returns over an extended period influence, or are believed to influence, the rate of return demanded by investors. Such an approach is not a standard approach in investment analysis.
244 It must be remembered, so the ERA submitted, that asset pricing models are not tools for forecasting actual returns.
245 While the ERA accepted that some element of past returns performance might contribute, at least to some extent, to investor expectations for the future, it made the point in its submissions that it is not aware of any reliable empirical measure of the degree to which its investor expectations are influenced by such historical data. The owners did not bring forward any such measure.
246 The ERA noted that the owners had submitted that its approach materially differed from the approach of the AER which had been endorsed by the Tribunal in PIAC and Ausgrid. So much may be accepted, so the ERA submitted. However, it went on to submit that its different approach was amply supported by a significant amount of other material, including the Partington and Satchell report of 15 May 2016.
247 The ERA submitted that, on review of this additional material, it was apparent that there was much debate about whether an adjustment needed to be made to the SL-CAPM to account for "low beta bias". The ERA ultimately concluded that there was little evidence that its estimates of beta used in the SL-CAPM were biased in the manner alleged. It then observed that, to the extent that there is any bias in the SL-CAPM, it is more likely to be due to the omission of the alpha intercept term of the SL-CAPM. However, on the evidence available, the ERA concluded that no adjustment for alpha in the estimates derived from the SL-CAPM was justified.
248 Ultimately, the ERA concluded that the available evidence did not justify the kinds of adjustments which were urged upon it by the owners and that, were it to make such adjustments, it would likely be making a greater error than by failing to make any adjustment.
249 The ERA submitted that the above conclusions expressed in its final decision involved the exercise of regulatory judgment by the ERA in deciding which estimation models, financial models, market data and other evidence was relevant and what weight to give to those materials. The ERA did not err, nor was it unreasonable, in reaching the conclusions which it did after having adopted such an approach.
250 In its oral submissions to the Tribunal, the ERA made a number of detailed references to the Pink Lake Analytics report and to the report of Professors Partington and Satchell in order to demonstrate that the evidence allegedly supporting the proposition that the vanilla SL-CAPM contained a low beta bias was not sustainable. It went on to submit that there was no statistically significant provable basis for that proposition.
251 The difficulties in the owners' approach were highlighted when, during the course of the hearing, the owners propounded (in MFI-2) the precise relief which they now sought. That form of relief (if granted) required the ERA to make a wholesale reassessment of its conclusions in respect of return on equity and ultimately the allowed rate of return within the meaning of r 87. The ERA submitted that the Tribunal would never make an order in such general terms.
252 The ERA submitted that there was ample support in the May 2016 report from Pink Lake Analytics and the report from Professors Partington and Satchell for the proposition that the so-called low beta bias in the SL-CAPM did not exist or, to put the matter more accurately, the evidence suggesting that such a bias existed was not sufficient to justify the conclusion that such a bias actually existed.
253 In oral submissions, Senior Counsel for the ERA emphasised that the SL-CAPM was never intended to incorporate assumptions as to investment returns which bore a close resemblance to reality. The assumptions to be fed into the SL-CAPM involved making rational and justifiable assumptions about investor expectations. Necessarily, that exercise involves looking to the future. Past performance would not necessarily provide a useful guide to making an assessment of such expectations.
254 The ERA also reminded the Tribunal in oral submissions that not only did the owners not now advance a case that error was committed by the ERA in rejecting the betastar model, but also they did not advance a case to the effect that rejecting the Black CAPM constituted a reviewable error or that adopting the SL-CAPM per se was such an error. In the end, the owners' case came down to two alleged errors: First, the ERA committed a reviewable error by failing to acknowledge and proceed upon the basis that the SL-CAPM had a low beta bias. Second, having reached the conclusion that the model contained such bias, it committed errors in failing to adjust the SL-CAPM for that bias. The only two potential adjustments that were identified in argument before us were the "rough and ready" approach of adopting as the equity beta that beta which was at the top of the derived range at any given point in time or adjusting the alpha interceptor from zero upwards. The ERA submitted that, even if the owners were correct in their submissions in respect of those two alleged errors, they did not undertake the task of establishing and plainly failed to establish that the adjustments for which they contended would, or would be likely to, result in a materially preferable designated NGO decision.
255 The ERA submitted that, in relying upon the expert advice which it received from Pink Lake Analytics and from Professors Partington and Satchell, it did not misunderstand the import of the opinions expressed by the authors of those reports.
256 The ultimate submission made by the ERA was that, far from failing to take account of the burden of the owners' responses during the regulatory process, far from proceeding upon false assumptions and far from misunderstanding the issues concerning the need to adjust the SL-CAPM, the ERA had devoted considerable attention to the requirements of s 24 (in respect of the RPP) and r 87 and had not failed to apply that which was required by those stipulations.
Consideration
257 The RPP require that a service provider (here, the owners) should be provided with a reasonable opportunity to recover at least the efficient costs which it incurs in providing the relevant services (here, the pipeline) and in complying with all relevant regulatory requirements (s 24(2) of the NGL(WA)). According to the RPP, a service provider should be provided with effective incentives to promote economic efficiency in the provision of the relevant services by (amongst other things) the means spelt out in s 24(3) of the NGL(WA). Subsections (4) to (7) of s 28 identify a number of other matters to which "regard should be had" by the relevant Regulator when making economic regulatory decisions to which the RPP apply.
258 In performing or exercising its economic regulatory functions or powers under the WA Act, the NGL(WA) and the Regs, the ERA must perform or exercise those functions or powers in a manner that will or is likely to contribute to the achievement of the NGO (s 28(1)(a) of the NGL(WA)). This obligation extends to preferring the decision that the ERA is satisfied will or is likely to contribute to the achievement of the NGO over any other decision that might also contribute to the achievement of the NGO (s 28(1)(b)). In addition, the ERA must take into account the RPP (s 28(2)(a)).
259 The return on the projected capital base for each regulatory year of a particular access arrangement period is to be calculated by applying a rate of return determined in accordance with s 87 (the allowed rate of return). The allowed rate of return is to be determined so that it achieves the allowed rate of return objective. Subject to subrule (2) of r 87, the allowed rate of return for a regulatory year is that rate of return which meets the requirements specified in subrules (4) and (5) of r 87 of the NGR. The return on equity is to be estimated upon the basis that it contributes to the achievement of the allowed rate of return objective (r 87(6)). In estimating the return on equity under r 87(6), regard must be had to the prevailing conditions in the market for equity funds.
260 The regulatory requirements to which we have referred at [257]β[259] above comprise the relevant regulatory requirements governing the ERA's decisions which are under challenge by Ground of Review 1.
261 The principles enunciated in PIAC and Ausgrid to which we have referred at [106]β[107] and [232] above are highly persuasive and should be applied for the sake of consistency that sensible administration mandates should underpin the regulatory regime.
262 In the end, the owners' challenge to the ERA's selection of 0.7 for the equity beta to be applied in the present case comes down to two matters. These are:
(a) whether the ERA committed reviewable error by deciding that the available evidence did not justify the conclusion that there was a low beta bias in the outputs from the SL-CAPM; and
(b) whether, in any event, the ERA committed reviewable error by declining to adjust the equity beta produced by the SL-CAPM to accommodate the actuality that such bias existed or the potentiality for such bias to exist or, alternatively, by declining to adjust alpha upwards to accommodate such low beta bias (actual or potential).
263 Despite the fact that the owners maintained the position that the ERA had not taken due account of the historical data provided to it by the owners as to actual relevant rates of returns, this complaint did not, in the end, feature prominently in the arguments advanced by the owners before us.
264 In addition, in the end, it seemed to be common ground between the parties that the only means currently available for making the adjustment which the owners said should have been made in the present case were:
(a) arbitrarily selecting an equity beta at the top of the derived range, a crude and unprincipled adjustment, at best; or
(b) adjusting alpha upwards.
265 Notwithstanding this, for some time, the owners refrained from submitting that the Tribunal should direct the ERA to adopt one or other of these approaches, in the event that the Tribunal were of the opinion that the matter should be remitted to the ERA to reconsider its ROE decision.
266 When it received the owners' response to its draft decision, the ERA analysed in detail the owners' model adequacy tests and betastar transformation, which constituted the substance of the owners' proposal contained in that response.
267 In Appendix 4 to its final decision, the ERA said that it had significant concerns with the owners' approachβboth conceptual and empirical. It then explained those concerns (at pp 57 to 63 (pars 264 to 285)).
268 In the course of that explanation, the ERA repeatedly referred to and relied upon two expert reports which it had obtained: These were the report provided by Pink Lake Analytics entitled "Statistical Advice to ERA on DBP Submission 56", May 2016 (the Pink Lake Report) and a report provided by Partington G and Satchell S entitled "The Cost of Equity and Asset Pricing Models", May 2016 (the Partington and Satchell Report). The ERA also referred to other academic sources such as, for example, Professor Davis' well-known paper "Cost of Equity Issues: A Report for the AER", January 2011.
269 At p 57 (par 264), the ERA noted the substance of r 87. At p 57 (par 265), it observed that, when equity prices are in equilibrium in the market, the required return is equal to the expected return. However, the ERA noted that there was no guarantee that expectations will be realised or that prices will always be in equilibrium. That could only be the case if the asset had no risk.
270 There is nothing controversial about the propositions referred to at [269] above.
271 At p 58 (pars 266 and 267), the ERA noted (correctly) that this conceptual difference between expectations and outcome is a major problem for ex post tests of asset pricing models, such as that proposed by the owners in the present case. The ERA said (correctly) that rational investors do not take on the additional risk of equity expecting it to deliver less than risky debt, yet this has been an actual outcome in the market over recent times. The ERA noted that the approach of the owners did not actually test the return on equity models against investors' expectations for that return, ex ante, as it would need to do in order to determine whether the outputs of the asset pricing models are biased. Rather, so the ERA said, the owners are testing those models against actual outcomes, realised in ex post.
272 At p 59 (par 270), the ERA observed that the method which the owners had adopted in sorting portfolios had reflected its focus on beta bias which was not the appropriate way of testing whether the SL-CAPM was the appropriate model to be used in the present case.
273 At pp 59 to 61 (pars 271 to 278), the ERA examined the owners' alternative methods for model testing. It ultimately concluded that there were significant issues with the construction of the owners' model adequacy tests.
274 At pp 61 to 63 (pars 279 to 285), the ERA explained its reasons for thinking that the better way of describing the so called low beta bias was to regard it as an "anomaly" rather than a bias. In these paragraphs, the ERA drew substantially upon the Pink Lake Report. The authors of that Report noted (correctly) that the ERA had derived its ROE calculation from the Henry statistical version of the SL-CAPM. The Pink Lake Report went on to explain the methodology of the ERA. This material is recorded at pp 61 to 62 (par 280) of Appendix 4 to the final decision.
275 At p 62 (par 281), the ERA noted that the authors of the Pink Lake Report had confirmed that the ERA's estimate of the SL-CAPM was not biased.
276 At p 62 (par 283), the ERA concluded that, if there is any "bias" arising in the ERA's estimate, that bias occurs because of the ERA's omission of the alpha intercept term from its statistical estimation process.
277 After again referring to the Pink Lake Report (at p 63 (par 284)), the ERA expressed its conclusion on the questions of the existence of low beta bias at p 63 (par 285). The ERA said that it had now come to the view that there was no justification for changing the value of beta in the SL-CAPM. In addition, if that beta were to be adjusted in the manner suggested by the owners or, indeed, in any other manner, such an adjustment would introduce a highly significant bias into the beta estimate in its implementation of the SL-CAPM.
278 The ERA then moved to consider the question of whether it was appropriate to make an alpha adjustment. Its consideration of that matter is found at pp 63 to 66 (pars 286 to 299). Throughout its discussion in this part of Appendix 4 to the final decision, the ERA drew heavily on the Pink Lake Report and the Partington and Satchell Report.
279 Ultimately, at p 65 (par 297), the ERA considered that there was inadequate evidence available to it, at this time, to justify a departure from an ex ante alpha estimate of zero in its implementation of the SL-CAPM. That is to say, it rejected the notion that an appropriate adjustment could and should be made through an adjustment of the alpha intercept.
280 The ERA then went on to point out that it did not consider the Black CAPM to be the best asset pricing model to be deployed in the present case. We note that the owners do not challenge that conclusion.
281 The ERA then undertook a detailed analysis of the betastar transformation and rejected that approach. Again, we note that the owners do not challenge that decision.
282 At pp 93 to 96 (pars 425 to 443), the ERA gathered together the views which it had expressed at pp 56 to 93 (pars 256 to 424) of Appendix 4 to the final decision and ultimately decided that it would retain the use of the "vanilla" SL-CAPM for the final decision, with the beta parameter based on the central best estimate. The ERA also said that, in light of the matters which it had discussed, no adjustment would be made for alpha.
283 At pp 95 to 96 (pars 439 to 443), the ERA said:
The Authority is satisfied that the resulting return on equity derived using the SL-CAPM is consistent with the allowed rate of return objective, and with the other requirements of the NGL and NGR. The Authority considers that the resulting SL-CAPM estimate for the return on equity:
β’ is reflective of economic and finance principles and market information;
β’ is fit for purpose, which is reflected in its broad acceptance in the finance industry as a means for estimating the cost of capital;
β’ can be implemented in accordance with good practice;
β’ is parsimonious, is not unduly sensitive to errors in inputs or arbitrary filtering, and is therefore difficult to game;
β’ uses input data that is credible and verifiable, comparable and timely and clearly sourced;
β’ is sufficiently flexible to allow for changing market conditions and new information to be reflected in regulatory outcomes, as appropriate.
In summary, the Authority determines the following for the purpose of estimating a return on equity in this Final Decision:
β’ The SL-CAPM will be utilised to estimate the return on equity.
β’ The Fama French (three factor) Model is not relevant and will not be used for the purpose of estimating a return on equity.
β’ The Black CAPM is relevant for informing the theory of the return on equity.
β However, given it is not reliable and practical to estimate a robust return on equity using this model, the model will not be used directly.
β Neither is it used indirectly. It is only used now to inform the theory of the return on equity.
β A revised consideration of the theoretical implications of the model makes clear that no adjustment to equity beta is appropriate. In addition, the Authority considers that there is no compelling evidence to apply an alpha adjustment to the return on equity determined by the vanilla CAPM, as a means to account for 'low beta bias' observed in ex post returns, at the current time.
β’ The DGM is a relevant model for informing the market return on equity and also the forward looking MRP.
β’ Other information such as historical data on equity risk premium; surveys of market risk and other equity analysts' estimates are also relevant for the purpose of estimating the MRP and the market return on equity. In addition, DBP's primary cross-check method is also accepted. This other material will be used as a cross check for the return on equity.
The Authority remains of the view that its reasons for adopting the SL-CAPM are sound. The Authority considers that its application of the SL-CAPM meets the requirements of the NGL and NGR, including the allowed rate of return objective.
Accordingly, the Authority considers that the estimated return on equity adopted in this Final Decision is commensurate with the equity costs incurred by a benchmark efficient entity with a similar degree of risk as DBP with respect to the provision of reference services. The Authority therefore considers that the estimated rate of return meets the allowed rate of return objectives and the requirements of the NGR and NGL.
In line with the requirements of NGR 87(5), the Authority has evaluated the relevance of a broad range of material for estimating the return on equity, covering relevant estimation methods, financial models, market data and other evidence for this Final Decision.
284 The ERA recognised that it had changed its approach to the question of assessing equity beta from the position which it had adopted in the ROR Guidelines and in the draft decision. It restated that conclusion at p 99 (par 459) of Appendix 4 to the final decision.
285 The Pink Lake Report provided to the ERA an updated range for equity beta derived from the SL-CAPM. The work undertaken by Pink Lake Analytics in order to provide that range to the ERA is found in Appendix 4A to the final decision. Based upon the Pink Lake Analytics report, the ERA concluded that a 95% confidence interval range of equity beta using the most recent data is from 0.479 to 0.870. It went on to say that the central best estimate given by the average of the portfolios is 0.699. Senior Counsel for the ERA pointed out to the Tribunal (correctly) that the central best estimate was the mean of the mean portfolios that fed into the model.
286 There is no doubt that the ERA's conclusion that there is insufficient evidence to support the notion that the use of a pure "vanilla" SL-CAPM will produce outputs which have a low beta bias was based upon the opinions of the experts which it retained and did not involve any misunderstanding on the part of the ERA as to the substance of those opinions. Further, there is also no doubt that the ERA's decision to adopt the central best estimate from the range of beta so derived and not to make any arbitrary adjustment to that central best estimate was also based upon the opinions of the experts who were providing advice to it. Again, there can be no suggestion that the ERA misunderstood the import of those opinions. Similarly, the ERA's decision not to make an adjustment to alpha was also based upon the advice of its expert advisers.
287 We think that it is well to remember the function which a capital asset pricing model performs. At a general level, this is explained succinctly at p 161 (pars 739 to 743) of the "Explanatory Statement for the Rate of Return Guidelines" promulgated by the ERA. In those paragraphs, the ERA said:
Under the capital asset pricing model (CAPM) model, the total risk of an asset is divided into systematic and non-systematic risk. Systematic risk is a function of broad macroeconomic factors (such as economic growth rates) that affect all assets and cannot be eliminated by diversification of the investor's asset portfolio.
The key insight of the CAPM is that the contribution of an asset to the systematic risk of a portfolio of assets is the correct measure of the asset's risk (known as beta risk) and the only systematic determinant of the asset's return, over and above the return on a risk free asset.
In contrast, non-systematic risk relates to the attributes of a particular asset. The CAPM assumes this risk can be managed by portfolio diversification. Therefore, the investor in an asset does not require compensation for this risk.
Formally, there are three main components of the Sharpe Lintner CAPM for measuring the return on an asset: (i) the market risk premium (MRP), which is the return on the market portfolio in excess of the risk free rate of return, (ii) the beta risk Γ, which correlates the return on the specific asset, in excess of the risk free rate of return, to the rise and fall of the return on the market portfolio and iii) the risk free rate of return. The most common formulation of the CAPM directly estimates the required return on the equity share of an asset as a linear function of the risk free rate and a component to reflect the risk premium that investors would require over the risk free rate:
Re = Rf + Γe(Rm β Rf)
where
Re is the required rate of return on equity;
Rf is the risk-free rate;
Γe is the equity beta that describes how a particular portfolio i will follow the market which is defined as;
Γe = cov(ri, rM)/var(rM); and
(Rm β Rf ) is the market risk premium, MRP
Rf is the market risk premium, MRP. 743.
In the CAPM, the equity beta value is a scaling factor applied to the market risk premium, to reflect the relative risk for the return to equity of the firm in question. Two types of risks are generally considered to determine a value of equity beta for a particular firm: (i) the type of business, and associated capital assets, that the firm operates; and (ii) the amount of financial leverage (gearing) employed by the firm.
288 The SL-CAPM is a well-known, well-understood, robust, acceptable and tried-and-true capital asset pricing model. No criticism can be made of the ERA for deploying that model in the present circumstances. Indeed, no such criticism is made in the present case.
289 In the end, the issue before us was very narrow indeed. It was confined to the question of whether some adjustment to the output or alternatively to the alpha intercept should be made in order to reflect some alleged low beta bias.
290 We are of the opinion that, in adopting the approach which it did, the ERA did not commit reviewable error.
291 The discussion of similar issues at [719] to [788] in PIAC and Ausgrid is not inconsistent with our conclusions in respect of the current challenges to the ERA's decision concerning equity beta. Indeed, the reasoning in those paragraphs supports the use of the SL-CAPM.
292 The approach advocated by the owners in its response to the draft decision cannot truly be classified as a methodology for the assessment of equity beta. However, on the assumption that it can be so classified, the present case is covered by the reasoning of the Full Court in ACCC v ACT (at 73 to 74 ([171] to [172]) to which we have referred at [117] above. It is not a finding of fact for the decision maker to make a choice between permitted methodologies for the calculation of total revenue nor is it an error of fact for the decision maker to base its ultimate decision upon a choice of one methodology over another. As the Full Court said, the relative weight to be given to the factors set out in the relevant statutory provision was a matter of discretion (or regulatory judgment) rather than a finding of fact which can be impugned as such.
293 Here, the exercise by the ERA of regulatory judgment (or discretion) was correct, having regard to all of the circumstances, nor was it unreasonable. Furthermore, even if we are wrong in those conclusions, we are of the opinion that the owners have fallen well short of establishing that a reconsideration by the ERA of its assessment of equity beta would, or would be likely to, result in a materially preferable designated NGO decision (as to which, see s 246(1)(a)). Prima facie, such a result would seem extremely unlikely.
294 We should also record that we have found the submissions made on behalf of the ERA in relation to Review Ground 1 which we have summarised at [229]β[256] above to be both correct and persuasive. We accept those submissions.
295 The form of relief ultimately sought by the owners in relation to Review Ground 1 is found in MFI-2. In that document, the owners claimed that the final decision, insofar as it estimated the owners' return on equity as a component of the required rate of return, should be set aside and remitted to the ERA upon the basis that the ERA be directed to, in effect, adjust for the so-called low beta bias:
(a) by relating actual/historical returns to the SL-CAPM; or
(b) if it reasonably considers that it is unable to make such an adjustment in a sufficiently transparent way, by selecting that beta which is at the top of the range in the final range of betas supplied to the ERA by Pink Lake Analytics (0.87), as to which, see the extracts from Appendix 4 set out at [192] above.
If it were necessary to decide, we would not be prepared to grant relief in that form because:
(a) the primary claim for relief would, if granted, present a near impossible task for the ERA; and
(b) the second claim for relief, namely, the selection of 0.87 as the appropriate equity beta, would produce an arbitrary result.
296 For all of the above reasons, we reject Review Ground 1.
Ground 2 β The Owners' Challenge to the Gamma Decision
The Issue
297 The owners complain about the ERA's final decision to deploy a gamma of 0.4 as the value of imputation credits to be inputted into the building block model. The critical questions raised by this ground of review involve the true interpretation of r 87A and its correct application in the circumstances of the present case insofar as the assessment of the value of imputation credits (gamma) is concerned. As the ERA said in Appendix 5, the gamma parameter accounts for the reduction in the effective corporate taxation that is generated by the distribution of franking credits to investors. As a general rule, investors who are able to utilise franking credits will accept the lower required rate of return, before personal tax, on an investment that has franking credits, compared with an investment that has similar risk and no franking credits, all other things being equal. As the owners also submitted, if the benefit to investors from imputation credits is not taken into account, the amount of revenue required to provide an appropriate return to investors would be overstated. Since allowable revenue has to include (inter alia) an amount to cover the costs of corporate income tax and an amount for the return on equity, mathematically the benefit that investors obtain from imputation credits could be deducted from either with the same effect. The NGR adopts the approach of deducting the benefit from the cost of corporate income tax.
298 In its final decision, the ERA derived a gamma of 0.4.
299 In the present case, the owners complain that the ERA's derived gamma overstated the value of the imputation credits to be deducted. The owners contended that this was brought about by the application to the relevant formula of an incorrect utilisation rate (theta). The owners' proposition (based upon the Tribunal's decision in PIAC and Ausgrid), was that the ERA has utilised methods that measure the wrong thing. It was submitted that the ERA's approach is inconsistent with the proper construction of r 87A, inconsistent with the proper conceptual approach to the treatment of imputation credits in the scheme of economic regulation, inconsistent with the ERA's approach to return on equity and inconsistent with the satisfaction of the NGO.
300 The owners observed that the common approach to the assessment of gamma is that gamma, in the formula in r 87A of the NGR, is to be calculated as the product of:
(a) The distribution rate for imputation credits, usually expressed as a decimal ratio; and
(b) The value of distributed imputation credits (theta), again expressed as a decimal ratio.
That is, gamma equals distribution rate times theta.
301 The ERA's decision in respect of gamma is effectively the same decision as it made in the ATCO Gas case and the same as the decision that the AER made that was subject to review by the Tribunal in Application by SA Power Networks [2016] ACompT 11 (SA Power Networks). The decision of the Tribunal in PIAC and Ausgrid employed different reasoning and supports a position adopted by the owners in the present case. The ERA adopted the same gamma (0.4) as it had adopted in ATCO Gas and as the AER had adopted in SA Power Networks. The owners contended for a gamma of 0.25 which they said was supported by PIAC and Ausgrid.
302 The owners also relied upon the concession made by the ERA in the ATCO Gas case to the effect that it had made a reviewable error by applying a gamma of 0.4 and that the best estimate of gamma on the basis of the material before the ERA at the time of its decision in the ATCO Gas case was 0.25.
303 At pars 266 to 269 of their Written Submissions, the owners said:
As a matter of discretion, this Tribunal should not embark upon another reconsideration of the same decision that has recently been found by a differently constituted panel of the Tribunal to involve error, but rather should simply adopt the earlier Tribunal decision. Aside from the cost to the parties of re-hearing the same issues for what will be a fourth time, any reconsideration would also give rise to the risk of inconsistent Tribunal judgments on the very same decision. Amongst other difficulties with such a result, it would undermine confidence and certainty in the regulatory regime, and would therefore not promote the objects of the statutory schemes under which the Tribunal carries out its review functions (i.e. the NGO). Those considerations apply a fortiori in respect to the ERA's inconsistent approaches between ATCO Gas and the Applicant, including its concession in ATCO Gas that it would be against the public interest, in promoting consistency of decision making, to reargue the matters determined in PIAC and Ausgrid.
A further reason not to reconsider the issue is because of the AER's judicial review application (including the gamma ground) which is being heard by the Full Court of the Federal Court in October 2016 [Australian Energy Regulator v Australian Competition Tribunal & Anor, NSD 415 - 420 of 2016. As at the date of these submissions, the hearing is part heard and commenced on 18 October 2016]. If there is any error in the previous Tribunal decision, then this will be considered by the Full Court. This provides two further reasons for the present Tribunal not to embark upon a reconsideration. First, the issue is being considered elsewhere. Secondly, if the present Tribunal was to embark upon a reconsideration of the gamma issue, then there would be separate consideration by each of the current Tribunal, and the Full Court, of the question of whether the previous Tribunal decision was affected by any relevant error. This would present the obvious risk of inconsistent judgments from the current Tribunal and the Full Court.
Therefore, the Tribunal's consideration in the present case should, as a matter of discretion, be limited to a consideration of whether there is anything in the present ERA decision that distinguishes it from the earlier decisions.
It is only against the possibility that the Tribunal does not accept this submission that we have, commencing in the next section, addressed the wider issues dealt with in PIAC and Ausgrid.
304 The owners then embarked a very detailed set of submissions seeking to support the reasoning in PIAC and Ausgrid and seeking to demonstrate that the ERA committed reviewable error.
305 As we have mentioned at [122] above, the Full Court in AER v ACT (No 2) considered the question of gamma in considerable detail. The Full Court adopted the same approach in SAPN. The decision of the Full Court in that matter is important for present purposes. We shall discuss that decision after the next section of these Reasons in which we set out the terms of the final decision relevant to gamma.
The Final Decision (Gamma)
306 At p 223 (pars 1071 to 1075), the ERA set out its ultimate conclusions in relation to the value of gamma. In those paragraphs, it said:
The Authority is required by the NGR to estimate the value of gamma, a parameter in the building block revenue model.
The gamma parameter accounts for the reduction in the effective corporate taxation that is generated by the distribution of franking credits to investors. As a general rule, investors who are able to utilise franking credits will accept a lower required rate of return, before personal tax, on an investment that has franking credits, compared with an investment that has similar risk and no franking credits, all other things being equal.
DBP's original proposal included a gamma of 0.25. In its Draft Decision the Authority did not accept this value and instead determined a gamma of 0.4. The Authority required the following amendment:
Required Amendment 15
DBP is required to adopt a gamma of 0.4.
In its response to the Draft Decision, DBP did not accept Required Amendment 14.
The Authority's consideration of DBP's amended proposal is set out in Appendix 5. The Authority has determined a gamma of 0.4. Reasoning for the Authority's decision is set out in Appendix 5 of this Final Decision.
307 The reasoning of the ERA in respect of gamma is found in Appendix 5 to the final decision.
308 In Appendix 5 to the final decision, the ERA gave a brief account of the history of its assessment of gamma.
309 At p 7 (par 41) of Appendix 5, the ERA recorded that, for the purposes of its draft decision, it had re-examined its method for estimating gamma and had adopted a different estimate to that which it had set out in the ROR Guidelines.
310 At pp 7 to 8 (pars 42 to 44), the ERA said that it had further considered its position in light of the owners' response to its draft decision and that, in evaluating its position, it had taken into account a large number of factors and reports listed in those paragraphs. At p 8 (par 43), the ERA noted that the experts to whom it had had regard differed in their interpretation of the best approach to estimating gamma in the regulatory setting. This was particularly the case with regard to the value of the utilisation rate (theta). The ERA stated that it did not consider that the Tribunal had come to a firm position in relation to the correct approach to gamma in the regulatory context and that it was not, therefore, bound to follow the Tribunal's decision in relation to gamma in PIAC and Ausgrid.
311 At pp 1 to 2 (pars 3 to 10) of Appendix 5, the ERA explained its understanding of the relevant regulatory requirements in the following manner (omitting footnotes):
Rule 87A of the NGR requires that the estimated cost of corporate income tax of a service provider for each regulatory year of an access arrangement period (ETCt) is to be estimated in accordance with formula (1).
Rule 87A accounts for the ability of imputation credits to reduce the effective corporate tax rate for equity investors.
In determining the value of imputation credits, the Authority is required to account for the national gas objective, the National Gas Law (NGL) (including the revenue and pricing principles) and the NGR.
In the Rate of Return Guidelines, the Authority estimated gamma (y) as the product of the distribution rate F and the estimate of the utilisation rate ΓΈ (theta), consistent with the approach set out in the Rate of Return Guidelines (equation 2)
y = F Γ ΓΈ
Under this Officer formulation (as extended by Monkhouse), gamma depends on the degree to which imputation credits are distributed and the degree to which investors utilise those credits that are distributed.
Contributing to the estimate of gamma, the Rate of Return Guidelines adopted an estimate for the distribution rate, F, of 0.7. The 0.7 rate was based on Australian Taxation Office (ATO) data showing around 70 per cent of cumulative imputation credits created had been distributed.
For the utilisation rate, the Rate of Return Guidelines adopted a range of 0.35 to 0.55. This estimated range was based on the results of Dividend Drop Off (DDO) studies.
The resulting range for gamma adopted for the Rate of Return Guidelines β given by the product of distribution rate and the range for the utilisation rate β was 0.25 to 0.385.
312 At p 10 (par 51), the ERA said that it took the view that the benefit arising from imputation credits can be interpreted as the proportion of franking credits distributed, multiplied by the proportion of those that are utilised by the representative investor. The ERA then referred to an expert report from the owners' consultant (Gray) and noted that the key challenge to the ERA's revised view of gamma therefore related to the estimate of the utilisation rate (theta).
313 Then, at pp 11 to 15 (pars 55 to 69) of Appendix 5, the ERA explained the essence of its view in relation to the utilisation rate (theta). In those paragraphs, the ERA said (omitting footnotes):
The Authority considers that the benefit of distributed imputation credits will rely on the proportion of franking credits received that are utilised by the representative investor. The estimate of this proportion is the utilisation rate, theta (ΓΈ).
The Authority notes that the utilisation rate is a market-level parameter, meaning that the same value applies to all firms.
Individual investors have differing utilisation rates; investors who are able to fully use tax credits are assigned a value of one whilst investors who cannot are assigned a value of zero. These individual utilisation rates may be weighted to produce the required market-level utilisation rate ΞΈ. The Authority therefore considers that ΞΈ 'is a complex weighted average over all investors holding risky assets, where the weights incorporate each investor's investment in risky assets, and their level of risk aversion.
To this end, the Authority's previous (Rate of Return Guidelines) estimation approach for estimating theta β using DDO studies β may not correctly estimate the utilisation rate required, as, among other things:
β’ The utilisation rate is a complex weighted average over investors, reflecting their relative wealth and risk aversion, and this need not correspond to the market value of the credits whether estimated by a DDO study or any other market based method. Even Gray accepts that, if theta is not defined as the market value of the credits, then market value studies such as DDO analysis will be of limited relevance.
β’ DDO studies at best only estimate the utilisation rate around just two days, the cum-dividend and ex-dividend dates. As a consequence, they provide an estimate of the utilisation rate with weights that reflect the composition of investors around the cum and ex dividend dates, not the weighted average across all points in time, as required. Furthermore, such investors may be quite untypical of investors in general. The 'market' value in these studies are influenced by the marginal investor over those dates, rather than the value attributed across all investors.
β’ DDO studies may not accurately separate out the effect of the taxation benefits associated with imputation credits on the share price change from the effect of the cash dividend. There are a range of statistical models that could be used, choices over which data to use, and the results seem to be quite sensitive to a small number of outlying observations.
β’ There is considerable evidence of anomalous share price behaviour around ex days, which raises the possibility that any estimate of the utilisation rate from a DDO is instead reflecting that anomalous behaviour.
β’ Estimates of the market value of the credits from methods other than DDOs produce markedly different results, which undermines the credibility of such market-based estimates.
For these reasons, the Authority has determined to place limited weight on the DDO estimates, and on the range of applied market value estimates more generally.
The Authority instead considers other approaches to estimating the utilisation rate.
In response, DBP's consultant Gray has argued that the Authority is in error in interpreting theta (and hence gamma) as the utilisation rate, rather than in terms of the value to the representative investor.
First, Gray points to the revised language of NGR 87A, which states that 'gamma is the value of imputation credits', rather than the previous term 'utilisation of imputation credits'. Gray acknowledges that the Australian Energy Market Commission did not provide a detailed explanation about the changed language in its Final Determination, but considers that its apparent intention was to be clear that imputation credits did not rely on utilisation. The Authority notes that the AER sought clarification from the AEMC on the reason for the change, which was unable to provide 'any further insight'.66 In any event, the definition of a parameter within a model can only be determined from a rigorous derivation of the model.
Second, Gray has argued that the parameter U in the following equation from Lally's analysis, specifically within the term IC1U, is defined as the value that investors attribute to imputation credits:
However, the Authority notes that Lally clearly states in context that U in the equation is a market level parameter, derived as a complex weighted average over all investors holding risky assets:
So, relative to the standard form of the CAPM, the Officer CAPM and the associated cash flows requires three additional parameters: the ratio of market-level imputation credits to the value of the market portfolio (ICm/Sm), the ratio of firm-level imputation credits to firm level company tax payments (IC/TAX) and the utilisation rate (U). The second of these parameters is called the "distribution rate" and the product of the last two is called "gamma".
The utilisation rate referred to here is a market-level parameter, i.e., the same value applies to each firm. Individual investors also have utilisation rates: one for those who can fully use the credits and zero for those who can't. Consequently it might be presumed that U is some type of weighted average over investors. Although Officer (1994) provides no clarification on this matter, because his derivation of the model is intuitive rather than formal, Lally and van Zijl (2003, section 3) provide a formal derivation of a generalisation of Officer's model (with the Officer model being a special case), in which variation of utilisation rates across investors is recognised. In this derivation, they show that U is a complex weighted average over all investors holding risky assets, where the weights involve each investor's investment in risky assets and their risk aversion. Individual investors' levels of risk aversion are not observable. Accordingly it is necessary to (reasonably) act as if risk aversion is uncorrelated with utilisation rate at the investor level, in which case the weights reduce to investors' relative investments in risky assets, i.e., U is a value-weighted average over the utilisation rates of individual investors.
Third, Gray considers that there is a material difference between the utilisation rate (the proportion of credits that are redeemed at the tax office) and the value of those credits to shareholders. Gray's core argument is that there is a cost for an investor to obtain and redeem a credit. Gray considers that:
β’ some credits that are distributed are never redeemed, for example because;
β the investors are non-residents; and
β the 45 day rule precludes it;
β’ record keeping creates administrative costs;
β’ there is a time delay in obtaining the benefit;
β’ imputation credits are taxed at their face value;
β’ as resident investors adjust their portfolio to hold domestic shares for imputation, their portfolios will become less diversified, at a cost; and
β’ a rational investor would increase the concentration of domestic shares in their portfolio until the marginal benefit of imputation is zero.
The Authority has noted these points, but has come to the view that:
β’ the first of these points is uncontroversial; it reduces both the utilisation rate as properly defined and the market value of the credits;
β’ the remaining points do or may give rise to a divergence between the utilisation rate as properly defined and the market value of the credits, but any such divergences make the market value of the credits less suitable as an estimator of the utilisation rate;
β’ these are arguments against using market prices to estimate the utilisation rate rather than arguments in support of using market prices;
β’ the effects of the time value of money are likely to be minimal, given the period of delay; and
β’ there is no empirical evidence on the diversification effect of imputation credits, and no clear theoretical position for the effect either.
In addition, transaction and other costs are unlikely to materially affect redemption of imputation credits, as investors are required to report franked dividends and eligible imputation credits, such that the incremental cost of these other costs to shareholding is likely to be small.
The Authority's view then is that these considerations do not detract from the fact that some investors will redeem credits, and thus have a utilisation rate of 1, and other investors in the Australian share market will not redeem credits, and will thus have a utilisation rate of 0. In the Authority's view, there is no case here that the utilisation rate is not a complex weighted average across all investors, both domestic and international. That complex weighted average depends on risk aversion and wealth.
Therefore the Authority is of the view that approaches that directly inform the degree of utilisation of imputation credits will provide relevant information. Those approaches include the domestic ownership share of equity, and taxation statistics on the proportion of redeemed imputation credits.
314 Throughout the paragraphs which I have extracted from Appendix 5, the ERA supported its observations by references to two reports. Those reports were: Lally M, The Estimation of Gamma, Report for the AER, November 2013; and Lally M and van Zijl T, Capital Gains Tax and the Capital Asset Pricing Model, Accounting and Finance, Vol 43, 2003. The ERA also referred to the experts relied upon by the owners, being the report of Gray (SFG Consulting) and a report from Frontier Economics.
315 The ERA continued to discuss the various experts' reports at pp 15 to 21 (pars 68 to 92) of Appendix 5.
316 At p 21 (pars 90 to 92), the ERA said:
The Authority notes that both Handley and Lally consider that it is appropriate to assume a domestic capital market for the purpose of estimating theta. Further, both take the position β in opposition to Gray β that the complex weighted average approach is preferable to market based approaches. The main point of difference between Handley and Lally is whether or not international investors should be excluded from the model.
Based on the foregoing, the Authority considers, on the balance of the arguments, that use of the CAPM and interpretation of theta as the utilisation rate (as a complex weighted average) is consistent with the assumption that the CAPM applies to a domestic market that includes the presence of international investors.
In light of the foregoing, the Authority considers that there is considerable uncertainty surrounding the estimation of the utilisation rate. The Authority therefore considers that applying a range of approaches is desirable in determining the estimate.
317 The ERA utilised data from all equity (both listed and unlisted).
318 At pp 25 to 26 (pars 107 to 112), the ERA set out its conclusions in relation to the utilisation rate and the reasons for those conclusions. In those paragraphs (omitting footnotes) the ERA said:
The Authority estimates the utilisation rate of imputation credits as being in the range of 0.47 to 0.59 at the current time (based on the most recent ABS data for December 2015, and using the 'refined' approach), depending on whether the estimate is based on listed or all equity respectively.
The Authority notes that this is somewhat lower than Handley's estimate, which is that the corresponding range is 0.5 to 0.7, depending on whether listed or all equity is used. The Authority notes that Handley's estimate is based on earlier ABS data (March 2014), and also took account of the estimate of Hathaway, that 'domestic investors held between 75 per cent and 81 per cent of Australian equity between 1988 and 2012'. The Authority has not accounted for Hathaway's data, given its preference to focus on the estimates for the post-2000 period.
In respect of the choice between listed and all equity, the fact that only listed equity is used to estimate the MRP and beta suggests that the same limitation be applied to the present issue. However, Lally argues that the limitation is only imposed for the MRP and beta because data from unlisted firms is entirely inadequate for estimating returns.
The Authority notes this argument for the use of listed equity, but is also aware that there is a lack of consensus in relation to this point. In the recent AusNet Services decision, the AER responded by considering both listed equity, and all equity (both listed and unlisted). The Authority has adopted a similar approach in this decision.
In its recent PIAC-AusGrid Decision, the ACT argues that the estimate of theta from the equity ownership approach is an upper bound, due to time delays, administrative costs in distributing the credits, portfolio effects, and the effect of the 45 day rule. Given the ACT's belief that theta is the market value of the credits, this would seem to follow. However, the Authority considers that the ACT's belief about theta is in error; theta is not the market value of the credits but is instead a complex weighted average over investors' utilisation rates.
In addition, even if theta were the market value of the credits, the belief that the equity ownership proportion necessarily exceeds the market value of the credits due to administrative costs, time delays, portfolio effects, et cetera is erroneous. For example, if 50 per cent of Australian equities were foreign owned on average, tax arbitrage involving local investors buying shares shortly before dividend ex-days and selling them shortly afterwards could lead to all credits being redeemed by locals and therefore the market value on the credits could be close to 1.0. Consequently, the market value of the credits may be above the proportion of equity owned by Australian investors.
319 The ERA then turned to the question of the appropriate use of taxation statistics. In that context, it discussed various expert opinions. At pp 27 to 28 (pars 123 to 125), the ERA set out its conclusions in relation to utilising taxation statistics to derive an estimate of gamma in the following terms (omitting footnotes):
The Authority notes that the AER recently set out the evidence for the estimate based on tax statistics in a further review, drawing on, and further, considering views from the experts:
β’ the evidence assembled by Hathaway, NERA, Gray, and the AER points to a range of around 0.4 to 0.6 for the utilisation rate;
β’ based on the observation that the post-2004 taxation statistics data is more reliable than data available prior to that date:
In this current work I only consider franking credit flows for the period for 2004 onwards and can provide a much more detailed insight into the flows and utilisations of franking credits for that period
I would caution anyone, including the AER, against relying on those parts of my earlier reports which focussed on ATO statistics [up to 2004]. The data was then not as clear as it is today. I had to rely on separate analyses of ATO tax data and the ATO financial data. As I am now aware with the new data, there is an extremely large discrepancy between these two subsets of data. The missing link was the data on the flows of credits between companies which is now visible after the changes of 1 July 2002. I would recommend that the AER do not rely on that earlier report.
β’ informed by two estimates of the distribution rate for the period 2004 to 2011, being 0.43 and 0.61;
β’ more recently updating the 0.44 estimate to 0.48 using ATO FAB data to the 2014 tax year, with;
β the (updated) 0.48 estimate of the utilisation rate (using ATO FAB data) corresponds to estimates of the distribution rate of around 0.7;
β the 0.61 estimate of the utilisation rate (using ATO dividend data) corresponds to estimates of the distribution rate of around 0.5; and
β’ with the updated 0.48 estimate based on post-2004 data being preferred as reasonable as it is consistent with an estimate of the distribution rate for 'all equity' of 0.7.
The Authority has reviewed this evidence and considers that the Hathaway study provides the best estimate of the utilisation rate derived from taxation statistics. The Authority has also been guided by Hathaway's finding that the ATO FAB data is more reliable than the ATO dividend data. On that basis, the Authority considers that a point estimate of 0.48 (as updated by the AER) should be applied, paired with a distribution rate based on all equity of 0.7.
However, the Authority remains mindful of Hathaway's concerns with the ATO data, and the pointed caution about relying on it for estimating utilisation rates:
Unfortunately, there are too many unreconciled problems with the ATO data for reliable estimates to be made about the utilisation of franking credits. The utilisation rate of franking credits is based on dividend data (from the tax office) and I have demonstrated that this data is questionable.
320 At pp 44 to 49 (pars 196 to 225) of Appendix 5, the ERA set out its conclusions in relation to gamma in the following terms:
Having considered Gray's arguments, the estimates made by Handley, Lally, and other experts, the AER's recent determination, and the reliability of the data underpinning these various estimates, the Authority considers that a reasonable estimate of the distribution rate for listed equity is a rounded estimate of 0.8.
Estimate of gamma
The Authority considers that three different approaches to estimating gamma are appropriate, based on the following methods for estimating the utilisation rate:
β’ the equity share approach;
β’ the taxation statistics approach; and
β’ the DDO method.
The Authority considers that, consistent with this conclusion, the 'most important approaches to estimation in order of importance to be the equity ownership approach, the taxation statistics approach, and DDO studies (being the most relevant within the class of implied market value studies)' [J.C. Handley, Advice on the Value of Imputation Credits, 29 September 2014, p. 31]. However, the Authority agrees that 'all approaches are subject to substantial uncertainty and so the estimate of theta is imprecise'[J.C. Handley, Advice on the Value of Imputation Credits, 29 September 2014, p. 32].
In considering the weight to be given to each approach, the Authority notes the AER's conclusion that [Australian Energy Regulator, AusNet Services distribution determination final decision 2016-20: Attachment 4 β Value of imputation credits, 26 May 2016, p. 4-17]:
β¦estimating the value of imputation credits consistent with the Officer framework will best promote the National Electricity Objective/National Gas Objective (NEO/NGO) and other requirements of the [National Electricity Rules/National Gas Rules].
In identifying a methodology consistent with the Officer framework, the AER noted that the equity share ownership, and tax statistics approaches are reasonably consistent with the Officer framework. However, DDO studies are affected by factors such as personal taxation and other costs. As such, they are inconsistent with the Officer framework unless adjusted [Australian Energy Regulator, AusNet Services distribution determination final decision 2016-20: Attachment 4 β Value of imputation credits, 26 May 2016, p. 4-11].
The Authority agrees with Handley that the equity ownership and tax statistics on utilisation of imputation credits provide key evidence for the utilisation rate. The Authority has also considered DDO estimates.
In what follows, these estimates are considered.
The equity share ownership estimate
The Authority's estimate of the utilisation rate based on the equity share ownership approach is either 0.59 (all equity β both listed and unlisted) or 0.47 (listed equity).
Combining the utilisation rate estimate for all equity, of 0.59, with the estimate of the distribution rate of all equity, of 0.7, gives an estimate of gamma of 0.41.
Combining the utilisation rate estimate for listed equity, of 0.47, with the estimate of the distribution rate for listed equity, of 0.8, gives an estimate of gamma of 0.38.
The taxation statistics estimate of the redemption rate
The Authority's estimate of the utilisation rate based on taxation statistics approach (using ATO FAB data) is 0.48. Combining that estimate with the relevant estimate of the distribution rate of 0.7 (all equity) gives a point estimate of gamma of 0.3, at one significant figure.
The dividend drop off estimate
As discussed above, the Authority's estimate of the utilisation rate from DDO studies is fairly broad, at 0.35 to 0.69, reflecting concerns with the robustness of the method.
That range for the utilisation rate combines with an estimate of the distribution rate for listed equity of 0.8 [The Authority considers that it was in error in the Guidelines and Draft Decision in applying an estimate of the distribution rate that was based on all equity]. The resulting range for gamma is 0.28 to 0.55, rounded to one significant figure.
Estimate of gamma
The Authority bases its estimate of gamma on the following, with estimates given most weight ranked first:
β’ the equity share ownership approach gives an estimate of gamma of 0.41 based on all equity, and 0.38 based on listed equity with a distribution rate of 0.8;
β’ the taxation statistics approach, using ATO FAB data, gives an estimate of gamma of 0.34; and
β’ the DDO approach gives a range for the estimate of gamma of 0.28 to 0.55 assuming a distribution rate of 0.8.
The resulting range for the Authority's estimate of gamma is 0.28 to 0.55, as shown in Table 2.
Consistent with its approach set out in the Draft Decision, the Authority places most reliance on the equity share ownership approach. It suggests a point estimate for gamma of 0.4.
Taxation statistics, using the ATO FAB data, suggest that the estimate of gamma could be lower, at 0.34. However, the Authority does not place much weight on the estimate, or on its ability to inform a point estimate of the utilisation rate, given concerns about the robustness of the taxation data used for estimating the utilisation rate.
Similarly, the DDO estimate suggests that the estimate of gamma could be higher or lower than 0.4, although the mid-point of the estimate range is reasonably consistent with an estimate of 0.4. The Authority gives only limited weight to the estimated range, and to the point estimate, given its concerns with regard to the sensitivity of the estimates to the dividend sample, parametric form of the regression equation and regression technique used.
The Authority notes that DBP has suggested that the foregoing estimates do not develop an appropriate range [DBP, Proposed Revisions DBNGP Access Arrangement 2016 β 2020 Regulatory Period Response to ERA Issues Paper Submission 26, 2 June 2015, p. 13]:
DBP does not believe that the ERA ought to continue to deviate from its own Guidelines by using the AER's approach to estimating gamma. However, if it does deviate from the Guidelines in respect of gamma, it should at least do so properly, and with relevant information. Instead of ranges based on somewhat irrelevant and misleading historical data, what one actually has using the AER's preferred approach is three estimates of gamma:
(a) One based on the share of ownership of all equity would give a gamma of 0.42 (0.6 for theta and 0.7 for the distribution rate).
(b) One based on the share of ownership of listed equity would give a gamma of 0.315 (0.45 for theta and 0.7 for the distribution rate; based on NERA's work).
(c) One based on taxation statistics would give a gamma of 0.3 (0.43 for theta, according to the AER, and 0.7 for the distribution rate).
The relevant range formed by these three estimates is not 0.3 to 0.5, but 0.3 to 0.42; the larger range is only created by using ranges for theta which give equal weight to single instances of outliers far from the mean and multiple instances of data-points close to the mean, effectively giving each outlier a much greater weight compared to each point close to the mean [[DBP footnote] We note that giving weight to outliers at the expense of values close to the mean (which we submit is wrong in any event) would run counter to the ERA's own approach of using so-called Robust regression in estimates of beta to limit the influence of outliers. It would be curious if the ERA adopted an approach which minimised the influence of outliers in respect of beta, and maximised the influence of outliers in respect of gamma]. Moreover, two of these estimates, including one which the AER's own advisor and the ERA have previously suggested forms an upper bound for gamma, [[DBP footnote] We note that the AER's adviser, Handley, has more recently reversed himself on this point, but his reasoning is not particularly convincing; see SFG (2015, p22-3) for a more detailed treatment.] are towards the lower end of the range and are in fact almost the same. This would suggest that a prudent, objective regulator, having regard to the information which the AER suggests it believes is most relevant, would form an estimate of gamma in the lower half of the range between 0.3 and 0.42, not at the upper end of that range as the AER has done.
However, in relation to the following points raised by DBP:
β’ First, as noted above, the Authority does not accept DBP's view on the distribution rate for listed equity. That leaves the Authority's estimate based on the equity share ownership approach at 0.4.
β’ Second, DBP does not dispute that the estimate based on taxation statistics is proximate to 0.34.
β’ Third, the use of DDO estimates β which is preferred by DBP but which is omitted from the above list β is 0.28 to 0.55.
β’ On that basis, the overall range is 0.28 to 0.55. Furthermore, the Authority considers that it is prudent and objective β in giving weight to those estimates β to adopt an estimate of 0.4.
DBP also quotes Officer to support its view that only implied market value studies are capable of estimating theta [DBP, Proposed Revisions DBNGP Access Arrangement 2016 β 2020 Regulatory Period Response to ERA Issues Paper Submission 26, 2 June 2015, p. 13.]. The Authority does not dispute that implied market value studies, however imperfect, provide relevant information as to the value of theta. Accordingly, the Authority has taken DDO studies into account. However, as articulated above, the Authority does not consider that to be the only method available.
In summary, based on the foregoing, the Authority considers that the evidence supports a prudent point estimate of gamma of 0.4. Therefore, the Authority does not accept the value of 0.25 put forward by DBP.
The Authority considers that the resulting estimate of 0.4 is consistent with its approach used elsewhere in this Final Decision, and in particular the use of the value of imputation credits within the building block framework. The estimate is supported by a range of evidence, including relevant academic literature, and also the views of academic experts:
β’ the estimate is within the range set out by Handley for his preferred estimate of gamma, of 0.4 to 0.5 [J. Handley, Advice on the value of imputation credits, 29 September 2014, p. 3.]; and
β’ the estimate is primarily based on the equity share ownership approach, which is Lally's second preference as a method for estimating gamma (after a strict Officer CAPM approach, which gives a value of 0.7 based on a utilisation rate of 1) [M. Lally, The Estimation of Gamma, Report for the AER, 23 November 2013, p. 5.].
Consistency with the National Gas Law and National Gas Rules
Consistent with the expert advice considered for this Final Decision, the Authority has determined that the Officer framework rightly provides the basis for the rate of return framework in the NGL and the NGR. It follows that estimating the value of imputation credits consistent with the Officer framework will best promote the NGO and the other requirements of the NGR.
To this end, the Authority has considered the differing expert opinions on the proper interpretation of the gamma parameter in the Officer framework. The Authority considered Handley's expert advice for the AER on the Officer framework at length in the Draft Decision. An important aspect of that advice is that the framework is on a 'before-personal-tax and before-personal-costs' basis.
By determining a value of imputation credits in a manner consistent with the Officer framework, the Authority considers that this Final Decision is made in a manner that will or is likely to contribute to the achievement of the NGO. Further, when exercising its discretion in making the relevant parts of a decision, the Authority has accounted for the revenue and pricing principles (RPP). The RPP provide, amongst other things, that:
β’ a service provider should be provided with a reasonable opportunity to recover at least the efficient costs the operator incurs providing regulated services and complying with regulatory obligations;
β’ a service provider should be provided with effective incentives in order to promote economic efficiency with respect to the regulated services it provides; and
β’ a price, charge or tariff for the provision of a regulated service should allow for a return commensurate with the regulatory and commercial risks involved in providing the regulated service.
Therefore, the gamma determined for this Final Decision will promote the achievement of the NGO (via its application in the estimated cost of corporate income tax building block) if it takes into account the RPP, being:
β’ not too low, in that it contributes to providing a reasonable opportunity to recover at least efficient corporate tax costs; and
β’ not too high, in that it contributes to a return that is not excessive and is commensurate with the relevant risks.
Finding the right balance in this task has been served by having regard to the merits of the full range of relevant evidence. The Authority has considered, and relied upon, the range of relevant evidence set out in this Appendix. The Authority is satisfied that the gamma balances first, the opportunity for service providers to recover at least efficient costs, and second, the relevant risks.
The Authority therefore considers that its estimate is fit for purpose, notwithstanding concerns with the data and the resulting robustness of the estimates. Importantly, the use of a range of approaches for estimating gamma assists in overcoming limitations associated with any particular study. This helps to ensure that the estimation method is consistent with accepted economic and financial principles, informed by sound empirical analysis. For these reasons, the Authority considers that its estimates meet the requirements of the NGL and the NGR.
In contrast, the Authority notes that DBP's proposed estimate is based on a single study, of questionable robustness. The Authority considers that DBP's proposed estimate does not provide the best estimate for the purposes of the NGL and the NGR, and therefore has determined to amend DBP's value of gamma for use in the building block model.
We have reproduced the footnotes to the above extracts in order to identify with particularity the sources in the expert materials relied upon by the ERA.
The Full Court's Decision in AER v ACT (No 2)
321 The Full Court considered the issues relating to gamma at 145β173 [618] to [784].
322 Ground 17 of the AER's challenge to the Tribunal's decision in relation to gamma was that the Tribunal erred in its construction of the expression "the value of imputation credits" in the NER, which error was based upon its rejection of the estimation methodologies preferred by the AER. The relevant rule in the NER was the same as r 87A.
323 In the course of considering the various grounds relating to grounds of review relating to gamma, at 167 [742], the Full Court said:
The substantial point of difference between the Tribunal and the AER was as to the meaning of "value" in that statutory context: the NER. It was not merely as to the weighing of evidence, or preference on the part of the Tribunal for one type of evidence over another. The measures which were used flowed from the interpretation of the statutory expression "the value of imputation credits". For example, the respondents contended, and the Tribunal accepted, that the equity ownership and tax statistics measures were not appropriate because those measures were not measuring the correct thing but a subset of it, and therefore were not in accordance with the correct interpretation of the NER. It would follow that there was error, reviewable by the Tribunal, in the AER giving primary weight to such measures. Put differently, the appropriate method, sources of information and/or weight to be attributed to each data source when determining "the value of imputation credits" was a derivative of the interpretation of that term.
324 At 168 [746], the Full Court said:
Ground 17 was to the effect that the Tribunal misconstrued and misunderstood the meaning of the expression "value of imputation credits" in r 6.5.3 of the NER and the requirements of the NER, including the revenue and pricing principles set out in s 7A of the NEL.
325 At 168 [748], the Full Court said that the correct interpretation of the expression "value of imputation credits" was the key dispute for the Court to resolve. The Tribunal had taken the view that it was necessary to consider both the eligibility of investors to redeem imputation credits and the extent to which investors determined the worth of imputation credits to them.
326 At 168 to 169 [750] to [757], the Full Court said:
The Tribunal expressed its conclusion on the question of construction at [1081], stating, in effect, that in light of its discussion of the competing views and the implications of those views, it did not accept the AER's approach that imputation credits were valued at their claimable amount or face value. The Tribunal said the value was not what can be claimed or utilised, but what is claimed or utilised as demonstrated by the behaviour of the shareholder recipients of the imputation credits.
In our opinion, the Tribunal erred in law in construing r 6.5.3 of the NER and r 87A of the NGR as invalidating the AER's approach to estimating the estimated cost of corporate income tax of the respondents where gamma is the value of imputation credits. In our opinion, the expression "the value of imputation credits" is to be construed as a whole, in its context and having regard to the subject matter of the exercise. It would be an error to limit attention to the word "value" and give it a meaning in isolation. In essence, we think this is what the Tribunal did. The Tribunal thereby misunderstood the function of imputation credits under the Rules in relation to the return on capital and the tax building block.
We accept the AER's submission that the context is the determination of a regulated return using a post-tax revenue model based on a nominal vanilla WACC. We accept the AER's submission that the Rules require consistency in the way the relevant building blocks interact, that is, a post-company tax and pre-personal tax and personal costs basis. We also note that the nature of gamma is an estimate to be used in a model.
The present context relates to a statutory model rather than the value of something which exists. In our opinion the Tribunal was distracted by the apparent simplicity of the concept of market studies and data into mistaking what was to be estimated as real in a market rather than as estimates within a model.
This is what led the Tribunal into error at [1081]-[1082] in concluding that the value of gamma is (only) what is claimed or utilised as demonstrated by the behaviour of the shareholder recipients of the imputation credits.
While we reject the AER's submission that the Tribunal exceeded the limits of its jurisdiction by failing to make a clear finding that a s 71C ground of review was made out, since we think it is clear that the Tribunal proceeded on the basis that the relevant ground was error of construction leading to errors of discretion, we accept the AER's submission the Tribunal's approach to gamma was underpinned by a misunderstanding on its part about how return to investors was conceptualised in a WACC framework. In our opinion the Tribunal assumed that other parameters in the WACC calculations were market values that already incorporated investors' tax positions and transaction costs but that misconstrued the "post-tax" framework. The rules required gamma to be determined consistently with return on equity.
In our opinion, it was not therefore a reviewable error for the AER to prefer one theoretical approach to considering the determination of gamma over another. This means that it is not an error of construction for the AER to focus on utilisation rather than on implied market value. This is not to say that the AER's approach to gamma is immune from (limited) merits review. For example, if it erred in principle and thereby omitted to take into account a mandatory relevant consideration or arrived at a conclusion which meant that its decision was unreasonable within the meaning of s 71C(1)(d) of the NEL, the Tribunal may intervene. It may also be that the AER would err within s 71C(1)(c) or (d) in acting on economic learning outside the mainstream of that discipline, at least if it did so without explaining the basis for so doing.
Ground 17 is made out.
327 At 169 to 170 [759] to [767], the Full Court considered Ground 18 of the grounds of review. The Full Court said:
Ground 18 was, in summary, that the Tribunal failed to consider or address significant aspects of the reasons for the AER's decision in relation to the valuation of imputation credits. The ground referred to the detailed consideration which the AER had given to why the tax statistics published by the ATO could be used to give a point estimate for gamma, rather than merely providing an upper bound or check. The ground also referred to the AER considering in detail the appropriate use of market value studies generally and the SFG study in particular and providing reasons for its conclusions as to the appropriate use to make of such studies.
These matters were said to involve the Tribunal not having jurisdiction to make its decision, that its decision was not authorised by the NEL, that the Tribunal's decision involved an error of law and that the Tribunal's decision was otherwise contrary to law: see paragraphs (c), (d), (f) and (j) of s 5(1) of the ADJR Act.
In substance, as we understood it, the complaint here was that the Tribunal had exceeded the jurisdiction available to it on the limited merits review established by s 71C of the NEL. In our opinion it would not be a legal error on the part of the Tribunal to fail to deal with the entirety of the reasons given by the AER for its use of tax statistics where, for example, the Tribunal found, on limited merits review, that an error on the part of the AER displaced those reasons. Similarly, in our opinion, it would not be a legal error on the part of the Tribunal to fail to deal with the entirety of the reasons given by the AER on the appropriate use of market value studies where the Tribunal found, on limited merits review, that an error on the part of the AER displaced those reasons.
In our opinion, this is what the Tribunal did. We again refer to Applicant WAEE: see [278] above.
In relation to tax statistics, the Tribunal concluded that as a matter of principle tax statistics can only provide an upper bound on the estimate of theta. It stated at [1095] that the AER's tax statistics approach made no attempt to assess the value of imputation credits to shareholders and ignored the likely existence of factors which reduced the value of imputation credits across all eligible shareholders below the "face" value assumed by the AER. The Tribunal considered that approach to be inconsistent with a proper interpretation of the Officer Framework underlying r 6.5.3 of the NEL. The Tribunal said, in the same paragraph, it was the reason that the theta estimates produced by the tax statistics could be no better than upper bounds on the market value of imputation credits.
We see no separate legal error on the part of the Tribunal in so concluding. In our opinion, it stands or falls with the construction issue raised by ground 17. The Tribunal was not required, in light of that approach, to give further consideration to the AER's reasons for using the tax statistics as it did. The Tribunal anchored its conclusion in an available ground of limited merits review within s 71C.
In relation to market value studies, the Tribunal explained at [1049] that market studies of the value of imputation credits was the third source of estimates of the utilisation rate. It referred, at [1092], to the value of theta produced not only by taxation statistics, but also by market value studies to some extent, was evidence that Australian investors did not value imputation credits at their face value, including because they may be unable to use them. Then, at [1095], the Tribunal said that the AER's approach was inconsistent with a proper interpretation of the Officer Framework underlying r 6.5.3 of the NER. It followed, the Tribunal said at [1096], that the assessment of theta must rely on market studies. It said that of the various methodologies for estimating gamma employed by the AER, market value studies were best placed to capture the considerations that investors made in determining the worth of imputation credits to them. At [1097], the Tribunal said that it considered the use of market studies to estimate the value of imputation credits was consistent with the method used to calculate other parameters of the costs of debt and equity from market data.
We see no separate legal error on the part of the Tribunal in so concluding. The Tribunal was not required, in light of that approach, to give further consideration to the AER's reasons for its conclusions as to the appropriate use to make of market value studies. The Tribunal anchored its conclusion in an available ground of limited merits review within s 71C.
In our opinion ground 18 is not made out as a separate source of legal error on the part of the Tribunal.
328 The Full Court introduced these observations by recognising that they were obiter dicta. They are, however, persuasive.
Consideration
329 As we have already mentioned at [110] above, the parties to the present matter were invited to make written submissions in relation to the impact of the Full Court's decision in AER v ACT (No 2) and did so pursuant to that invitation.
330 The owners accepted in its submissions that market-value estimates of gamma ought not to form "the sole basis" for determining theta. Nonetheless, they persisted with their challenge to the ERA's final decision.
331 The owners went on to submit that the ERA's model used in the present case did not ignore or fail to incorporate personal transaction costs whereas the AER's position in AER v ACT (No 2) reflected in PIAC and Ausgrid is that modelling of the relevant costs is not required because they are already reflected in asset prices. For this reason, the owners submitted that the decision of the Full Court does not determine the outcome of the present case.
332 The owners then submitted that the ERA in the present case had adopted an unorthodox approach by not estimating a complex weighted average but rather a simple average and thus acted on economic learning outside the mainstream of the relevant disciplines. This argument is new and has never been raised before either with the ERA or before this Tribunal.
333 The owners endeavoured to persuade the Tribunal that resort to tax statistics was still available for the purposes of assessing the value of imputation credits under r 87A. The ultimate submission in this regard was that consideration of tax statistics was permissible and might lead the Tribunal to determine a different value for gamma, even accepting the ERA's theoretical framework, and focussing solely on the issue of tax statistics as an upper bound for gamma.
334 The owners accepted that the Full Court's decision had implications for those aspects of the owners' application relying on the plain meaning of the term "the value of imputation credits". However, they went on to submit that the decision of the Full Court did not otherwise determine the Tribunal's assessment of the gamma topic. They went on to submit that the Tribunal ought to consider three topics. These were adumbrated at pars 29 to 31 of the owners' Written Submissions dated 12 July 2017 in the following terms:
First, whether the ERA erred in failing to indicate where and how it has considered relevant transaction costs associated with imputation credits, if not explicitly in the formulation of a gamma estimate.
Secondly, whether the ERA's use of a simple rather than a complex weighted average, as required by the theoretical framework, represents "economic learning outside the mainstream of that discipline" and, if so, whether that has been sufficiently well-explained to avoid error.
Thirdly, whether the Tribunal's finding in PIAC and Ausgrid, that tax statistics form an upper bound even within the theoretical framework used by the ERA, which finding has not been disturbed by the Full Court, has implications for the gamma value (even if the ERA's principal point as to value is accepted). In particular, based on the material before this Tribunal, including issues as to the reliable use of FAB data, is 0.4 a feasible value for gamma, or should it be reduced to 0.34?
335 The ERA submitted that the Full Court's decision in AER v ACT (No 2) disposes of the primary ground of review relied upon by the owners in its Review Application. That ground was that the ERA erred in construing and applying the phrase "the value of imputation credits" in r 87A.
336 As submitted by the ERA, the Full Court relevantly found that:
(a) The method, sources of information and/or weight to be attributed to each data source when determining "the value of imputation credits" is a derivative of the interpretation of that term (at [742]).
(b) The expression "the value of imputation credits" is to be construed as a whole, in its statutory context and having regard to the subject matter of the exercise. It would be an error to limit attention to the word "value" and give it a meaning in isolation. The relevant context is the function of the imputation credits under the NER (and, by analogy, under the NGR) in relation to the return on capital and the tax building block and, in particular, the determination of a regulated return using a post-tax revenue model based on a nominal vanilla WACC. The NER (and NGR) require consistency in the way the relevant building blocks interact (at [744], [751] and [752]).
(c) It is a misconstruction of the expression "the value of imputation credits" to interpret "value" as a "market value" derived from market studies rather than a value within a post-tax revenue model in which the integers are determined on a consistent basis (at [753] and [755]).
(d) It was not an error of construction for the AER (and, by analogy, the ERA in this case) to prefer one theoretical approach to considering the determination of gamma over another. Specifically, the AER did not err by focussing on the utilisation of imputation credits rather than on an implied market value (at [756]).
337 The ERA submitted that the effect of the decision of the Full Court is that the ERA's interpretation of the phrase "value of imputation credits" was correct and that the interpretation of that phrase given by the Tribunal in PIAC and Ausgrid was incorrect. That conclusion removed the primary argument being advanced before us, namely, that the matter had been correctly decided by the Tribunal in PIAC and Ausgrid and that this Tribunal should follow that decision.
338 The ERA criticised the submissions made by the owners in their Written Submissions dated 12 July 2017 to the effect that the ERA's model differed from the modelling framework adopted by the AER. Here, the ERA submitted that the owners had put the opposite position in their Submissions-in-Chief. The ERA argued that, in the present case, the owners should not be permitted to depart from that position. In any event, there was sufficient material before us for us to be satisfied that the substance of the model deployed by the AER in PIAC and Ausgrid is the same as that deployed by the ERA in the present case.
339 In its Written Submissions dated 2 August 2017, the ERA submitted that the owners' argument that the ERA's approach to WACC was "unorthodox" and outside the "mainstream of the relevant discipline" is a new argument not previously been raised. We agree. No leave has been sought to raise this argument and we do not propose to entertain it.
340 In any event, as the ERA submitted, this new submission made by the owners is inconsistent with submissions made to this Tribunal at the hearing in the sense that, when they accepted (as they did) that the approach of the AER in PIAC and Ausgrid was the same as the approach of ERA in the present case, the owners were also accepting that that approach was within the mainstream of economics.
341 The ERA submitted that, in any event, Dr Lally had expressly said that he concurred with the AER's approach of simplifying the averaging over the utilisation rates of all investors because it is difficult to estimate differences across investors in their level of risk aversion (because individual investors' levels of risk aversion are not observable).
342 The ERA submitted in its Written Submissions of 2 August 2017 that the Full Court's decision also disposed of the owners' challenge to the ERA's use of tax statistics. We agree with that submission.
343 In any event, the ERA repeated its submissions made at the hearing before us to the effect that the uncontradicted evidence in the economic literature considered by the ERA was that there was some unexplained discrepancy in the tax statistics date. This is revealed in Professor Hathaway's paper Imputation Credit Redemption ATO Data 1988β2011, Where have all the Credits Gone?, September 2013. According to the ERA, Professor Hathaway's advice was unequivocal. He said:
Until [reconciliation of the discrepancy] has occurred or it can be explained for me how to account for those credits, I urge all caution in using ATO statistics for any estimates of parameters concerned with franking credits [emphasis added].
344 As the Full Court found in AER v ACT (No 2), the Tribunal's use in PIAC and Ausgrid of the point estimate which the AER had derived from tax statistics in that case (0.43), as an upper bound, reflected an incorrect construction of the phrase "value of imputation credits".
345 In SAPN, the Full Court affirmed its earlier decision in AER v ACT (No 2).
346 In SAPN, at [52]-[57], the Full Court found that:
(a) The Tribunal in SA Power Networks did not make any error of law in determining that the AER was entitled to use its regulatory judgment in determining what approach should be used to estimate the cost of corporate income tax for the purposes of r 6.5.3 of the NER;
(b) The Tribunal in SA Power Networks did not misunderstand its function by concluding that the methodology to be used for determining an estimate of the cost of corporate income tax for the purposes of r 6.5.3. of the NER was a matter of judgment for the AER;
(c) No reviewable error arises from the relevant Regulator preferring one theoretical approach to considering the determination of gamma over another;
(d) It is not an error of construction for the Regulator to focus on utilisation rather than on implied market value;
(e) The limited merits review function reposed in the Tribunal and the field of choice available to the Regulator mean that reviewable error could not be established by an argument that the information before the Tribunal in SA Power Networks dictated a different conclusion for the proper legal content for gamma than the information that was before the Tribunal and the Court in PIAC and Ausgrid and AER v ACT (No 2); and
(f) It is not a function of the Tribunal, when performing a limited merits review of a regulator's decision, to determine the proper legal content for gamma in light of factual findings about the Regulator's approach to the PTRM in the particular case.
347 As submitted on behalf of the ERA, the matters set out at [346] above fatally undermine the contentions at pars 6 to 9 of the owners' Supplementary Submissions that the Tribunal in this case ought to find reviewable error in the ERA's approach to determining estimates of gamma on the ground that the information before this Tribunal is different from the information which was before the Tribunal in PIAC and Ausgrid or, for that matter, before the Tribunal in SA Power Networks.
348 The lengthy submissions made by the owners at the hearing before us depended entirely upon the reasoning adopted by the Tribunal in PIAC and Ausgrid which has been rejected by the Full Court in AER v ACT (No 2) and in SAPN. In the circumstances, we do not think that it is necessary for us to address those submissions in detail in these Reasons. Further, detailed and lengthy submissions along the same lines as those advanced by the owners here were rejected by the Tribunal in Application by ActewAGL Distribution [2017] ACompT 2 at [240]-[260], [278]-[353] esp at [299]-[353].
349 The reasoning of the Full Court in the two decisions to which we have referred is fatal to the owners' entire case in support of Ground 2 in their Review Application. For the above reasons, we reject Ground 2.
The Leave Application
350 Under s 245(1) of the NGL (WA), the leave of the Tribunal is required for a review of a reviewable regulatory decision. Sections 248β251 set out various rules in relation to any application for leave to apply for a review of such a decision.
351 Neither the ERA nor any other person opposed the application for leave. In light of that circumstance, we propose to keep our reasons for granting leave brief.
Timing of the Application
352 The Application for Leave to Review was lodged with the Tribunal on 21 July 2016 within the 15 business days specified in s 247 of the NGL (WA).
Serious issue to be heard and determined (s 248(a))
353 At [39]β[42] in Re Application by ElectraNet Pty Limited [2008] ACompT 1, the Tribunal held that the concept of "a serious issue to be heard and determined" should be analysed and applied by reference to the learning and principles applicable to the grant of interlocutory injunctions. In that case, the Tribunal also held that it is a concept found in s 237(2)(d) of the Corporations Act 2001 (Cth) which concerns the power of the Court to grant leave to a party to bring a statutory derivative action on behalf of a company. The relevant question is whether an applicant has established that there is a serious issue to be heard and determined given the nature of the rights asserted by the applicant and "the practical consequences likely to flow" from the grant of leave. In particular, the Tribunal has, on a number of occasions, expressed the view that the threshold merely requires the applicant to "show that there is a sufficient prospect of success to justify in the circumstances it being given the opportunity" to have the decision reviewed (see Application by Envestra Limited [2011] ACompT 12 at [21]).
354 In February 2017, when we granted leave to the owners to apply for a review of the ERA's decision, the Tribunal's decisions in PIAC and Ausgrid, ATCO Gas and SA Power Networks had already been handed down. In addition, at that time, other decisions relating to the NEL were under consideration. In each of these Tribunal decisions, the question of gamma was considered. In PIAC and Ausgrid the Tribunal determined that the AER was in error in deciding a value for gamma of 0.40. In ATCO Gas, the ERA itself accepted that it was in error in applying a gamma of 0.40. By way of contrast, the Tribunal in SA Power Networks considered that the AER had not erred, or been unreasonable, in adopting a value of 0.40 for gamma. The issue of the correct figure for gamma was under consideration in other matters before the Tribunal which, as at February 2017, had not been determined.
355 In addition, in PIAC and Ausgrid, the question of the suitability of the SL-CAPM was at issue. Although the specific issues raised in that matter in respect of return on equity were slightly different from those raised in the present matter, nonetheless the broad question of how the Tribunal should go about determining the relevant integers in respect of return on equity was in play in that matter.
356 In light of the matters to which we have referred at [350]-[355], we formed the view that the owners had met the threshold test specified in s 248(a) of the NGL (WA).
Materially preferable designated NGO decision (s 248(b))
357 The meaning of the expression "materially preferable designated NGO decision" is referred at [120] above. These matters are more particularly canvassed in ss 23, 244 and 259(4a)(c) of the NGL (WA). In the present case, given the amounts at stake, it seems to us that, were we to grant the relief sought by the owners, it would result in such a decision.
Revenue threshold
358 Section 249(2) of the NGL (WA) provides, in effect, that the Tribunal must not grant leave unless the amount that is specified in or derived from the decision exceeds the lessor of $5 million or 2% of the average annual regulated revenue of the covered pipelines service provider.
359 In the affidavit materials supporting the application for leave and the review application, the owners brought forward evidence which more than satisfied this requirement. The ERA did not take issue with that material. That evidence disclosed that the difference between the owners' claims and the value of the ERA decision in respect of the two grounds in question were:
(a) $181.48 million as to the return on equity grounds
(b) $16.74 million as to the gamma ground.
360 There was no suggestion that s 251 of the NGL (WA), which allows the Tribunal to refuse to grant leave if the owners had conducted themselves inappropriately during the regulatory process in the respects adumbrated in that section, was engaged in the present case.
361 For all of the above reasons, we granted leave to the owners to apply for a review of the ERA's final decision. That leave was granted on 13 February 2017.
Conclusion
362 For all of the above reasons, the owners' Review Application must be dismissed and the ERA's determination confirmed.
I certify that the preceding three hundred and sixty-two (362) numbered paragraphs are a true copy of the Reasons for Determination herein of the Honourable Justice Foster, Mr Robin Davey and Mr Rodney Shogren.
Associate:
Dated: 16 July 2018
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Oztech Pty Ltd v Public Trustee of Queensland (No 8) [2016] FCA 712
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FEDERAL COURT OF AUSTRALIA
Oztech Pty Ltd v Public Trustee of Queensland (No 8) [2016] FCA 712
File number: NSD 937 of 2014
Judge: PERRY J
Date of judgment: 16 June 2016
Catchwords: EVIDENCE β client legal privilege β whether waiver is to be implied from allegedly inconsistent conduct β where respondent produces evidence in the course of discovery of statements by counsel for a former employee of the respondent of his understanding of the content of the legal advices β where privilege was not the former employee's to waive β where not appropriate to infer whether description of legal advice accurate β application for production of privileged documents dismissed.
Legislation: Federal Court of Australia Act 1976 (Cth)
Evidence Act 1995 (Cth)
Cases cited: Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305
Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited [2013] HCA 46; (2013) 250 CLR 303
Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1
Osland v Secretary, Department of Justice [2008] HCA 37; (2008) 234 CLR 275
Oztech Pty Ltd v Public Trustee of Queensland [2015] FCA 1010
Oztech Pty Ltd v The Public Trustee of Queensland (No 5) [2016] FCA 333
Date of hearing: 9 June 2016
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 45
Counsel for the Applicant: Mr C Withers, Mr A Hochroth and Mr R May
Solicitor for the Applicant: Squire Patton Boggs
Counsel for the Respondent: Mr MJ O'Meara and Mr JP O'Regan
Solicitor for the Respondent: Clayton Utz
ORDERS
NSD 937 of 2014
BETWEEN: OZTECH PTY LTD ACN 005 907 871
Applicant
AND: THE PUBLIC TRUSTEE OF QUEENSLAND
Respondent
JUDGE: PERRY J
DATE OF ORDER: 16 JUNE 2016
THE COURT ORDERS THAT:
1. The applicant's interlocutory application dated 26 May 2016, to the extent that it seeks an order for production of documents in respect of which claims of privilege have been made, is dismissed.
2. The applicant is to pay the respondent's costs of the interlocutory application referred to in Order 1 as agreed or assessed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
PERRY J:
1. INTRODUCTION
1 By its interlocutory application dated 26 May 2016, the applicant in these proceedings, Oztech Pty Ltd (Oztech), seeks production of certain documents discovered by the Public Trustee over which the respondent (the Public Trustee) claims legal professional privilege (or client legal privilege, as it is now known under the Evidence Act 1995 (Cth)) comprising three legal advices and associated briefing documents.
2 Oztech does not dispute that the documents in question are subject to client legal privilege. Rather, Oztech contends that the Public Trustee has impliedly waived privilege over these communications.
3 These documents had been the subject of an earlier interlocutory application by Oztech for their production also on the ground that privilege over the documents had been waived. That application was dismissed by Perram J in March 2016: Oztech Pty Ltd v The Public Trustee of Queensland (No 5) [2016] FCA 333 (Oztech (No 5)). However, the conduct allegedly constituting a waiver of privilege now relied upon is said to have occurred after that decision by reason of the production in May 2016 by the Public Trustee of a document said to disclose the content of the legal advices pursuant to continuing discovery obligations.
4 For the reasons that follow, I do not consider that there has been any waiver of privilege by the Public Trustee and the application must be dismissed.
2. BACKGROUND
2.1 The proceedings and the first application for production
5 The substantive proceeding is a representative proceeding instituted by Oztech under Pt IVA of the Federal Court of Australia Act 1976 (Cth). The issues were summarised by Yates J in Oztech Pty Ltd v Public Trustee of Queensland [2015] FCA 1010 (Oztech (No 1)) at [1]:
[The proceeding] arises out of the respondent's role as the trustee for noteholders in respect of senior unsecured notes issued by the company now called Octaviar Investment Notes Limited (in liquidation) (OIN). A company now called Octaviar Limited (receivers and managers appointed) (in liquidation) (OL) was a guarantor of OIN's obligations under the notes. The applicant alleges that, following a sharp drop in OL's share price in January 2008, and OL's sale of a business (the Stella Group) which was completed on 29 February 2008, the respondent acted too slowly to protect the interests of noteholders, in particular by failing to apply to wind-up OIN and OL, and to take other steps, by 29 February 2008, with the consequence that the respondent breached his statutory, contractual and general law duties to noteholders.
6 Relevantly, the applicant asserts in broad terms that after 18 January 2008, the Public Trustee acted too slowly in seeking the winding up of OIN and OL. In his defence, the Public Trustee alleges among other things that after 18 January 2008 (and specifically from 4 February 2008) he acted upon legal advice in fulfilling his obligations as trustee. In this regard, it was not in dispute that the Public Trustee waived privilege over the advice he received from his solicitors relating to steps which he should take in relation to limiting any liabilities that might arise in the future (the future conduct advice): Oztech (No 5) at [9] and [13]. As Perram J explained: "Plainly enough, it would be inconsistent for him to assert that he relied upon legal advice after 18 January 2008 in acting as he did whilst maintaining the confidentiality of that advice and, no doubt, that is why the Public Trustee does not dispute the entitlement of Oztech to examine that material": Oztech (No 5) at [13]. Rather, the documents sought in Oztech (No 5) and here comprise legal advice sought by the Public Trustee (and the associated briefing documents) in relation to the past conduct of the Public Trustee and its officers, including as trustee of OIN (formerly known as the MFS Investments Notes Limited (MFS)) Note Trust, and on any potential liability arising out of those past actions: Oztech (No 5) at [22] (the past conduct advice). Justice Perram concluded that there had been no waiver of privilege of the past conduct advice on the ground that there was no inconsistency between the Public Trustee's allegation in his defence that he acted on the future conduct advice, on the one hand, and the maintenance of privilege by the Public Trustee over the past conduct advice, on the other hand: Oztech (No 5) at [26].
2.2 The further supplementary discovery
7 Following delivery of judgment in Oztech (No 5), the Public Trustee served further supplementary discovery on Oztech in May 2016. Oztech submits that by producing certain documents identified in the further supplementary discovery without redaction, the Public Trustee has waived privilege in the past conduct advice. These documents were, in turn, attachments to letters sent to the Queensland Crime and Misconduct Commission (CMC) by the Public Trustee concerning the referral of one of his employees, Mr Ian Kelly, in relation to the MFS Note Trust. Mr Kelly had been the Director, Client Services, of the Public Trustee.
8 In particular, the further supplementary discovery comprised the following.
(1) A letter dated 4 June 2008 with attachments (the 4 June 2008 letter) from Mr McKay, the then Acting Deputy Director General, Crown Law, to Hall Payne Lawyers, the solicitors then acting for Mr Kelly. Mr Kelly's employment with the Public Trustee at that time was suspended and later terminated. In the letter, Mr McKay set out particulars of the Public Trustee's allegations in the employment dispute between Mr Kelly and the Public Trustee then before the Queensland Industrial Relations Commission (the IR Commission).
(2) A letter dated 10 July 2008 with various attachments from Hall Payne Lawyers on behalf of Mr Kelly to the CMC (the 10 July 2008 letter).
9 As I explain below, Oztech ultimately relied only upon production of an unredacted passage in the transcript of proceedings on 5 June 2008 in the IR Commission which was attached to the 10 July 2008 letter as the ground on which it was said that the Public Trustee has waived privilege over three legal advices and associated briefing documents, namely:
(1) an opinion of Mr Gotterson QC (now the Hon Justice Gotterson of the Supreme Court of Queensland Court of Appeal) obtained by Crown Law and provided to the Public Trustee on 17 March 2008;
(2) advice in relation to aspects of Mr Gotterson QC's opinion, provided by Clayton Utz to the Public Trustee on 10 and 17 April 2008; and
(3) advice in relation to aspects of Mr Gotterson QC's opinion, provided by Mr Sofronoff QC in conference on 17 April 2008.
10 For convenience, I will refer to the three advices and briefing documents collectively as the Legal Advices. The circumstances in which the Legal Advices were prepared are explained in Oztech (No 5) at [16]-[23].
11 It is not in dispute that the Legal Advices themselves have not been produced and that the Public Trustee has consistently asserted privilege over them.
2.3 The 10 July 2008 letter
12 The 10 July 2008 letter is from Hall Payne Lawyers, the solicitors then acting for Mr Kelly, to the CMC, and is accompanied by some 500 pages of attachments.
13 Among the attachments to that letter is the transcript of a conciliation conference on 5 June 2008 before the IR Commission between Mr Kelly and the Public Trustee in relation to Mr Kelly's employment. That transcript is stamped "RELEASED TO PARTIES AND PUBLIC State Reporting Bureau Date: 6 June 2008 Attachments β NO". The State Reporting Bureau is identified as the author of the transcript at the top of the first page. By contrast, the transcript of proceedings in the IR Commission on 30 May 2008 (which was also included as an attachment to the 10 July 2008 letter) was stamped "RELEASED TO PARTIES ONLYβ¦". I infer from this that the transcript of proceedings in the IR Commission on 5 June 2008 was publicly available and was not the subject of any confidentiality orders. No evidence was led to the contrary.
14 The transcript records that during the conference on 5 June 2008, the following exchange occurred between counsel for Mr Kelly (Mr Amerena) and counsel for the Public Trustee (Ms Watson) in which Mr Amerena sought to obtain copies of the Legal Advices following receipt of the particulars in the 4 June 2008 letter from Mr McKay:
MR AMERENA: All right. Now, the documents, in our letter to you today we have listed a number of documents that we're entitled to from β assisted by the instructions we've received by the client and in ignorance of what are the true allegations against us. But these documents are being asked for because of the nature of what you're [sic] said in your letter of 4 June, let's deal with 4 June.
The fact of the matters is that my client is aware, because it was part of the process, that advice was obtained from Mr Gotterson QC, relating to the very issue which is held against him as part of the conflict of interest, namely whether or not the note holder should have been informed as to certain matters which were contained in the Price Waterhouse Cooper reports.
Now my client is also aware that Mr Sofronoff of Council [sic], instructed by Clayton Utz, was briefed on the very same matter and gave a contrary opinion, that's at the very heart of this, because Mr Sofronoff QC's advise [sic] said that there was no obligation to inform the note holders of the things which you're now alleging against my client here. Now, why is it β why is it when we made it very plain we wanted all the relevant documents, that we're not given documents which are of an exculpatory nature.
MS WATSON: Mr McKay, to my knowledge, does not have the advice by Gotterson and does not have the advice by Walter Sofronoff or anything from Clayton Utz. The second point is, Mr McKay would not have the power to waive legal professional privilege in relation to those matters, on the Attorney-General could do that, so that's all I have to stay at this stage. Mr McKay does not have those documents.
MR AMERENA: Mr McKay has been made the delegate of the Public Trustee. The Public Trustee has those documents, are you suggesting that Mr McKay is not entitled to them?
MS WATSON: No, I'm not suggesting that, I'm just telling you that at this stage today he does not have those documents.
15 The reference to "our letter to you today" appears to be a reference to a letter from Hall Payne Lawyers to Crown Law dated 5 June 2008, which is also included as an attachment to 10 July 2008 letter. That letter sought among other things, the Legal Advices together with instructions and any brief to Mr Gotterson QC and Mr Sofronoff QC and any file notes taken at a meeting with Mr Sofronoff.
2.4 The circumstances in which the allegedly privileged material was produced
16 The Public Trustee led evidence from Mr Sammut, a partner at Clayton Utz, the solicitors for the Public Trustee, as to the circumstances in which the allegedly privileged material was produced. Mr Sammut was not cross-examined on his evidence, although as I later explain Oztech seek to rely upon what it submitted were gaps in his evidence.
17 On 6 May 2016, Mr Sammut prepared an advice for the Official Solicitor to the Public Trustee, a redacted copy of which was in evidence. (The redactions related to advice on a document which is not relevant to this application.) That advice concerned the discoverability of, relevantly, the 4 June 2008 and 10 July 2008 letters which, with their attachments, together total approximately 600 pages in length. Those documents had been located in the file maintained by Crown Law on behalf of the Public Trustee in 2008.
18 Mr Sammut explained that, as part of his review of the Crown Law file, he has a clear recollection of "closely reviewing the material including the 4 June and 10 July letters (excluding their attachments)". He could "clearly recall scanning the attachments but β¦did not review them closely".
19 Mr Sammut obtained advice on behalf of the Public Trustee from Mr O'Sullivan QC as to the discoverability of the documents that had been located on the Crown Law file. Mr Sullivan QC's opinion dated 6 May 2016 (which was in evidence with some redactions relating to other matters) was that the 4 June 2008 Letter and the 10 July 2008 Letter were discoverable and not immune from inspection. The key reasons for that conclusion were that the documents fell within the scope of the order for discovery made by Justice Yates on 23 December 2015, and the communications contained in the letters were not protected by privilege. Mr Sammut agreed with that advice and he recommended that the Public Trustee provide instructions to deliver the documents to Oztech by way of discovery. On receiving those instructions, the letters were produced on 10 May 2016 and the attachments on 11 May 2016.
20 Mr Sammut has no recollection of reading the extract from the transcript excised above, and believes that it is likely that he would have drawn it to the attention of Queen's Counsel and discussed it with him if he had read it. He deposes that he "β¦certainly did not take a deliberate decision not to redact the extract or to waive privilege in the underlying advice of Mr Gotterson QC, Mr Sofronoff QC or Clayton Utz referred to in the extract". He further explained that:
At no stage has Clayton Utz received instructions from the Public Trustee to waive privilege in the documents referred to in paragraphs 1(a) and 1(b) of the Application. Instead, the Public Trustee's instructions to Clayton Utz have at all times been to maintain privilege in respect of all privileged communications other than those on which the Public Trustee relies in his defence of the proceeding.
21 In his second affidavit sworn on 8 June 2016, Mr Sammut attached a letter received from Mr O'Sullivan QC that day. In the letter, Mr O'Sullivan QC states that he "did not read or consider that part of the transcript of the hearing before the Queensland Industrial Relations Commission extracted at paragraph 8 of the [applicant's] submissions" and that when he provided his advice, he "had not considered whether that part of the transcript was amenable to a claim for legal professional privilege, or whether those lines of the transcript ought to be redacted". As was pointed out at the hearing, this did not amount to a statement by Mr O'Sullivan QC that he did not read or consider any part of the attachments to the letters, as Oztech initially submitted.
3. OZTECH'S SUBMISSIONS
22 As mentioned, Oztech's case that privilege in the past conduct advice had been waived ultimately relied upon production by the Public Trustee of the alleged description of the Legal Advices by Mr Kelly's legal representative recorded in the unredacted passage of the transcript of the IR Commission proceedings on 5 June 2008 (quoted at [14] above). As Mr Withers, counsel for Oztech, explained at the hearing:
The first waiver βact of waiver is producing a transcript in unredacted form which discloses the substance of the advice of Mr Gotterson and Mr Sofronoff, and we say that that means that we should be entitled to inspection of the advice itself and the materials with which they are supplied in order to provide their opinions. That is, in effect, the universe of what we say there has been a waiver over.
23 This act was said to be inconsistent with the maintenance of privilege and thereby to constitute a waiver of the privilege, irrespective of whether or not there was any subjective intention to waive the privilege.
24 In support of their submission as to waiver, Oztech contended first that that transcript made clear:
(a) the subject matter of the advice, namely, whether the Public Trustee was obliged to disclose to noteholders its decision to resign as trustee of the MFS Note Trust and the concerns about MFS's ability to repay the Notes, as expressed in the reports from PricewaterhouseCoopers, which underpinned that decision; and
(b) the conclusions of the advice, namely that Mr Gotterson QC considered that the Public Trustee was obliged to inform the noteholders of those things, Clayton Utz disagreed, and Mr Sofronoff QC agreed with Clayton Utz's advice.
25 Secondly, Oztech submitted that the evidence demonstrated that Mr Kelly was aware of the content of the Legal Advices. In this regard, Oztech relied upon the affidavit of Mr Scott Sharry, a partner of Clayton Utz, which had been prepared for the first privilege application before Perram J. Mr Sharry gave evidence that Mr Kelly had attended the conference on 17 April 2008 at Clayton Utz in which the past conduct advice was discussed. Present also at that meeting were Mr Sofronoff QC and legal representatives for the State of Queensland and the Public Trustee. Mr Sharry had also given evidence that Mr Kelly had been sent a copy of the additional past conduct advice by email on 17 April 2008. I accept for the purposes of this application that Mr Kelly had been privy to the content of the Legal Advices. On the basis of this evidence Oztech submits that it should be inferred that Mr Kelly's legal representative at the IR Commission conference had been appraised of the content of the legal advice by his client and that his description in the relevant passage of the transcript of the advice given in the Legal Advices was accurate.
26 Thirdly, Oztech relied upon the fact that at no time after this application was filed on 26 May 2016 and the issue had been drawn to the Public Trustee's attention, was any claim of privilege made over the transcript. The Public Trustee did not say that the unredacted document had been produced for inspection in error and did not seek the document's return or redaction of the relevant passage.
27 Fourthly, at the hearing Oztech also relied upon the Public Trustee's allegedly inconsistent conduct with respect to production of an unsigned statement of Mr Kelly which was described by the parties as the February statement, over which privilege had previously had been claimed and successfully defended before Perram J.
4. CONSIDERATION
4.1 Relevant principles
28 It is not in issue that there has been no express waiver of privilege. The most recent statement by the High Court of waiver implied from inconsistent conduct is found in the decision in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited [2013] HCA 46; (2013) 250 CLR 303 (Expense Reduction). Specifically at 315 [30], the Court held that:
According to its strict legal connotation, waiver is an intentional act done with knowledge whereby a person abandons a right (or privilege) by acting in a manner inconsistent with that right (or privilege). It may be expressed or implied. In most cases concerning waiver, the area of dispute is whether it is to be implied. In some cases waiver will be imputed by the law with the consequence that a privilege is lost, even though that consequence was not intended by the party losing the privilege. The courts will impute an intention where the actions of a party are plainly inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. (emphasis added)
See also Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 at 13 [29] (Gleeson CJ, Gaudron, Gummow and Callinan JJ); and Osland v Secretary, Department of Justice [2008] HCA 37; (2008) 234 CLR 275 at 298 [49] (Gleeson CJ, Gummow, Heydon and Kiefel JJ).
29 Thus as their Honours then explained, waiver looks chiefly to the conduct and position of the person said to have waived privilege in order to see whether she or he has "approbated" so as to prevent her or him from "reprobating" (Expense Reduction at 315-316 [31] (quoting with approval Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305 at 326)).
30 Consistently with this, Perram J summarised the relevant legal principles in Oztech (No 5) at [25] :
First, what is involved is the application of classical concepts of waiver from the general law which are sometimes also referred to as election: Craine v Colonial Mutual Fire Insurance Co (1920) 28 CLR 305 at 326; Commonwealth v Verwayen (1990) 170 CLR 394 at 423; secondly, the doctrine will apply where there is a choice between inconsistent legal rights which, in the case of a privilege debate, will generally mean the choice between maintaining the privilege by resisting production and disclosing the content of the communications: Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 641-642 and 655-656; thirdly, in the context of a privilege debate, this will require a judgment as to whether the conduct of the party entitled to the privilege is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect; fourthly, that judgment is to be made in the light of the context and circumstances of the case and in the light of any considerations of fairness arising from that context or those considerations. Finally, in this forensic calculus, the issue of fairness is clearly to be understood as only arising as part of the inconsistency analysis. It is not to be thought as warranting some kind of general inquiry into the fairness of the case. As to the third and fourth propositions, see Osland v Secretary, Department of Justice (2008) 234 CLR 275 at [45]. As to the fifth, see Mann v Carnell (1999) 201 CLR 1 at [29].
4.2 Has privilege been waived?
4.2.1 Production of the unredacted document and failure to request its return
31 Applying these principles, I do not accept that the Public Trustee's conduct in producing the relevant portion of the transcript and in not seeking its return or redaction is inconsistent with the Public Trustee maintaining privilege in the Legal Advices, let alone that it is "plainly inconsistent".
32 As Mr O'Meara, counsel for the Public Trustee submitted, it is necessary to start with the document which was produced and is said to have disclosed the substance of the Legal Advices. That document constitutes a transcript of proceedings held in public in the IR Commission. It records assertions made by a third party, namely, counsel for a suspended employee litigating against the Public Trustee, as to the alleged content of advice received by the Public Trustee. It is evident from the transcript that those assertions were made in circumstances where neither Mr Kelly's counsel nor Mr Kelly were in possession of the legal advices. To the contrary, they were made in support of a submission that they should be entitled to production of the Legal Advices. As such, the allegations by Mr Kelly's counsel as to the content of the Legal Advices were no more than his "second-hand" understanding, uninformed as they were by the documents themselves and based no doubt upon what his client had conveyed to him as to their content. Moreover, plainly neither Mr Kelly nor his counsel could waive the Public Trustee's privilege in the Legal Advices. Only the Public Trustee could waive his privilege, yet the Public Trustee disclosed nothing of the content of the Legal Advices. To the contrary, counsel for the Public Trustee immediately responded at the IR Commission conference with an assertion of privilege over them.
33 As counsel for the Public Trustee submitted, "the stream cannot rise higher than its source". In the same way that statements uttered by a third party publicly at the IR Commission conference could not waive the Public Trustee's privilege, equally it follows in my view that the discovery and production of those statements cannot waive the Public Trustee's privilege in the Legal Advices. In these circumstances, the question of whether or not it can be inferred that Mr Kelly's legal representative accurately described the conclusions reached in the Legal Advices is irrelevant and it would not be appropriate for me to rule upon the issue in an application of this kind. The circumstances of the disclosure were not in any event such as to create any inconsistency between maintenance of the privilege and the conduct of the Public Trustee in producing the document or, for that matter, in not seeking in the IR Commission to have the relevant portion of the transcript redacted. Indeed, if the Public Trustee had sought such a redaction in the IR proceedings, it may have implied that what was said about the advices by Mr Kelly's counsel was accurate, thereby undermining the Public Trustee's expressed intention to maintain the confidentiality of the Legal Advices.
34 It follows that this is not a case where legal advice was mistakenly provided to a party and the failure (promptly or otherwise) to request the return of the unredacted transcript might therefore be regarded as inconsistent with the assertion of privilege over the advices in response to this application. By contrast, in Expense Reduction, the legal advices themselves had been inadvertently produced, having been mistakenly listed in the discovery process in both the privileged and unprivileged sections of the Lists of Documents β a factor which the High Court found did not clearly suggest abandonment of privilege (Expense Reduction at 316 [33]). In those circumstances, the Court considered that the letter from the solicitors for what was termed "the ERA parties" promptly advising of the error and requesting the documents return "was important to convey the true position" and concluded that no inconsistent position had been taken by the ERA parties such that waiver should be imputed to them (Expense Reduction at 316 [34]-[35]).
35 For these reasons, there is no inconsistency in the Public Trustee's conduct in producing the relevant portion of the transcript and in not seeking its return or redaction while maintaining confidentiality in the Legal Advices themselves.
4.2.2 The alleged inconsistency in producing the February statement: a 'red herring'
36 Finally, at the hearing Oztech also relied on the Public Trustee's conduct in successfully defending a claim for privilege in Oztech (No 5) over the February statement which had been prepared by Mr Kelly for the purposes of the past conduct advice, yet in the further supplementary discovery intentionally producing an unsigned version of that statement to Oztech, together with the unredacted transcript: see Oztech (No 5). While no express reference was made by Perram J in Oztech (No 5) to the February statement, no objection was made to Oztech's submission that it was covered by that decision.
37 As to the basis on which the Public Trustee subsequently produced the February statement, Oztech relied on the email from the Public Trustee's solicitors advising the Public Trustee as follows:
We draw to your attention that the unsigned "February 2008" statement of Mr Kelly is included as an attachment to both documents (1) and (2) [being the June 2008 and July 2008 letters]. The Public Trustee previously successfully resisted production of that draft statement as a stand-alone document. However, as it forms an attachment to otherwise discoverable documents, it must now be produced.
38 That advice was consistent, in Oztech's submission, with the proposition that, even if the Public Trustee's legal representatives had considered the passage of the transcript in question in advising on the issue of privilege contrary to their evidence, they would have given the same erroneous advice, namely, that the whole of the transcript must be produced because it was attached to an otherwise discoverable document. This in turn was said to explain why the Public Trustee did not assert that the passage in the transcript had been produced for inspection by mistake and sought the return of the document β the so-called "gap" in the Public Trustee's evidence.
39 Counsel for the Public Trustee, however, submitted that this was a "red herring". He explained that the reason why the February statement had been produced was because it was a copy and not the same document which had been the subject of argument before Perram J. He submitted that:
What occurred was that the previous versions of the February 2008 statement were considered to attract a Propend privilege, that is to say, they were copies of a document made for the purposes of obtaining legal advice and, therefore, production was resisted on that basis. This version of the February statement was not such a document. It was a document which was attached to β¦ a letter from the Crown Law β Queensland Crown Law to the solicitors for Mr Kelly, Hall Payne. Therefore, it was not a document which attracted Propend privilege.
40 Oztech said that it did not accept this explanation:
β¦because it's one that was given from the bar table. It is addressed in paragraph 21 of our written submissions. We referred it to and relied upon the February statement, and it is β there is no evidence about it. What happened was, they provided two affidavits which specifically referred to the written submissions that we filed and addressed Mr O'Sullivan's conduct in reviewing the documents et cetera but did not address this point.
41 As a result, Oztech contended that the explanation given by counsel for the Public Trustee should be disregarded.
42 I do not agree. First, while it is true that Oztech referred to the production of Mr Kelly's unsigned February statement in their written submissions, they did not submit at that stage that the Court should draw the inference identified later in Oztech's oral submissions. Rather in its written submissions at [21], Oztech submitted simply that "[t]he fact that the Respondent has now made a positive decision to disclose that statement (rather than redact the document or withhold it from production as per the Respondent's usual practice) supports the view that the Respondent has acted inconsistently with the maintenance of confidentiality in respect of the advice and the documents created for the purpose of informing that advice." That being so, I do not consider that the Public Trustee can be said to have been fairly on notice that the Court would be asked to draw the specific inference identified at the hearing so as to afford him a fair opportunity to lead evidence to dispel that inference.
43 Secondly, the onus lies upon Oztech to establish waiver of the privilege. Irrespective of the position adopted with respect to previous versions of the February statement before Perram J, the February statement does not in terms contain legal advice so could not attract client legal privilege in itself. Whether a particular version and copy of the statement attracted privilege must therefore turn upon the purpose for which the particular document or copy in question was created, supporting the Public Trustee's version of events.
44 Finally and in any event, any privilege over the unsigned version of the February statement in issue here would have been expressly waived when it was provided by Crown Law to Mr Kelly's solicitors, as the Public Trustee submitted. In those circumstances, there is no inconsistency between the Public Trustee maintaining privilege over the Legal Advices and other briefing documents, on the one hand, including those copies which were the subject of argument in Oztech (No 5), and production by the Public Trustee of this particular version of the February statement, on the other hand.
5. CONCLUSION
45 For these reasons, Oztech has failed to establish any waiver of privilege over the Legal Advices and its application for production must be dismissed with costs.
I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perry.
Associate:
Dated: 16 June 2016
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FEDERAL COURT OF AUSTRALIA
Commissioner of Taxation v Hornibrook [2006] FCAFC 170
TAXATION LAW β income tax β remission of additional or penalty tax by Administrative Appeals Tribunal β Tribunal did not have power to remit additional tax in exercising its jurisdiction under s 14ZZ of the Taxation Administration Act 1953 (Cth) having affirmed liability for primary tax β appeal allowed
STATUTES β specific prohibition in one statute not overridden by general power in complementary statute
Administrative Appeals Tribunal Act 1975 (Cth), ss 2A, 25, 27, 29, 32, 33, 35, 41, 43, 44
Income Tax Assessment Act 1936 (Cth), ss 193, 207, 223, 227, Pt VII
Taxation Administration Act 1953 (Cth), Pt IVC, ss 14ZL, 14ZQ, 14ZR, 14ZS, 14ZU, 14ZY, 14ZZ, 14ZZA, 14ZZK
Taxation Laws Amendment (No 3) Act 1991 (Cth)
Taxation Laws Amendment (Self Assessment) Act 1992 (Cth), ss 6, 14, 27
Commissioner of Taxation v Hornibrook (2006) 42 AAR 136; 2006 ATC 4051; (2006) 61 ATR 573; [2006] FCA 9reversed
Re Applicant and Federal Commissioner of Taxation 2005 ATC 127; (2005) 58 ATR 1256 related
Australian Securities and Investments Commission v Donald (2003) 136 FCR 7considered
Berowra Holdings Pty Ltd v Gordon (2006) 228 ALR 387; (2006) 80 ALJR 1214 considered
Comcare v Burton (1998) 157 ALR 522 cited
Comcare v Etheridge (2006) 149 FCR 522 cited
Commissioner of Taxation v Queensland Trading & Holding Company Ltd [2006] FCAFC 112applied
Commonwealth Bank Officers Superannuation Corporation Pty Ltd v Commissioner of Taxation (2005) 148 FCR 427 cited
Coulton v Holcombe (1986) 162 CLR 1applied
Grollo Nominees Pty Ltd and Others v Commissioner of Taxation (1997) 73 FCR 452 discussed
HBF Health Funds Inc v Minister for Health and Ageing (2006) 149 FCR 291 cited
Hoffman v Chief of Army (2004) 137 FCR 520 cited
Isaacs v Commissioner of Taxation (2006) 151 FCR 427 cited
Lees v Comcare and Another (1999) 56 ALD 84; (1999) 29 AAR 350 cited
Minister for Immigration and Multicultural and Indigenous Affairs v Nystrom [2006] HCA 50 cited
O'Grady v Northern Queensland Co Ltd (1990) 169 CLR 356cited
PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301cited
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 cited
Saraswati v The Queen (1991) 172 CLR 1 applied
Secretary, Department of Social Security v Hodgson (1992) 37 FCR 32 cited
Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1982) 148 CLR 150 cited
Water Board v Moustakas (1987) 180 CLR 491 cited
DC Pearce and RS Geddes, Statutory Interpretation in Australia, 6th edn, LexisNexis, Australia, 2006, paras [4.30]β[4.32]
THE COMMISSIONER OF TAXATION v REGINALD HORNIBROOK
NSD 210 OF 2006
GYLES, STONE AND YOUNG JJ
28 NOVEMBER 2006
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD 210 OF 2006
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN: THE COMMISSIONER OF TAXATION
Appellant
AND: REGINALD HORNIBROOK
Respondent
JUDGES: GYLES, STONE AND YOUNG JJ
DATE OF ORDER: 28 NOVEMBER 2006
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The application to file a notice of contention out of time be refused.
2. The appeal be allowed.
3. The order of 20 January 2006 dismissing the appeal to the Court be set aside and in lieu thereof the appeal to the Court be allowed and the matter remitted to the Administrative Appeals Tribunal to be decided according to law.
4. The appellant pay the respondent's costs of this appeal.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD 210 OF 2006
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN: THE COMMISSIONER OF TAXATION
Appellant
AND: REGINALD HORNIBROOK
Respondent
JUDGES: GYLES, STONE AND YOUNG JJ
DATE: 28 NOVEMBER 2006
PLACE: SYDNEY
REASONS FOR JUDGMENT
GYLES J:
1 This appeal concerns the interplay between s 43 of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act) and the provisions of Pt IVC of the Taxation Administration Act 1953 (Cth) (the Administration Act) as they formerly stood in relation to the remission of additional or penalty tax. A reassessment of income tax by the Commissioner amended an assessment to include further income upon which further primary income tax was levied and additional (penalty) tax. The taxpayer, Reginald Hornibrook, objected to the reassessment insofar as the income component was concerned. The Commissioner of Taxation rejected the objection. The taxpayer appealed to the Administrative Appeals Tribunal (the Tribunal) against the imposition of further income tax. The Tribunal affirmed the decision in relation to the further income tax but, in relation to penalty, remitted the matter to the Commissioner with the direction that the assessment for that income year be amended by remitting additional tax in full (Re Applicant and Federal Commissioner of Taxation 2005 ATC 127; (2005) 58 ATR 1256). The Commissioner appealed to the Court pursuant to s 44 of the AAT Actchallenging that direction. The appeal was dismissed (Commissioner of Taxation v Hornibrook (2006) 42 AAR 136; 2006 ATC 4051; (2006) 61 ATR 573; [2006] FCA 9). The Commissioner appeals against that dismissal.
Background
2 In early 1989 the taxpayer received an assessment for income tax in relation to the year ended 30 June 1988 in the sum of $30,256.56. On 24 June 1994, following an audit, the Commissioner issued the respondent taxpayer with an amended assessment of income tax for the year ended 30 June 1988.
3 The starting point was that s 223 of the Income Tax Assessment Act 1936 (Cth) as it applied to the case (being that in force as at 30 June 1988) rendered a taxpayer, who had made a false or misleading statement or omitted material without which a statement would be misleading so that the tax properly payable exceeds the tax assessed on the false basis, liable to pay, by way of penalty, additional tax equal to double the amount of the excess. The Commissioner deemed s 223 to apply. That activated the duty to assess (s 227(1)) and a discretion to remit the additional tax in whole or part (s 227(3)). The form of the notice of amended assessment (so far as material) was as follows:
'Your Amended Taxable Income is $1270324 $ Λ
Tax on Taxable Income A 615309.76DR
Medicare Levy O 15879.05DR
Provisional Tax on 1988 Income + 12.0% B 16389.00DR
Additional Tax for Incorrect Return D 586858.75DR
Balance of this Assessment L 1234436.56DR
Balance of your previous 1988 Assessment M 30256.56DR
Difference between this and previous Assessment N 1204180.00DR
This amount is payable by 28 JUL 94'
4 The taxpayer, by his taxation agent, lodged an objection to the amended assessment by letter dated 5 July 1994 as follows:
'On behalf of the taxpayer, I wish to object to the above assessment in respect of the amount deemed by you as income.
At the time your Mr. Merlins visited my office, I advised that the taxpayer was overseas and that documentation would satisfy him that his assumption was wrong. He was not prepared to await the return of the taxpayer.
The amount received was not payment for services as no service was rendered. It was a payment for the sale of proprietory rights of the taxpayer which commenced in 1984 and accordingly the sale of these rights is by way of a capital sale and therefore not subject to income tax.
These were determined by the Supreme Court of NSW in August, 1985 and accordingly you are requested to issue an amended assessment.'
5 By letter dated 16 February 1996 the Commissioner disallowed the taxpayer's objection and gave notice of that objection decision for the reason:
'It is considered that the income received from Kumagai Gumi Co Ltd and Transfield Pty Ltd forms part of your assessable income.'
6 The taxpayer applied to the Tribunal pursuant to s 29(1) of the AAT Act for review of the Commissioner's decision disallowing the objection. The reasons for the application commenced as follows:
'The amended assessment under objection was numbered 291379/001 and was issued on or after 23 June 1994. The objection was made by letter of Ken Livingstone, the Applicant's tax agent to the Australian Tax Office dated 5 July 1994.
The amended assessment increased the Applicant's assessable income for the year to 30 June 1988 by $1,228,500. "representing payment for services rendered to Transfield Pty Ltd and Kumagai Limited (meaning Kumagai Gumi Company) under the Joint Venture Agreement entered into with them to secure the contract to build the Sydney Harbour Tunnel." '
All of the remaining reasons related solely to the amount of $1,228,500.00. There was no mention of penalty tax.
7 On 31 October 2003 solicitors acting for the taxpayer filed a statement of facts, issues and contentions on behalf of the taxpayer. Additional tax was not raised as an issue. Not surprisingly, the Commissioner's amended statement of facts, issues and contentions likewise made no reference to the issue of additional tax.
8 Taxation objections, reviews and appeals are governed by Pt IVC of the Administration Act. The amended assessment in this case was a 'taxation decision' for the purposes of Pt IVC β see s 14ZQ. Section 14ZL provides as follows:
'(1) This Part applies if a provision of an Act or of regulations (including the provision as applied by another Act) provides that a person who is dissatisfied with an assessment, determination, notice or decision, or with a failure to make a private ruling, may object against it in the manner set out in this Part.
(2) Such an objection is in this Part called ataxation objection.'
9 Section 14ZZK provided:
'On an application for review of a reviewable objection decision:
(a) the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and
(b) the applicant has the burden of proving that:
(i) if the taxation decision concerned is an assessment (other than a franking assessment)βthe assessment is excessive; or
(ii) if the taxation decision concerned is a franking assessmentβthe assessment is incorrect; or
(iii) in any other caseβthe taxation decision concerned should not have been made or should have been made differently.'
10 Section 14ZR provided:
'(1) If:
(a) a provision of an Act (including a provision as applied by another Act, but not including section 14E of this Act) provides that a person who is dissatisfied with a taxation decision may object against it in the manner set out in this Part; and
(b) a notice incorporates notice of 2 or more such taxation decisions;
then, for the purposes of the provision and of this Part, the taxation decisions are taken to be one taxation decision.
(2) If:
(a) under subsection (1), 2 or more taxation decisions are taken to be a single taxation decision (in this subsection called the deemed single taxation decision); and
(b) the Commissioner makes an objection decision in relation to the deemed single taxation decision; and
(c) the objection decision is, to any extent:
(i) an ineligible income tax remission decision; or
(ii) an ineligible sales tax remission decision;
then, this Part has effect, in relation to any review or appeal, as if:
(d) so much of the objection decision as consists of one or more ineligible income tax remission decisions were taken to be a separate objection decision; and
(e) so much of the objection decision as consists of one or more ineligible sales tax remission decisions were taken to be a separate objection decision.'
11 Section 14ZU prescribes the manner in which the respondent's objection was to be made, including a requirement that it state in full and in detail the grounds that the person relies upon. The respondent's objection was a 'taxation objection' within the meaning of s 14ZL. Section 14ZY required the appellant to make a decision about the objection and that decision became an 'objection decision' within the meaning of that section.
12 Section 14ZZ provides that a person who is dissatisfied with the 'objection decision' may appeal to the Tribunal but only where, relevantly, an 'objection decision' is a 'reviewable objection decision'. The latter expression is defined in s 14ZQ to be an 'objection decision' that is not, relevantly, an 'ineligible income tax remission decision' within the meaning of s 14ZS.
13 Section 14ZS in the form it took at the relevant time was as follows:
'(1) For the purposes of this Part, an objection decision is an ineligible income tax remission decision if subsection (2) β¦ applies.
(2) An objection decision is an ineligible income tax remission decision if it relates to the remission of additional tax payable by a taxpayer under the Income Tax Assessment Act 1936 other than Division 11 of Part IIIAA, except where the additional tax is payable under Part VII of that Act and its amount, after the decision is made, exceeds:
(a) β¦
(b) in the case of additional tax payable under section 223 of that Act because of the making of a statement:
(i) if the statement relates to only one year of income β the amount calculated, in respect of the period commencing on the day that is the prescribed day in relation to the taxpayer in relation to the year of income and ending on the day on which the assessment of the additional tax is made, at the rate of 20% per year of the amount of the relevant affected tax in relation to the taxpayer in relation to the year of income; or
(ii) β¦'
(Emphasis added)
Tribunal hearing and decision
14 The focus of the Tribunal hearing was the transaction said to give rise to the omitted income. There was some evidence that related to penalty tax and there was argument on the topic. No reference was made to s 14ZR or s 14ZS of the Administration Act or to any limit to power or jurisdiction to deal with penalty tax. The direction for remission of penalty tax was made without any discussion of the source of power to do so. The critical paragraph of the reasons of the Tribunal was as follows:
'I accept the applicant's submission that this transaction or dealing is one that falls into the clearly arguable category. I also accept that his income tax return gave the respondent some information about the transaction and this should be contrasted with the situation where there is a total omission of any reference to the particular transaction. Having regard to the policy of encouraging accuracy and completeness of returns that is embodied in s.223, but being cognisant also that the discretion has been introduced to mitigate potential harshness resulting from the imposition of penalty under s.223(1) being double the amount of tax avoided, I am satisfied that this is an appropriate case in which to remit the culpability component of the penalty in full. In relation to the per annum component, it is relevant to note that the respondent consented to the matter being held in abeyance for a number of years pending the finalisation of proceedings brought by Jones, extending to his appeals to the High Court. I consider it appropriate that any per annum component be remitted for the entire period from the date of issue of the amended assessment.'
Appeal to the Court
15 The questions of law raised on the appeal to the Court were framed as follows:
'1. Whether the Tribunal exceeded the jurisdiction conferred on it by section 14ZZ of the Taxation Administration Act 1953 [(Cth) ('the Administration Act')] in purporting to direct the Applicant to remit in full additional tax imposed on the Respondent for the year ended 30 June 1988.
2. The proper interpretation of sections 14ZQ and 14ZS of the [Administration Act].
3. Whether the Tribunal erred in law in purporting to direct the Applicant to remit additional tax in full.'
16 The grounds of appeal were as follows:
'4.1 The Tribunal erred in law in failing to hold that the Applicant's decision on objection refusing to remit additional tax imposed pursuant to sec 223 was an "ineligible income tax remission decision" under section 14ZS of the TAA and therefore not a "reviewable objection decision" for the purposes of section 14ZQ of that Act.
4.2 The Tribunal erred in law in purporting to direct the Applicant to remit the additional tax in full, in circumstances where there was no jurisdiction to do so.
4.3 The Tribunal should have held that the Applicant's decision refusing to remit the additional tax was not a "reviewable objection decision" within the meaning of section 14ZQ of the TAA.
4.4 In so far as the Tribunal purported to direct the Applicant to remit additional tax payable under either section 207 of the Income Tax Assessment Act 1936 or Division 1 of Part IIA of the TAA, the Tribunal had no jurisdiction to make such a direction.
4.5 If, contrary to the grounds set out in paragraphs 4.1 to 4.4 above, the Tribunal did have jurisdiction to direct that additional tax be remitted in full, the Tribunal, in purporting to make such a direction, erred in law in taking into account an irrelevant consideration namely the Applicant's consent to the matter remaining in abeyance before the Tribunal pending finalisation of other proceedings.'
Decision on primary appeal
17 The primary judge held that there had been no objection decision relating to the remission of additional tax. There had been no relevant objection and no relevant objection decision and it followed that there was no ineligible income tax remission decision in question. However, it was found that s 43 of the AAT Act was the source of the relevant power exercised by the Tribunal, that section being in the following terms:
'For the purpose of reviewing a decision, the Tribunal may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision and shall make a decision in writing:
(a) affirming the decision under review;
(b) varying the decision under review; or
(c) setting aside the decision under review and:
(i) making a decision in substitution for the decision so set aside; or
(ii) remitting the matter for reconsideration in accordance with any directions or recommendations of the Tribunal.'
18 The gist of his Honour's reasoning can be gleaned from the following extracts:
'While the taxpayer did not include in his objection a ground putting in issue the imposition of additional tax; and while the Commissioner's objection decision disallowing the taxpayer's objection did not, in consequence, deal with that issue; and while the taxpayer had no right to agitate the issue before the Tribunal unless the Tribunal otherwise ordered (s 14ZZK(a) of the Administration Act), which the Tribunal did not, nevertheless, in deciding the taxpayer's objection, the Commissioner could have further remitted the additional tax imposed at label D of the notice of amended assessment, pursuant to the discretion vested in him by subs 227(3) of the ITAA 36. The fact that he had already exercised this discretion, at the time of assessment to remit the additional tax to $586,858.75 was no bar or impediment to his further remission of the additional tax at the time of making his objection decision.
If this be right, then it is difficult to see why subs 43(1) of the AAT Act did not give the Tribunal jurisdiction to make that part of the decision against which this appeal is brought, namely, remission of the penalty matter to the Commissioner with the direction that the assessment for the year ended 30 June 1988 be amended by remitting additional tax in full. β¦
There can be no doubt, in the present case, that the exercise by the Tribunal of the discretion to remit the matter of the additional tax to the Commissioner with a direction that the additional tax be remitted in full is relevant to the making of the objection decision, if not dependent upon it. In that sense, the Tribunal exercised the discretion for the purpose of reviewing the objection decision and any argument that it did not must be rejected.'
The judge referred to the authorities as follows:
'Subsection 43(1) of the AAT Act has been construed as not requiring the power or discretion to be exercised by the Tribunal as being necessarily involved in the making of the decision under review: Secretary, Department of Social Security v Hodgson supra at 39β40. In Commonwealth Bank Officers Superannuation Corporation Pty Ltd v Commissioner of Taxation [2005] FCAFC 244 (30 November 2005, unreported) the Full Court of this Court observed at [29]β[30]:
'β¦Section 43 empowers the Tribunal to exercise all the powers and discretions conferred upon the original decision-maker, provided it does so for the purpose of reviewing a decision. Provided the necessary purpose is present, the power conferred upon the Tribunal is not otherwise limited. It is neither necessary nor permissible to put a gloss upon s 43 that would permit the Tribunal to exercise the discretion maker's powers and discretions only when those powers or discretions are necessarily interdependent with the decision under review, or where the power or discretion to be exercised by the Tribunal is necessarily involved in the making of the decision under review β see Secretary, Department of Social Security v Hodgson [supra].
Thus, so long as the exercise of powers and discretions by the Tribunal is for the purpose of reviewing a decision, all of the powers and discretions conferred by any relevant enactment on the decision-maker who made the decision, can be exercised by the Tribunal' (Emphasis)
In making this observation, the Full Court was adopting the views expressed by Hill J in Hodgson. In particular, what his Honour went on to say in that case at 40:
'Of course there must be an association between the power to be exercised by the Tribunal and the decision under review, but that association is to be found in the restriction of the grant of power in s 43(1) to the purpose of the Tribunal's review. The test is one of relevance rather than dependence. Where the exercise of a power or discretion is relevant to the making of the decision under review then, if requested, the Tribunal may exercise the discretion.' (Emphasis)'
No reference was made to s 14ZR of the Administration Act as apparently that provision was not drawn to the judge's attention.
Contentions of the parties
19 The respondent taxpayer adopts the reasoning of the primary judge and also refers to ss 2A, 25(4) and 33 of the AAT Act as supporting the conclusion reached.
20 The respondent sought to raise a contention that the Commissioner was estopped from contesting the power of the Tribunal to make the direction as to penalty tax as no such point had been taken before the Tribunal. That issue will be returned to after consideration of the merits of the appeal.
21 It is contended for the Commissioner that s 14ZR(2) and s 14ZS of the Administration Act together provide an insurmountable barrier to the Tribunal's exercise of power to remit additional tax caught by those provisions that cannot be overcome by s 43 of the AAT Act, particularly where there is no adjustment to primary tax.
22 In the alternative, it is submitted that, as there was no express taxation objection as to additional tax, no such issue was before the Tribunal (s 14ZZK). The power to remit additional tax was separate from the taxation objection in relation to primary tax. Section 43 could not bridge the gap. It is submitted that the authorities in point include Lees v Comcare and Another (1999) 56 ALD 84; (1999) 29 AAR 350 at [48], affirming Comcare v Burton (1998) 157 ALR 522 at 528, rather than those referred to by the primary judge.
23 In reply it is submitted for the taxpayer that s 14ZZK of the Administration Act says nothing about the jurisdiction of the Tribunal as it is directed to the taxpayer, not the Tribunal. It does not impose a statutory condition addressed to an administrative decision maker which was a condition of regulating the exercise of a statutory power (Berowra Holdings Pty Ltd v Gordon (2006) 228 ALR 387; (2006) 80 ALJR 1214 at [28] and [36]). It is said to be a procedural precondition not a jurisdictional condition. It was further submitted that s 14ZR(1) of the Administration Act resulted in all issues, including penalty, being before the Tribunal.
Decision
24 There is no doubting the width of the construction of s 43 enunciated by Hill J in Secretary, Department of Social Security v Hodgson (1992) 37 FCR 32 at 39β40, approved in Commonwealth Bank Officers Superannuation Corporation Pty Ltd v Commissioner of Taxation (2005) 148 FCR 427 at [29]β[30] and referred to in Isaacs v Commissioner of Taxation (2006) 151 FCR 427 at [37]. However, that construction does not deal with, and the situations in those cases did not present, the problem created by s 14ZR and s 14ZS that arises here, namely a possible statutory prohibition upon use of the relevant power by the Tribunal.
25 An anomaly, if not a 'practical absurdity' (cf Kitto J in Rawson v Hobbs (1961) 107 CLR 466 at 488), is created by the Tribunal decision in this case. It is perfectly clear that s 14ZS would have prevented any challenge to the remission decision as such. In other words, if there were no challenge to the imposition of primary tax then there could be no challenge to the remission decision. Furthermore, insofar as s 14ZR(1) may have led to a different position, s 14ZR(2) implements the statutory intention to exclude particular remission decisions from review. The result of the Tribunal decision is that an appeal against an objection decision in relation to primary tax, even if quite hopeless and doomed to failure, entitles the Tribunal to review the remission decision on the merits of that decision alone, regardless of the fate of the appeal concerning the imposition of primary tax, despite the inability to directly review that decision on that basis.
26 The only authority to which the Court was referred, which relates to this set of provisions, is the decision of the Full Court in Grollo Nominees Pty Ltd and Others v Commissioner of Taxation (1997) 73 FCR 452 at 523β524. That case dealt with another potential anomaly arising out of these provisions, namely, a reduction by the Tribunal of the amount of primary tax leaving the amount of penalty above the threshold set by s 14ZS. As the Court remarked, it would seem wrong to leave in place penalties imposed by the Commissioner on the basis that an unduly high amount of primary tax was unpaid. The submission of the taxpayer, which was accepted by the Court, was that s 14ZS only excluded review of an objection decision which related wholly to the remission of additional tax. Section 14ZR was not referred to in the decision. It is not apparent why that was so. The issue in Grollo does not arise here but counsel for the Commissioner, no doubt keen to avoid a possible anomaly, suggested that the result of the formula in s 14ZS would change depending upon the ultimate decision as to the tax properly payable, leading to an ambulatory application of the section. Whether that is correct does not need to be decided in this case. Another possible solution may be found in the decision of the Full Court in Deputy Commissioner of Taxation v Mostyn (1987) 18 FCR 260. Be all that as it may, the provisions of s 14ZR must be applied in this case.
27 The notice of amended assessment expressly incorporated decisions concerning both primary tax and additional tax which, by virtue of s 14ZR(1), are taken to be one taxation decision (Commissioner of Taxation v Queensland Trading & Holding Company Ltd [2006] FCAFC 112). The taxpayer objected to that decision. The Commissioner made an objection decision pursuant to s 14ZY in relation to that deemed single taxation decision within the meaning of s 14ZR(2). The question is whether the objection decision was, to any extent, an ineligible income tax remission decision. The negative decision rejected the whole objection and so both original taxation decisions stood. What is the position if the objection, although relating to both taxation decisions by virtue of s ZR(1) and s ZR(2), only referred to one of them? By s 14ZS(2) an objection decision is an ineligible income tax remission decision if it relates to the remission of additional tax. The remission of additional tax is one of the relevant taxation decisions. Thus, the objection decision related to that remission. The condition provided by s 14ZR(2)(c) is satisfied. It follows that Part IVC has effect in relation to the appeal to the Tribunal as if the decision in relation to additional tax was taken to be a separate objection decision and so would be caught by s 14ZS (s 14ZR(2)(d)).
28 It may generally be correct to say that the Tribunal stands in the shoes of the decision maker, but that is subject to particular provisions which relate to the conduct of an appeal. The Tribunal exercises the powers granted by the Administration Act pursuant to the provisions of the AAT Act. The two statutes must be read together so far as possible. In that situation, a general power in the AAT Act cannot be used to circumvent the express limitations in the Administration Act. (See Saraswati v The Queen (1991) 172 CLR 1; Hoffman v Chief of Army (2004) 137 FCR 520 per Black CJ, Wilcox and Gyles JJ at [7]β[27]); Minister for Immigration and Multicultural and Indigenous Affairs v Nystrom [2006] HCA 50 per Gummow and Hayne JJ at [43]β[70]; per Heydon and Crennan JJ at [130]β[169]; and DC Pearce and RS Geddes, Statutory Interpretation in Australia, 6th edn, LexisNexis, Australia, 2006, paras [4.30]β[4.32].) In my opinion, s 14ZR, coupled with s 14ZS, govern the manner in which the Tribunal appeal was to be conducted in this case, whether or not the same provisions would bind the Commissioner. In my opinion, s 14ZR makes clear a legislative intention that ineligible income tax remission decisions are outside the purview of the Tribunal. It follows that, in a case where there is no amendment to the primary tax, the decision does not cease to be an ineligible income tax remission decision, even if the ambulatory construction suggested on behalf of the Commissioner were adopted.
29 In my opinion, the same conclusion would follow if the reasoning adopted by the primary judge, also reflected in the Commissioner's alternative argument, is followed. On this hypothesis the only decision under review would be that relating to primary tax because of the limited scope of the objection (s 14ZZK). On any view, there has to be a relevant association between the power to be exercised pursuant to s 43 of the AAT Act and the review by the Tribunal of the decision in question before it. If the Tribunal affirms the decision as to primary tax, then there is no relevant association between that decision and the decision to remit additional tax. Affirmation of the decision as to primary tax changes nothing in relation to additional tax. The point is illustrated by noting that the reasons of the Tribunal for remitting the additional tax in this case had nothing relevant to do with the decision as to primary tax.
30 I cannot see that the arguments for the taxpayer based upon ss 2A, 25(4) or 33 of the AAT Act and s 14ZZK of the Administration Act alter the position.
31 I would answer the questions of law proposed as follows:
Q.1. Whether the Tribunal exceeded the jurisdiction conferred on it by s 14ZZ of the Administration Actin purporting to direct the applicant to remit in full additional tax imposed on the respondent for the year ended 30 June 1988?
A. Jurisdiction is not strictly the issue. The Tribunal had jurisdiction to deal with the matter before it. However, as it had affirmed the liability for primary tax, it did not have power to remit additional tax in exercising that jurisdiction.
Q.2. The proper interpretation of s 14ZQ and s 14ZS of the AdministrationAct.
A. Inappropriate to answer (Comcare v Etheridge (2006) 149 FCR 522 per Branson J at [19]).
Q.3. Whether the Tribunal erred in law in purporting to direct the applicant to remit additional tax in full?
A. Yes. It had no power to so direct.
32 In my opinion, the contention as to estoppel sought to be advanced in this proceeding is misconceived. It is inappropriate to be raised for the first time on appeal to the Full Court. It is a mixed question of fact and of law. (See Coulton v Holcombe (1986) 162 CLR 1.) For the same reason, it is inappropriate to be raised on an appeal on a question of law pursuant to s 44 of the AAT Act (HBF Health Funds Inc v Minister for Health and Ageing (2006) 149 FCR 291 at [67]). It is submitted for the Commissioner that, in any event, the contention is misconceived on the merits, both as to the facts and the law. There is no need to enter upon that debate. The application to file a notice of contention should be refused.
33 Normally it would be appropriate to exercise the power granted by s 44(4) of the AAT Act and set aside the direction in question rather than incur the additional costs of remitting the matter to the Tribunal. However, in the present case, it is appropriate to remit the matter to the Tribunal to be dealt with according to law. That would afford the taxpayer the opportunity, if so advised, of taking other proceedings to restrain interference with the Tribunal's decision based upon the estoppel that is claimed to operate. I should not be taken as expressing any opinion about the wisdom of taking that course.
34 I would allow the appeal, set aside the order dismissing the appeal to the Court and in lieu thereof allow the appeal to the Court and remit the matter to the Administrative Appeals Tribunal to be decided according to law. In view of the arrangements between the parties, the Commissioner should pay the respondent's costs of this appeal and the order for costs below should not be disturbed.
I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.
Associate:
Dated: 28 November 2006
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD 210 OF 2006
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN: COMMISSIONER OF TAXATION
Appellant
AND: REGINALD HORNIBROOK
Respondent
JUDGES: GYLES, STONE & YOUNG JJ
DATE: 28 NOVEMBER 2006
PLACE: SYDNEY
REASONS FOR JUDGMENT
STONE J:
35 I have had the advantage of reading the draft judgment of Gyles J and respectfully agree with his Honour's analysis and conclusions in this appeal.
36 By way of emphasis, while I acknowledge the force of the argument that s 43 of the Administrative Appeals Tribunal Act 1975 (Cth) gives the Tribunal broad powers to stand in the shoes of the original decision maker, I cannot accept that these general powers override the specific prohibition created by later statutory provisions namely, s 14ZR(2) and s 14ZS of the Taxation Administration Act 1953 (Cth). The anomaly to which Gyles J refers in [25] of his reasons makes this clear.
37 I agree with the orders proposed by Gyles J.
I certify that the preceding three (3) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone.
Associate:
Dated: 28 November 2006
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD 210 OF 2006
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN: COMMISSIONER OF TAXATION
Appellant
AND: REGINALD HORNIBROOK
Respondent
JUDGES: GYLES, STONE & YOUNG JJ
DATE: 28 NOVEMBER 2006
PLACE: SYDNEY
REASONS FOR JUDGMENT
YOUNG J:
38 This is an appeal from the judgment of Edmonds J in Commissioner of Taxation v Hornibrook (2006) 61 ATR 573 in which his Honour dismissed an appeal, on a question of law, from a decision of the Administrative Appeals Tribunal ('the Tribunal'): see Re: Applicant and Federal Commissioner of Taxation (2005) 58 ATR 1256. The central issue in the appeal concerns the proper construction of ss 14ZR and 14ZS(2) of the Taxation Administration Act 1953 (Cth) ('Administration Act').
The Amended Assessment and the Taxpayer's Objection
39 In his income tax return for the year ended 30 June 1988, the taxpayer did not include any income arising from his involvement in a large infrastructure project. However, the taxpayer's return contained the following statement:
'23 Sale or Other Transfer of Property YES
The taxpayer was part of a syndicate which developed the concept of the Sydney Harbour tunnel back in 1983. They intended to develope [sic] the venture in their own right. The syndicate sold their interest in the concept and as it was not created with any intent of resale at a profit and was commenced prior to 19th September, 1985, any surplus on the sale has been treated as a capital surplus.'
The taxpayer was assessed in accordance with his return.
40 On 24 June 1994, after an audit of the taxpayer's affairs, the Commissioner issued an amended assessment that increased the taxpayer's taxable income by $1,228,500. The adjustment sheet accompanying the amended assessment identified this sum as a payment that the taxpayer received from Transfield Pty Ltd and Kumagai Ltd during the year ended 30 June 1988.
41 The notice of amended assessment stated:
'NOTICE OF AMENDED ASSESSMENT
Your Amended Taxable Income is $1270324 $ Λ
Tax on Taxable Income A 615309.76DR
Medicare Levy O 15879.05DR
Provisional Tax on 1988 Income + 12.0% B 16389.00DR
Additional Tax for Incorrect Return D 586858.75DR
Balance of this Assessment L 1234436.56DR
Balance of your previous 1988 Assessment M 30256.56DR
Difference between this and previous Assessment N 1204180.00DR
This amount is payable by 28 JUL 94'
42 Through his taxation agent, the taxpayer lodged a notice of objection in the form of a letter dated 5 July 1994. The letter stated that the taxpayer wished to 'object to the above assessment in respect of the amount deemed by you as income'. The letter went on to claim that the payment that the taxpayer received was not a payment for services he rendered but a capital receipt from the sale of his proprietary rights. The letter did not make any reference to the additional tax assessment of $586,858.75.
43 The Commissioner disallowed the taxpayer's objection. By letter dated 16 February 1996, the Commissioner advised the taxpayer as follows:
'Your objection dated 5 July 1994 against the assessment for the income tax year ended 30 June 1988 has been considered.
The objection has been disallowed for the following reason:
It is considered that the income received from Kumagai Gumi Co Ltd and Transfield Pty Ltd forms part of your assessable income.'
No mention was made of the assessment of additional tax.
The Tribunal Proceedings
44 The taxpayer applied to the Tribunal to review the Commissioner's decision to disallow his objection. His application focused on the primary tax assessment. In particular, it contended that the sum of $1,228,500 was a capital receipt. The application did not refer to the assessment of additional tax.
45 It is clear, however, that the additional tax assessment was debated in the course of the proceedings before the Tribunal. In its reasons for decision, the Tribunal referred to the additional tax assessment of $586,858.75, set out Item 23 of the applicant's 1988 income tax return and extracted the relevant provisions concerning additional tax in ss 223 and 227 of the Income Tax Assessment Act 1936 (Cth) ('ITAA'). The Tribunal then continued:
'The applicant's written submissions on penalty referred to the rulings by the respondent that set out the respondent's view of the operation of the false or misleading concept in s.223 (IT2141) and the remission of additional tax (IT2517). Counsel acknowledged that the applicant's 1988 return enclosed neither the joint venture deed nor the indemnity deed, nevertheless it was submitted that there had been appropriate disclosure by way of a statement in the return that money had been received. In the respondent's statement of facts and contentions dated 6 June 1997, it was contended that the applicant had made a false or misleading statement by omitting the sum of $1,228,500 from his assessable income. Accordingly, additional tax was payable by virtue of s.223 of the Act. Further, the respondent contended that he had correctly exercised his discretion under sub-section 227(3) to remit the additional tax to $586,858.75 and no further remission was warranted in the circumstances.'
46 The Tribunal found that there were mitigating circumstances that should be taken into account on review in the exercise of the discretion in s 227(3) to remit additional tax. Those circumstances included the following matters: the income tax return was prepared by a tax agent and it was to be inferred that the taxpayer had acted on professional advice in treating the receipt as non-assessable and in making the level of disclosure set out in the return; and the assessability of the receipt was a contentious issue within the meaning of the Commissioner's guidelines concerning the remission of additional tax (IT2517). The Tribunal also noted that the guidelines said that a statement which is clearly arguable as a matter of law would not, as a general rule, result in the imposition of any penalty even though the statement may be found to have been inaccurate.
47 The Tribunal concluded:
'I accept the applicant's submission that this transaction or dealing is one that falls into the clearly arguable category. I also accept that his income tax return gave the respondent some information about the transaction and this should be contrasted with the situation where there is a total omission of any reference to the particular transaction. Having regard to the policy of encouraging accuracy and completeness of returns that is embodied in s.223, but being cognisant also that the discretion has been introduced to mitigate potential harshness resulting from the imposition of penalty under s.223(1) being double the amount of tax avoided, I am satisfied that this is an appropriate case in which to remit the culpability component of the penalty in full. In relation to the per annum component, it is relevant to note that the respondent consented to the matter being held in abeyance for a number of years pending the finalisation of proceedings brought by Jones, extending to his appeals to the High Court. I consider it appropriate that any per annum component be remitted for the entire period from the date of issue of the amended assessment.'
48 In the result, the Tribunal affirmed the decision under review in relation to the inclusion of the sum of $1,228,500 in the applicant's assessable income for the year ended 30 June 1988, but in relation to penalty remitted the matter to the Commissioner with the direction that the assessment for that income year be amended by remitting additional tax in full.
49 The Commissioner did not contend at any stage of the proceedings before the Tribunal that the Tribunal had no jurisdiction or power to review the assessment of additional tax. On the contrary, the Commissioner debated the appropriateness of the additional tax assessment and submitted to the Tribunal that 'no further remission was warranted in the circumstances'. Neither party referred the Tribunal to the provisions of s 14ZR and s 14ZS of the Administration Act.
The Appeal from the Tribunal to the Federal Court
50 Section 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) ('AAT Act') provides that a party to a proceeding before the Tribunal may appeal to the Federal Court, on a question of law, from a decision of the Tribunal. The Commissioner filed an amended notice of appeal dated 20 June 2005 which said that the questions of law raised on the appeal were:
'2.1. Whether the Tribunal exceeded the jurisdiction conferred on it by section 14ZZ of the [Administration Act] in purporting to direct the Applicant to remit in full additional tax imposed on the Respondent for the year ended 30 June 1988.
2.2. The proper interpretation of sections 14ZQ and 14ZS of the [Administration Act].
2.3. Whether the Tribunal erred in law in purporting to direct the Applicant to remit additional tax in full.'
51 The grounds of appeal were as follows:
'4.1 The Tribunal erred in law in failing to hold that the Applicant's decision on objection refusing to remit additional tax imposed pursuant to sec 223 was an "ineligible income tax remission decision" under section 14ZS of the [Administration Act] and therefore not a "reviewable objection decision" for the purposes of section 14ZQ of that Act.
4.2 The Tribunal erred in law in purporting to direct the Applicant to remit the additional tax in full, in circumstances where there was no jurisdiction to do so.
4.3 The Tribunal should have held that the Applicant's decision refusing to remit the additional tax was not a "reviewable objection decision" within the meaning of section 14ZQ of the [Administration Act].
4.4 In so far as the Tribunal purported to direct the Applicant to remit additional tax payable under either section 207 of the Income Tax Assessment Act 1936 or Division 1 of Part IIA of the [Administration Act], the Tribunal had no jurisdiction to make such a direction.
4.5 If, contrary to the grounds set out in paragraphs 4.1 to 4.4 above, the Tribunal did have jurisdiction to direct that additional tax be remitted in full, the Tribunal, in purporting to make such a direction, erred in law in taking into account an irrelevant consideration namely the Applicant's consent to the matter remaining in abeyance before the Tribunal pending finalisation of other proceedings.'
52 The amended notice of appeal raises only two questions of law. The first and most important question is whether the Tribunal's decision in relation to additional tax was beyond its jurisdiction, having regard to the provisions of ss 14ZZ, 14ZQ and 14ZS of the Administration Act. The second question is whether, assuming the Tribunal had jurisdiction to review the assessment of additional tax, it nonetheless erred in law in making its decision. The error in paragraph 4.5 of the amended notice of appeal was said to arise from the Tribunal's finding that the taxpayer consented to the Tribunal proceedings being held in abeyance for some years: this fact was irrelevant to the assessment of additional tax under s 227 and could only be relevant to the application of s 207 of the ITAA which was not before the Tribunal.
53 The amended notice of appeal makes no reference to s 14ZZK of the Administration Act or to any alleged error of law arising in connection with it. This is hardly surprising given the course of the proceedings before the Tribunal, where no reference was made to that section and the parties debated the question whether any further remission of additional tax was warranted.
THE ADMINISTRATION ACT
54 Part IVC of the Administration Act governs taxation objections, reviews and appeals. Several provisions define the circumstances in which, and the manner in which, a person who is dissatisfied with an assessment, determination, notice or decision may object against it. An objection of this kind is called a 'taxation objection': s 14ZL(2). Under s 14ZU a person making a taxation objection must make it in writing, lodge it with the Commissioner within the period set out in s 14ZW and state in it, fully and in detail, the grounds that the person relies upon. Where a taxation objection has been lodged with the Commissioner within the applicable time limits, the Commissioner must decide whether to allow it, wholly or in part, or to disallow it. Such a decision is called an 'objection decision': see s 14ZY(1) and (2). Section 14ZY(3) provides that the Commissioner must serve written notice of his objection decision.
55 Section 14ZQ defines 'taxation decision' to mean the assessment, determination, notice or decision against which a taxation objection may be, or has been, made. Special provisions apply where several taxation decisions are covered by a single notice of assessment or amended assessment. Section 14ZR provides:
'(1) If:
(a) a provision of an Act (including a provision as applied by another Act, but not including section 14E of this Act) provides that a person who is dissatisfied with a taxation decision may object against it in the manner set out in this Part; and
(b) a notice incorporates notice of 2 or more such taxation decisions;
then, for the purposes of the provision and of this Part, the taxation decisions are taken to be one taxation decision.
(2) If:
(a) under subsection (1), 2 or more taxation decisions are taken to be a single taxation decision (in this subsection called the "deemed single taxation decision"); and
(b) the Commissioner makes an objection decision in relation to the deemed single taxation decision; and
(c) the objection decision is, to any extent:
(i) an ineligible income tax remission decision; or
(ii) an ineligible sales tax remission decision;
then, this Part has effect, in relation to any review or appeal, as if:
(d) so much of the objection decision as consists of one or more ineligible income tax remission decisions were taken to be a separate objection decision; and
(e) so much of the objection decision as consists of one or more ineligible sales tax remission decisions were taken to be a separate objection decision.'
56 Section 14ZR applied in this case as the notice of amended assessment incorporated both an assessment of primary tax and an assessment of additional tax.
57 In view of the questions of law raised by the Commissioner's appeal to this Court, the most important provisions for present purposes are those which define the nature and scope of the decisions which are amenable to review by the Tribunal. The logical starting point is s 14ZZ which provides:
'If the person is dissatisfied with the Commissioner's objection decision, the person may:
(a) if the decision is both a reviewable objection decision and an appealable objection decisionβeither:
(i) apply to the [Tribunal] for review of the decision; or
(ii) appeal to the Federal Court against the decision; or
(b) if the decision is a reviewable objection decision (other than an appealable objection decision)βapply to the [Tribunal] for review of the decision; or
(c) if the decision is an appealable objection decision (other than a reviewable objection decision)βappeal to the Federal Court against the decision.'
58 This provision must be read in conjunction with the definitions in s 14ZQ. Relevantly, a 'reviewable objection decision' means an objection decision that is not 'an ineligible income tax remission decision'. The expression 'objection decision' has the meaning given by s 14ZY(2), to which reference has already been made.
59 The expression 'ineligible income tax remission decision' has the meaning given by s 14ZS. Between the date upon which the taxpayer filed his 1988 return of income and the date of the amended assessment, s 6 of the Taxation Laws Amendment (Self Assessment) Act 1992 (Cth) amended s 14ZS so as to exclude any reference to s 223 of the ITAA. Section 27 of the same Act repealed s 223. However, s 14(1) preserved the previous form of s 14ZS for certain purposes. It provided:
'Despite the amendments made by section 6, section 14ZS of the [Administration Act] as in force immediately before the commencement of this Act continues to apply to objection decisions that relate to the remission of additional tax payable by a taxpayer:
(a) under section 223 of the Income Tax Assessment Act 1936; or
(b) under section 224, 225 or 226 of that Act in relation to assessments in respect of:
(i) the 1991-92 year of income or an earlier year of income; or
(ii) an accounting period adopted in lieu of the 1992-93 year of income and commencing before 1 July 1992.'
60 It is common ground that s 14ZS, in the form originally enacted by the Taxation Laws Amendment (No 3) Act 1991 (Cth), applies to objection decisions that relate to the remission of additional tax under s 223 of the ITAA. In that form, s 14ZS provided as follows:
'(1) For the purposes of this Part, an objection decision is an ineligible income tax remission decision if subsection (2) β¦ applies.
(3) An objection decision is an ineligible income tax remission decision if it relates to the remission of additional tax payable by a taxpayer under the Income Tax Assessment Act 1936 (other than Division 11 of Part IIIAA), except where the additional tax is payable under Part VII of that Act and its amount, after the decision is made, exceeds:
(c) β¦
(d) in the case of additional tax payable under section 223 of that Act because of the making of a statement:
(iii) if the statement relates to only one year of income β the amount calculated, in respect of the period commencing on the day that is the prescribed day in relation to the taxpayer in relation to the year of income and ending on the day on which the assessment of the additional tax is made, at the rate of 20% per year of the amount of relevant affected tax in relation to the taxpayer in relation to the year of income; or
(iv) β¦'
61 The effect of s 14ZS(2) in that form is that an objection decision will be an ineligible income tax remission decision, and hence not a reviewable objection decision within s 14ZZ, 'if it relates to the remission of additional tax payable by a taxpayer' under s 223 of the ITAA except where its amount, after the decision is made, exceeds the 20 per cent per year figure fixed by paragraph (b)(i).
62 The additional tax assessment in this case did not exceed the 20 per cent threshold. Additional tax was assessed at $586,858.75. The expression 'relevant affected tax' essentially means the difference between the tax properly payable under the amended assessment and that payable under the original assessment: see s 14ZS(3). Here, the difference in tax payable, including the Medicare levy, was $617,321.25. The rate of 20 per cent per year is calculated over the period from the prescribed day for furnishing a return of income for the 1988 year (31 March 1989) until the day on which the assessment of additional tax was made (24 June 1994). The relevant period was therefore approximately 5.23 years. Applying these integers, 20 per cent of the relevant affected tax over the relevant period can be calculated as $645,718.03. The additional tax assessed to the taxpayer is less than this figure.
The AAT Act
63 Section 25 of the AAT Act provides that another Commonwealth enactment may provide that applications may be made to the Tribunal for review of decisions made in the exercise of powers conferred by that enactment. Section 25(3) provides that enactments of this kind may be expressed to apply to specific classes of decision and may specify conditions subject to which applications for review may be made. Section 25(6) also provides that enactments may include provisions adding to, excluding or modifying the operation of any of the provisions of ss 27, 29, 32, 33, 35, 41(1) or 43(1) or (2) of the AAT Act.
64 Section 14ZZ is an enactment of the kind described in s 25(3) of the AAT Act. Division 4 of Part IVC of the Administration Act also contains provisions that add to, or modify, the way in which the AAT Act applies in relation to the review of reviewable objection decisions: see s 14ZZA. Division 4 includes s 14ZZK which provides:
'On an application for review of a reviewable objection decision:
(a) the applicant is, unless the [Tribunal] orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and
(b) the applicant has the burden of proving that:
(i) if the taxation decision concerned is an assessment (other than a franking assessment)βthe assessment is excessive; or
(ii) if the taxation decision concerned is a franking assessmentβthe assessment is incorrect; or
(iii) in any other caseβthe taxation decision concerned should not have been made or should have been made differently.'
As will appear, one of the arguments raised by the Commissioner in its appeal from the decision of Edmonds J is founded upon this provision.
65 Where the Tribunal is given power to review a decision made under an enactment, the AAT Act confers extensive powers on the Tribunal. Section 25(4) provides that the Tribunal has power to review any decision in respect of which application is made to it under any enactment. Section 25(4A) provides that the Tribunal may determine the scope of the review of a decision by limiting the questions of fact, the evidence, and the issues that it considers. Most importantly, s 43(1) provides:
'(1) For the purpose of reviewing a decision, the Tribunal may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision and shall make a decision in writing:
(a) affirming the decision under review;
(b) varying the decision under review; or
(c) setting aside the decision under review and:
(i) making a decision in substitution for the decision so set aside; or
(ii) remitting the matter for reconsideration in accordance with any directions or recommendations of the Tribunal.'
Section 14ZS of the Administration Act
66 Edmonds J held that the objection decision in the present case was not an ineligible income tax remission decision under s 14ZS and that, insofar as the Commissioner's appeal was grounded on this issue, it must fail. In reaching this conclusion, His Honour said (at 578 [15]):
'It is difficult to understand the focus of the Commissioner on s 14ZS of the [Administration Act] in the present case when neither the taxpayer's objection nor, in consequence, the Commissioner's objection decision, referred in any way to the remission of additional tax imposed by the amended notice of assessment. In support of that focus I was referred to cases which, correctly in my view, hold that the words "relates to" are wide words signifying some connection between 2 subject matters β with the connection or association signified by the words being either direct or indirect, substantial or real. However, in the present case, there is absolutely no connection or association between the objection decision and the remission of additional tax payable under s 223 of the [ITAA].'
67 The Commissioner contends that this holding was erroneous, essentially because the assessment of additional tax involved or gave effect to a remission under s 227(3) and there was a deemed objection to that assessment by force of s 14ZR.
68 It is helpful to separate the steps in the Commissioner's argument. The starting point is the nature of the amended assessment insofar as it related to additional tax. As it operated in 1988 when the taxpayer filed his return of income, s 223(1) of the ITAA provided that where a taxpayer makes a false or misleading statement in his return, or omits material from the return which renders it misleading, so that the tax properly payable by the taxpayer exceeds the tax that was assessed on the basis of the return, the taxpayer is liable to pay, by way of penalty, additional tax equal to double the amount of the excess. Section 223(7) provided that where a person omits from a return any assessable income that he or she derived, the person shall for the purposes of s 223 be taken to have made a statement in the return to the effect that the person did not derive the assessable income during the period. Where s 223 applied, it triggered the Commissioner's duty to make an assessment of additional tax under s 227(1). Section 227(3) provided that the Commissioner may, in his discretion, remit the whole or any part of the additional tax payable by a person. This power could be exercised by the Commissioner prior to, or when making, an assessment of additional tax under s 227(1). The power can also be exercised, or re-exercised, by the Commissioner at some other or later time, such as when considering a notice of objection. Indeed, the power to remit can be exercised independently of the process of assessment and objection: Deputy Commissioner of Taxation v Mostyn (1987) 18 FCR 260.
69 In this case, the amount of additional tax was less than double the amount of primary tax imposed by the amended assessment, so the Commissioner must have exercised his powers of remission under s 227. For this reason, the Commissioner's argument characterised the assessment of additional tax as a 'remission decision'.
70 The second step in the Commissioner's argument invokes the provisions of s 14ZR. Section 14ZR(1) deems two tax decisions (viz, the assessment of primary tax and the assessment of additional tax) to be one taxation decision for the purposes of s 14ZR and of Part IVC (which includes ss 14ZS and 14ZZ). By force of s 14ZR(1), the taxpayer's objection to the amended assessment by letter dated 5 July 1994 must be regarded as an objection against the whole of the amended assessment, including the assessments of primary and additional tax. Section 14ZR(2) addresses the situation where the Commissioner makes an objection decision in relation to a deemed single taxation decision. Reading ss 14ZR(2)(c) and 14ZS together, s 14ZR(2)(c) applies if 'to any extent' the objection decision 'relates to' the remission of additional tax payable by a taxpayer under s 223 and the exception for assessments of additional tax exceeding the threshold of 20 per cent per annum does not apply. In that event, so much of the objection decision as constitutes an ineligible income tax remission decision is taken to be a separate objection decision.
71 The third and critical step in the Commissioner's argument is that it is enough to satisfy the relationship required by s 14ZS(2) that s 14ZR applies and the underlying assessment of additional tax by the Commissioner involved an exercise of his power of remission under s 227(3).
72 Thus, the competing considerations are that on the one hand the Commissioner's objection decision did not make any reference to the assessment of additional tax, and on the other hand the assessment of additional tax involved or gave effect to a remission decision. The fine but crucial question of construction of s 14ZS(2) is whether an objection decision must in fact consider the remission of additional tax before it can fall within s 14ZS(2); or whether it is sufficient that the Commissioner disallows an objection that is deemed to relate to an assessment of additional tax that involved some remission under s 227(3) without turning his mind to the question whether he should use his power of remission to vary that assessment. The Commissioner concedes that Edmonds J was not referred to s 14ZR, so his Honour did not consider the question of construction in quite this way.
73 The question which must be answered is whether, objectively, the Commissioner's decision to disallow the taxpayer's deemed objection to the entirety of the notice of amended assessment was, to any extent, a decision that related to the remission of additional tax. The answer depends on what kind of connection is required when the words 'relates to' are used in conjunction with the expression 'to any extent'.
74 Edmonds J observed that the words 'relates to' are wide words signifying some connection between two subject matters β with the connection or association signified by the words being either direct or indirect, but nonetheless substantial or real: at 578 [15].
75 In O'Grady v Northern Queensland Co Ltd (1990) 169 CLR 356 at 367, the High Court considered the meaning of the cognate phrase 'in relation to'. Dawson J said that, read out of context, those words are wide enough to cover every conceivable connection; but the words should not be read out of context β what is required is a relevant relationship having regard to the scope of the Act: see also Brennan J at 364 and McHugh J at 376. In PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301 at 313, Brennan CJ, Gaudron and McHugh JJ said that the closeness of the relationship required by the expression 'in or in relation to' must be ascertained by reference to the nature and purpose of the provision in question and the context in which it appears: see also Toohey and Gummow JJ at 330-331.
76 The relevant statutory context is to be found primarily in Part VII of the ITAA and Part IVC of the Administration Act. I have already described the operation of ss 223(1) and 227 and the respects in which an assessment of additional tax under s 223 is linked to the assessment of primary tax.
77 Section 14ZS(2) excludes from the category of ineligible income tax remission decisions cases in which the additional tax is payable under various other provisions of Part VII of the ITAA, whatever its amount. In general terms, these provisions operate where certain anti-avoidance or tax shortfall provisions apply. The rationale for excepting them from s 14ZS(2) seems to be that, where the imposition of additional tax depends on a determination that special provisions apply, the taxpayer should be able to apply for review of an objection decision that relates to the remission of additional tax. Accordingly, the exception of these provisions sheds no light on the question of construction that arises in this case.
78 Section 14ZS(2) also excludes cases arising under s 223 of the ITAA where the amount of additional tax 'after the decision is made' exceeds 20 per cent per year of the amount of relevant affected tax. The words 'after the decision is made' refer back to the objection decision that is mentioned at the commencement of the subsection. On balance, I do not think that these words afford a reliable indication that the subsection is concerned with an objection decision that actually addresses the question whether additional tax should, or should not, be remitted from that stated in the assessment. There is no difficulty in giving meaning to the words where the amount of the additional tax assessment is not altered, and indeed never considered, by the objection decision. In that scenario, the additional tax either will, or will not, exceed the 20 per cent threshold after the decision is made.
79 Somewhat greater assistance is provided by the decision of the Full Court of this Court (Sheppard, Foster and Whitlam JJ) in Grollo Nominees Pty Ltd v Commissioner of Taxation (1997) 73 FCR 452 ('Grollo'). In its judgment, the Court considered the proper construction and application of s 14ZS(2) at 523-524:
'Two further matters remain to be dealt with. They do raise questions of law. The first dealt with the application of s 14ZS of the Administration Act. In the submission of counsel for the Commissioner, there was no appeal to the Tribunal permitted because the 20 per cent limit imposed by s 14ZS of the Administration Act was not exceeded. In the submission of counsel for the appellants, the provisions of s 14ZS of the Administration Act did not preclude the review of the Commissioner's decision because the relevant objection decisions that were before the Tribunal related to the correctness of the whole of the assessments, not just the correctness of the remission of additional tax. In the appellants' submissions, the effect of s 14ZS was not to exclude a review of an objection decision which related in some part only to remission of additional tax. It only excluded review of an objection decision which related wholly to the remission of additional tax. That, so counsel submitted, was not the case here.
We think that the question of construction which counsel's submission presents for decision is not without difficulty. The relevant words of s 14ZS(2) are "An objection decision is an ineligible income tax remission decision if it relates to the remission of additional tax payable by a taxpayer ...". The expression "it relates to" is an expression of wide import. It is capable of applying to the words which are used even though the remission decision is only part of what is involved in the totality of the decision. On the other hand, it would seem an odd thing if there were, as here there is, an appeal to the Tribunal on the question of the amount of income tax payable which did not carry with it the right to question any consequential imposition of additional tax. In other words, if as indeed happened, the Commissioner assessed a taxpayer on the basis that the whole of a particular sum of money was assessable income in its hands and it was found by the Tribunal that only half the amount was income, it would seem wrong to leave in place penalties imposed by the Commissioner on the basis that the whole amount was assessable income. It is that feature of the matter which has persuaded us that effect should be given to the submissions of the appellants.'
Accordingly, s 14ZS(2) must be construed in a manner that allows an application to the Tribunal for review of the primary tax assessment to carry with it the right to consider and determine any consequential imposition of additional tax.
80 In holding that the Tribunal needed to have the ability to undertake consequential adjustments of additional tax, the Full Court did not suggest that the need only arises where the Tribunal reduces the amount of a primary tax assessment to such an extent that an assessment of additional tax that was previously below the threshold imposed by s 14ZS(2)(b)(i) rises above that threshold. That situation could be addressed by giving s 14ZS(2) an ambulatory operation: ie if s 14ZS(2) is applied after the Tribunal's adjustment of the primary tax assessment, s 14ZS(2) would not be attracted because 20 per cent threshold is exceeded. The Full Court in Grollo went further and concluded that, if the primary tax assessment is reduced to any extent, then the Tribunal should be able to review any penalties that were imposed on the basis that the primary tax was correctly assessed by the Commissioner.
81 In Grollo, the Full Court focused more on the effect that should be given to s 14ZS(2) where the Tribunal varies an assessment of the primary tax than on the way in which s 14ZS(2) should be read and interpreted so as to achieve that effect. It concluded its discussion by saying that effect should be given to the submissions of the appellants. The appellants in Grollo argued that an objection decision will only be an ineligible income tax remission decision if it relates wholly, ie only, to the remission of additional tax. At first blush, it is hard to see how an objection decision could be characterised as one that relates wholly to the remission of additional tax unless it specifically considered whether or not additional tax should be remitted. The Full Court's decision also suggests that an objection decision which considered an objection to the assessment of primary tax, or a challenge to the assessment of additional tax on the grounds that the preconditions in s 223(1) were not satisfied, would fall outside s 14ZS. This would be so even if the notice of objection also challenged the amount of the additional tax assessment on the ground that it should be further remitted.
82 The decision in Grollo focused on the case where the Tribunal needs to vary an assessment of additional tax in consequence of its decision concerning the primary tax assessment. It did not consider the question of construction that arises in this case. Moreover, it did not address s 14ZR(2)(c) and its use of the expression 'to any extent'.
83 This brings me back to the purpose and underlying policy of ss 14ZR and 14ZS(2). Section 14ZR(1) deems several taxation decisions that were incorporated in a single notice to be one taxation decision. By doing so, s 14ZR(1) ensures that, regardless of the grounds specified in the taxpayer's notice of objection, the Commissioner can, if he wishes, deal with any of the issues raised by the deemed single taxation decision when he considers a notice of objection and makes an objection decision. The point can be illustrated by taking the common case of a single notice of assessment that contains both primary tax and additional tax assessments. If in such a case, despite s 14ZU, a notice of objection is filed that does not object to the assessment of additional tax and does not specify any grounds for such an objection, s 14ZR(1) ensures that the Commissioner's powers in that circumstance are not limited to dealing with the matters that are expressly raised by the notice of objection. The Commissioner can address both aspects of the deemed single income tax decision and, if he thinks fit, he can allow the objection insofar as it relates to additional tax either wholly or partly by remitting the amount of the additional tax assessment to a lesser sum. However, it is hard to detect any statutory intention that s 14ZR(1) should go further and impose a positive obligation on the Commissioner to reconsider an assessment of additional tax in the absence of any relevant grounds of objection being stated in the notice of objection. Indeed, if s 14ZR(1) took this extra step, it might create some tension with s 14ZU(c).
84 The purpose of s 14ZR(2) is quite different. Its objective is to ensure that the deeming provision in subs (1) does not give the taxpayer a right to review the Commissioner's objection decision that would not otherwise exist. Therefore, for the purposes of any review or appeal, s 14ZR(2) splits the Commissioner's objection decision apart if the objection decision is to any extent an ineligible income tax remission decision as defined in s 14ZS(2). Where s 14ZR(2) applies, so much of the objection decision as consists of one or more ineligible income tax remission decisions is taken to be a separate objection decision for the purposes of any review or appeal.
85 The words 'to any extent' in s 14ZR(2) are words of extension. They loosen the nexus that might otherwise be required by the words 'relates to' where they appear in s 14ZS(2).
86 The long history of provisions in the income tax laws that aim to limit or exclude any external administrative review of remission decisions by the Commissioner sheds some light on why these words were included in s 14ZR(2). As originally enacted in 1936, the ITAA limited the taxpayer in every reference to the Board of Review or appeal to the Court to the grounds stated in his or her notice of objection. Section 192 gave the Board of Review power to review such decisions of the Commissioner as are referred to it under the Act. Section 193(1) gave the Board all the powers and functions of the Commissioner in making assessments, determinations and decisions under the Act. However, s 193(2) provided as follows:
'The Board shall not have power to review decisions of the Commissioner relating to the remission of additional tax except decisions relating to the remission of additional tax imposed by section two hundred and twenty-six of this Act where the additional tax payable, after the making by the Commissioner of his decision, exceeds β
(a) β¦'.
87 In the Income Tax Assessment Bill 1935 (Cth), cl 194 covered the same basic ground as s 193(1) and (2). It provided:
'For the purposes of reviewing such decisions, the Board shall have all the powers and functions of the Commissioner in making assessments, determinations and decisions under this Act, other than decisions to remit additional tax or any part thereof, and such assessments, determinations and decisions of the Board, and its decisions upon review, shall for all purposes (except for the purpose of objections thereto and review thereof and appeals therefrom) be deemed to be assessments, determinations or decisions of the Commissioner.' (emphasis added)
88 The explanatory memorandum to the Bill gave the following explanation for the exclusion of remission decisions from the scope of the Board's review:
'This clause takes away the right of the Board to remit additional tax by way of penalty imposed by the Act and reviewed by the Commissioner. Until recently, the view was held that the Board had no such right. Apart from the undesirability from a general and administrative point of view of having a review by the Commissioner further reviewed by the Board, it would prove impracticable to give the Board the right to review the many cases of penalties that taxpayers could refer if the restraint were not imposed. It would call for the appointment of further Boards, with additional expense, to meet a situation which is at present equitably and reasonably met by the Department. It is to be remembered that Parliament in the Act itself prescribes the penalties and gives the Commissioner power to remit the penalties wholly or in part if the circumstances warrant. Not merely are penalties imposed for evasions of tax, omissions from returns, and failure to lodge returns, but for late lodgment of returns and late payments of tax.'
In my view, this explanation remains relevant, despite the changed form in which the provision was enacted; the object of the change was to allow remission decisions to be reviewed where a specified threshold was exceeded, but not otherwise.
89 By 1991 these provisions had been modified and the Board of Review had been replaced by the Tribunal. But the ITAA continued the basic policy of limiting the Tribunal's power to review remission decisions. Section 193(2) provided:
'Notwithstanding section 25 of the Administrative Appeals Tribunal Act 1975, the Tribunal does not have power to review decisions of the Commissioner relating to the remission of additional tax payable by a taxpayer except decisions relating to the remission of additional tax under Part VII where the additional tax payable, after the making by the Commissioner of the decision, exceeds - ...'
There followed a number of subparagraphs which provided for various thresholds, some of which were set at 20 per cent per annum of the relevant affected tax.
90 It seems that s 193(2) was not aimed solely at objection decisions as it referred more widely to 'decisions of the Commissioner relating to the remission of additional taxβ¦'. On this reading, the section precluded the Tribunal undertaking any review of a remission decision by the Commissioner, including a remission decision that was integral to the making of the original assessment of additional tax.
91 The provisions of the ITAA concerning taxation objections, reviews and appeals were transferred into the Administration Act in 1991 by the Taxation Laws Amendment (No 3) Act 1991 (Cth). In doing so, a new drafting style was adopted. There is nothing to suggest that the new provisions in Part IVC of the Administration Act were intended to enlarge the powers and jurisdiction of the Tribunal in any significant way. The explanatory memorandum to the 1991 Bill contains no such suggestion; indeed, it contains nothing of assistance.
92 In Grollo, the Full Court said that the construction of s 14ZS(2) is not without difficulty. I think the same observation can be made about the combined operation of ss 14ZR and 14ZS(2). The principal difficulty arises from the fact that both ss 14ZR(2) and 14ZS(2) are directed to the nature and effect of the objection decision by the Commissioner, rather than any remission decision made by the Commissioner. However, the gap between these two concepts is largely, if not wholly, diluted by the words 'to any extent' that appear in s 14ZR(2).
93 Taking all of the foregoing considerations into account, I have concluded that the Commissioner's objection decision in this case did relate, to an extent, to the remission of additional tax payable under s 223. If the Commissioner in determining the taxpayer's objection had either made a decision to remit the additional tax, partly or wholly, or refused to do so, there would be no doubt that the Commissioner had made an objection decision that relates to the remission of additional tax under s 223. Although the connection is more attenuated, I consider that the same conclusion should follow where the assessment of additional tax involved or gave effect to a remission of additional tax, and the taxpayer's objection related to a deemed single taxation decision that includes the assessment of additional tax. In that situation, the Commissioner's decision to disallow the objection confirms, and therefore relates to, the assessment of additional tax. It also follows, in my view, that the objection decision relates, to an extent, to the Commissioner's earlier remission decision that formed an integral part of the additional tax assessment. If the Commissioner does not turn his mind to the question whether additional tax should be remitted or maintained, the connection will be indirect. But, in view of the phrase 'to any extent' in s 14ZR(2), the connection is sufficient to satisfy the description in ss 14ZR(2) and 14ZS(2).
94 Accordingly, I disagree with the primary judge's conclusion that s 14ZS(2) had no application. In my view, s 14ZS(2) applied, with the consequence that the Tribunal had no jurisdiction to make decisions in relation to the remission of additional tax. The Tribunal's only relevant jurisdiction is to review objection decisions that are referred to it in accordance with s 14ZZ. Since the Commissioner's objection decision related to the remission of additional tax, it was not a reviewable objection decision within the meaning of s 14ZZ(b).
95 The taxpayer argued that, as the Commissioner had not raised s 14ZS(2) before the Tribunal and had argued the merits of the case concerning the remission of additional tax, he had waived, or should be estopped from raising, any arguments founded on s 14ZS(2). In my opinion, there is no scope for these doctrines to operate because s 14ZS(2) goes directly to the jurisdiction of the Tribunal. Jurisdiction cannot be conferred by consent or by the conduct of the parties: Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1982) 148 CLR 150 at 163.
96 My findings as to ss 14ZS(2) and 14ZZ are sufficient to dispose of the appeal. The Tribunal did not have the jurisdiction to make the orders it did and consequently the appeal must be allowed. However, several other issues were argued and, in case this matter should go further, it is appropriate that I address them.
Section 43(1) of the AAT Act
97 If s 14ZS is put to one side and if the assumption is made that the Tribunal had jurisdiction under s 14ZZ of the Administration Act and s 25 of the AAT Act to review the Commissioner's objection decision insofar as it related to additional tax, it is quite clear that s 43(1) of the AAT Act would give the Tribunal ample power to make an order of the kind it did. The purpose of s 43(1) is to give the Tribunal the same powers and discretions as could have been exercised by the Commissioner when he made his decision on the objection. As Edmonds J pointed out, the Commissioner could have further remitted the additional tax imposed by the notice of amended assessment. The fact that the Commissioner had already exercised a discretion to assess additional tax at something less than the maximum prescribed by s 223(1) was no bar or impedient to his further remission of the additional tax at the time of making his objection decision.
98 These propositions are confirmed by the authorities that have considered s 43(1). In Commonwealth Bank Officers Superannuation Corporation Pty Ltd v Commissioner of Taxation (2005) 148 FCR 427, the Full Court of this Court (Finn, Emmett and Edmonds JJ) said at 433 [29]-[30]:
'Section 43 empowers the Tribunal to exercise all the powers and discretions conferred upon the original decision maker, provided it does so for the purpose of reviewing a decision. Provided the necessary purpose is present, the power conferred upon the Tribunal is not otherwise limited. It is neither necessary nor permissible to put a gloss upon s 43 that would permit the Tribunal to exercise the decision-maker's powers and discretions only when those powers or discretions are necessarily interdependent with the decision under review, or where the power or discretion to be exercised by the Tribunal is necessarily involved in the making of the decision under review ΔΎ see Department of Social Security v Hodgson (1992) 37 FCR 32 at 39-40.
Thus, so long as the exercise of powers and discretions by the Tribunal is for the purpose of reviewing a decision, all of the powers and discretions conferred by any relevant enactment on the decision maker who made the decision, can be exercised by the Tribunal.'
99 It is helpful to extract the passage from Hill J's judgment in Secretary, Department of Social Security v Hodgson (1992) 37 FCR 32 ('Hodgson') at 39-40, which was adopted and applied by the Full Court, because it deals with a fact situation which is not all that remote from the circumstances of the present case:
'Although I accept, therefore, that a decision to recover an overpayment does not necessarily involve a consideration of waiver, I do not think that it follows that in an appeal against the decision to proceed to recover an overpayment where the question of waiver has been raised by an applicant the Tribunal is precluded from exercising the power to waive under s 43(1) of the Administrative Appeals Tribunal Act. The language of s 43 is quite clear and unambiguous. It empowers the Tribunal to exercise all the powers and discretions conferred upon the original decision-maker provided it does so for the purpose of reviewing a decision. Provided the necessary purpose is present, the power conferred upon the Tribunal is not otherwise limited. It is not necessary or permissible to put a gloss upon s 43 that would permit the Tribunal to exercise the decision-maker's powers and discretions only when those powers or discretions are necessarily interdependent with the decision under review or where the power or discretion to be exercised by the Tribunal is necessarily involved in the making of the decision under review.
Of course there must be an association between the power to be exercised by the Tribunal and the decision under review, but that association is to be found in the restriction of the grant of power in s 43(1) to the purpose of the Tribunal's review. The test is one of relevance rather than dependence. Where the exercise of a power or discretion is relevant to the making of the decision under review then, if requested, the Tribunal may exercise the discretion. The Tribunal is, like the Taxation Boards of Review discussed in Jolly v Commissioner of Taxation(Cth) (1935) 53 CLR 206 at 214, "another executive body in an administrative hierarchy". Where its jurisdiction is enlivened by an application to review an administrative decision it exists to do again, within the limits of the review, that which the decision-maker was entrusted to do. To adapt what was said by Kitto J in Mobil Oil Australia Pty Ltd v Commissioner of Taxation(Cth) (1963) 113 CLR 475 at 502, the Tribunal in deciding whether an overpaid benefit should be recovered has the function of working out as a step in administration what it considers the situation to be. If the original decision-maker could legitimately have considered the issue of waiver before the issue of recovery and would have been obliged so to do if requested by the recipient of the overpayment, why should the Tribunal be precluded from so doing when for the purposes of the review it stands in the shoes of the original decision-maker?
It follows, in my view, that the Tribunal had jurisdiction to determine for itself, but as part of its review of the decision to recover the overpaid benefits, the question of whether some or all of the benefit should be waived.'
The foregoing principles were reiterated by the Full Court in Isaacs v Commissioner of Taxation (2006) 151 FCR 427 at 435 [37].
100 The Commissioner argued that, if the decision under review in this case is correctly identified, it is clear that the boundaries of the decision made by the Commissioner in dealing with the objection did not encompass the remission of additional tax in any sense. It is difficult to see how this argument assists the Commissioner. In the first place, if the boundaries of the Commissioner's objection decision did not encompass the remission of additional tax in any sense, as the Commissioner contended, that would suggest that s 14ZS(2) was not attracted (contrary to my view and to the Commissioner's principal argument). Secondly, the authorities on s 43(1) make it clear that the Tribunal enjoys all of the powers that the Commissioner could have exercised in making the objection decision that is under review. It is not limited to the powers that the Commissioner in fact exercised, or considered exercising, when he made the objection decision.
101 In Australian Securities and Investments Commission v Donald (2003) 136 FCR 7 ('Donald'), the Commission had imposed a banning order on the respondent under ss 829 and 830 of the Corporations Law but, on review, the Administrative Appeals Tribunal substituted a decision which reduced the length of the ban and accepted an undertaking from the respondent as to his continuing education and other conduct. The Commission had power under s 93AA of the Australian Securities and Investments Commission Act 1989 (Cth) to accept a written undertaking of this kind but a decision by the Commission under this provision was not reviewable by the Tribunal. The Full Court (Gray, Kenny and Downes JJ) held that it was open to the Tribunal, just as it was open to the Commission, to treat s 93AA as amongst the powers available to it, provided it does so only for the purpose of reviewing the reviewable decision that was made by the Commission: at 9 [3], 16 [32] and 21 [56].
102 At 16 [32], Kenny J said that:
'Accordingly, whilst there is no right to apply to the Tribunal to review a decision by the Commission not to accept an undertaking under s 93AA of the ASIC Act, it is open to the Tribunal, just as it was open to the Commission, to treat s 93AA as amongst the powers available to it, providing it does so only for the purpose of reviewing the reviewable decision that was made by the Commission.'
Gray J agreed with this reasoning: at 9 [3].
103 Downes J said at 21 [56]:
'It follows that ASIC's argument approaches the question from the wrong perspective. The question is not whether s 93AA is the subject of an express right of appeal, but, first, whether the Tribunal has jurisdiction over the relevant decision-making process, and, second, if it does, whether ASIC could have done what the Tribunal proposes to do. The Tribunal had jurisdiction, pursuant to s 1317B of the Corporations Law, with respect to the present decision-making process. Once it had that jurisdiction it had, pursuant to s 43 of the AAT Act, "all the powers and discretions" of the original decision-maker, of ASIC. Consequently, it could exercise all of the powers of ASIC to respond, including the power to accept an undertaking under s 93AA of the ASIC Act. Merkel J was correct in dismissing the appeal from the Tribunal under s 44 of the AAT Act.'
104 It was not disputed that the Commissioner could have remitted the additional tax assessment in dealing with the notice of objection; consequently, s 43(1) would authorise the Tribunal to do likewise.
105 The only other question under s 43(1) is whether the Tribunal exercised the power of remission for the purposes of reviewing the Commissioner's objection decision. I agree with Edmonds J that this requirement was satisfied.
SECTION 14zzk
106 The Commissioner advanced an alternative argument which assumed that the orders made by the Tribunal concerning additional tax were not precluded by s 14ZS. The argument was that the Tribunal had no power or jurisdiction to make the orders it did by reason of the operation of s 14ZZK. Section 14ZZK limits the applicant for review to the grounds stated in the taxation objection to which the decision relates, unless the Tribunal orders otherwise. In my opinion, the Commissioner's argument based on s 14ZZK should not be accepted.
107 It must be kept steadily in mind that this is an appeal, on a question of law, from the Tribunal's decision. The Commissioner's amended notice of appeal from the Tribunal does not raise any question of law concerning the operation of s 14ZZK. Further, when the case was before the primary judge, the Commissioner did not seek leave to further amend its amended notice of appeal so as to identify a question of law, and to add a ground of appeal, relating to s 14ZZK. There is nothing in the record before this Court to suggest that the argument that is now advanced about s 14ZZK was put to the Tribunal or to Edmonds J. In these circumstances, the s 14ZZK argument does not identify any error of law.
108 In this Court, the respondent did not raise any objection that the Commissioner's argument based on s 14ZZK fell outside the proper scope of the appeal. Nevertheless, I do not consider that this Court can or should entertain the argument.
109 The significance of the point not having been raised before the Tribunal does not lie in procedural niceties; it raises a matter of basic procedural fairness. The argument in the Tribunal proceeded on the basis that it was open to the taxpayer to contest the quantum of the additional tax assessment. By his conduct, the Commissioner accepted that the question of additional tax was in contest before the Tribunal. In the course of the Tribunal proceedings, the Commissioner did not raise any objection based on s 14ZZK. Had he done so, there would have been a real prospect that the Tribunal would have made a specific order under s 14ZZK(a) permitting the taxpayer to raise the questions he did concerning additional tax. If these events had transpired in the course of ordinary civil litigation, it is probable that the Commissioner would be regarded as bound by the way in which he conducted the case before the Tribunal: see Coulton v Holcombe (1986) 162 CLR 1 at 7-8; and Water Board v Moustakas (1987) 180 CLR 491 at 497.
110 Different considerations might come into play if s 14ZZK deprived the Tribunal of jurisdiction, as jurisdiction cannot be conferred by consent. But s 14ZZK does not go to the jurisdiction of the Tribunal, which is attracted by an application for review that satisfies the requirements of s 14ZZ. On its face, s 14ZZK(a) assumes that the Tribunal has jurisdiction and empowers the Tribunal to make an order permitting the applicant to go beyond the grounds stated in the taxation objection.
111 The taxpayer argued that s 14ZZK is in the nature of a procedural condition that speaks to the taxpayer, but which does not limit the powers of the Tribunal. Section 14ZZK is found in Division 4 which contains various modifications as to the way in which the AAT Act is to apply to the review of objection decisions: see s 14ZZA. Section 14ZZK does not purport to modify any particular provision of the AAT Act; rather it is an additional provision that regulates the way in which the review of an objection decision is to proceed: cf s 25(6) of the AAT Act.
112 The taxpayer relied upon Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 391 [95] and Berowra Holdings Pty Ltd v Gordon (2006) 228 ALR 387 ('Berowra'). In Berowra, the High Court held that s 151C of the Workers Compensation Act 1987 (NSW), which stipulated a six month delay before the commencement of Court proceedings against an employer for damages, did not impose a statutory prohibition on the commencement of proceedings or a precondition to the Court's jurisdiction to entertain the proceedings. In their joint judgment, Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ said at 395 [36]-[37]:
'Proceedings commenced by a worker in contravention of s 151C engage the jurisdiction and procedural rules of the court in question. Such proceedings are vulnerable to an application by the defendant to strike out the initiating process or to move for summary dismissal, but they are not a "nullity". Once a plaintiff has commenced proceedings, s 151C must be understood in connection with the procedural structure for the conduct of litigation in that court, not in isolation from it. This is not to subjugate the statute to the Rules, but to recognise that the subject-matter with which the statute deals is "rights" in the context of actual or apprehended litigation, and to understand the function of the Rules of Court and procedural law in facilitating adjudication of disputed claims.
The upshot is that the effect of non-compliance with s 151C will depend in each case upon the actions of the defendant in the context of the relevant Rules of Court. Where the defendant requires an order by the court for the defendant to give effect to a point as to s 151C, in exercising its discretion the court will take into account numerous factors. Not all of these (as Lord Griffiths recognised in Ketteman v Hansel Properties) may be measured in economic terms.'
113 Their Honours added that once it was appreciated that the Court has jurisdiction and that its procedural rules have been engaged, concepts such as waiver, acquiescence and estoppel are confusing and imprecise: see Commonwealth v Verwayen (1990) 170 CLR 394 at 456 and 482-483. The relevant inquiry is how the Court should exercise its discretionary powers in the event that the plaintiff does not comply with s 151C. In a separate judgment, Kirby J agreed that, in the type of proceedings to which s 151C was addressed, it was left to the parties in the ordinary way by their pleadings to raise issues as to the application of s 151C, thereby presenting them to the Court for resolution.
114 Although there are obvious differences between Court proceedings and review proceedings before the Tribunal, the decision in Berowra provides some guidance in determining how s 14ZZK should be approached. In my opinion, the better view is that s 14ZZK does not limit the powers or jurisdiction of the Tribunal. Like rules of pleading in a court, s 14ZZK regulates the way in which the Tribunal is to conduct its proceedings. It confines an applicant for review to the grounds stated in the taxation objection unless the Tribunal otherwise orders. It should be regarded as a provision that is directed to the parties to the review. The effect of any non-compliance with s 14ZZK will depend on the actions of the parties, whether they raised any objection based on s 14ZZK, and whether they submitted issues to the Tribunal for its decision which travelled beyond the grounds stated in the notice of objection.
115 The taxpayer couched many of its arguments concerning s 14ZZK in terms of waiver or estoppel. In my opinion, it is unnecessary to have recourse to concepts of waiver or estoppel to reject the Commissioner's arguments based on s 14ZZK. For the reasons I have given, the s 14ZZK argument does not establish that the Tribunal made an error of law that falls within the proper scope of this appeal.
Irrelevant Considerations
116 The Commissioner's final argument was that the Tribunal took irrelevant considerations into account in deciding to direct the remission of additional tax.
117 In its reasons for decision, the Tribunal explained why it considered that the culpability component of the additional tax assessment should be reconsidered. As to the per annum component of that assessment, the Tribunal noted that the taxpayer had consented to the matter being held in abeyance for a number of years pending the finalisation of proceedings brought by another taxpayer. The Tribunal then said that it considered it appropriate that any per annum component be remitted for the entire period from the date of issue of the amended assessment. In the result, the Tribunal remitted the matter to the Commissioner with a direction that additional tax be remitted in full.
118 Edmonds J dealt with this issue very briefly. His Honour stated at 577 [11]:
'While the tribunal's ultimate decision (at [2] above) in relation to "penalty" is clearly a reference to additional tax imposed at label D of the amended notice of assessment, it is equally clear, in my view, that what the tribunal is referring to in the last 2 sentences at [61] of its reasons for decision and in the extract from the transcript cited above is the additional tax by way of interest pursuant to s 207 of the [ITAA] and, if it is, it is clearly beyond the tribunal's jurisdiction. This latter matter was not, however, the subject of the tribunal's ultimate decision. It follows that ground 4.5 of the amended notice of appeal is misconceived.'
119 In my opinion, Edmonds J was correct in observing that the delay in the finalisation of the Tribunal proceedings was not relevant to the imposition of additional tax under s 223 and its remission under s 227. The per annum component of the additional tax that was in fact assessed under s 223 and s 227 was calculated as a percentage of the tax avoided during the period from the due date of the original assessment (31 March 1989) to the due date of the amended assessment (24 June 1994). The subsequent delay in the finalisation of the Tribunal proceedings may have been relevant, as Edmonds J observed, to the calculation of additional tax by way of interest pursuant to s 207 of the ITAA, but that was not the matter before the Tribunal.
120 In my opinion, the Tribunal's reasons for decision show that it was confused about the per annum component of the additional tax assessment. The only reason why the Tribunal referred to the delay in the finalisation of the proceedings was that it considered that this delay was relevant to the calculation of the per annum component of the additional tax assessment. That view was mistaken. I am unable to accept the primary judge's conclusion that the Tribunal's observation concerning the per annum component was not the subject of its ultimate decision. I infer that the Tribunal directed that additional tax be remitted in full because of the observations it made concerning the culpability component and the per annum component of the assessment of additional tax. It follows that the Tribunal took an irrelevant consideration into account in making the direction it did.
121 If this were the only issue, the matter would be remitted to the Tribunal to be dealt with according to law. However, I have found that the appeal must be allowed on other grounds.
Relief
122 I would allow the appeal, and set aside the order of Edmonds J dismissing the appeal.
123 As for the costs of the appeal, the Commissioner and the taxpayer agreed that, regardless of which party succeeds on the appeal, the Commissioner would pay the taxpayer's costs of the appeal, as taxed or agreed. It was also agreed between the parties that Edmonds J's order that the Commissioner pay the taxpayer's costs of the appeal from the Tribunal to the Federal Court should not be disturbed, regardless of the outcome of the present appeal to the Full Court. The context of this agreement was that the taxpayer was provided with funding under the Australian Tax Office Test Case Litigation Program to assist the taxpayer to meet his costs of the proceedings.
124 Accordingly, I would order that the Commissioner pay the respondent's costs of the appeal, as taxed or agreed.
I certify that the preceding eighty-seven (87) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Young.
Associate:
Dated: 28 November 2006
Counsel for the Appellant: Mr DH Bloom, QC, Mr JO Hmelnitsky
Solicitor for the Appellant: Australian Government Solicitor
Counsel for the Respondent: Mr DKL Raphael, Mr JA Watson
Solicitor for the Respondent: Northside Law
Date of Hearing: 14 August 2006
Date of Judgment: 28 November 2006
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Northpoint Shipping Ltd v Pacific Marine & Civil Solutions Ltd [2016] FCA 1043
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2024-09-13T22:47:10.774527+10:00
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FEDERAL COURT OF AUSTRALIA
Northpoint Shipping Ltd v Pacific Marine & Civil Solutions Ltd [2016] FCA 1043
File number: NSD 934 of 2016
Judge: RARES J
Date of judgment: 22 July 2016
Legislation: Australian Consumer Law (Cth) ss 18, 29(1)(d)
Competition and Consumer Act 2010 (Cth) Sch 2
Corporations Act 2001 (Cth) ss 127(1), 129(5)
Federal Court Rules 2011 (Cth) rr 10.42, 10.43
Cases cited: Beluga Shipping GmbH & Co KS "Beluga Fantastic" v Headway Shipping Limited (No 2) (2008) 251 ALR 620
Brinkibon Limited v Stahag Stahl und Stahlwarenhandels GmbH [1983] 2 AC 34
Entores Limited v Miles Far East Corporation [1955] 2 QB 327
Ho v Akai Australia Pty Limited (In Liq) (2006) 24 ACLC 1526
Jasmin Solar Pty Limited v Trina Solar Australia Pty Limited (2015) 331 ALR 108
Sydbank Soenderjylland A/S v Bannerton Holdings Pty Limited (1996) 68 FCR 539
Voth v Manildra Flour Mills Pty Limited (1990) 171 CLR 538
Date of hearing: 22 July 2016
Registry: New South Wales
Division: General Division
National Practice Area: Admiralty and Maritime
Category: No Catchwords
Number of paragraphs: 32
Counsel for the Plaintiffs: Mr EGH Cox
Solicitor for the Plaintiffs: Aus Ship Lawyers
ORDERS
NSD 934 of 2016
BETWEEN: NORTHPOINT SHIPPING LTD
First Plaintiff
FENWICK SHIPPING SERVICES LTD
Second Plaintiff
AND: PACIFIC MARINE & CIVIL SOLUTIONS LTD
First Defendant
ROBERT SEMAAN
Second Defendant
MICHAEL FAIRFAX
Third Defendant
PACIFIC BUILDING SOLUTIONS LIMITED
Fourth Defendant
SAFE PACIFIC SHIPPING (HONG KONG) LTD
Fifth Defendant
JUDGE: RARES J
DATE OF ORDER: 22 JULY 2016
THE COURT ORDERS THAT:
1. The plaintiffs have leave to serve the originating application, statement of claim and this order on each of the second, third and fourth defendants in Fiji.
2. The plaintiffs' costs of the interlocutory application filed on 7 July 2016 be the plaintiffs' costs in the cause.
3. The proceeding be stood over to 2 September 2016 for further directions
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT)
RARES J:
1 Northpoint Shipping Limited and Fenwick Shipping Services Limited, the plaintiffs, seek leave to serve the originating application and statement of claim on the second, third and fourth defendants, Robert Semaan, Michael Fairfax and Pacific Building Solutions Limited (Pacific Fiji), in Fiji. Both Mr Semaan and Mr Fairfax were directors of Pacific Fiji. Northpoint is a Hong Kong company and was the owner of MV Kuanyin. Fenwick is an Australian company, whose secretary is Christopher Rabbidge (also a director). It is the ship manager of Kuanyin under an agreement between Northpoint and Fenwick dated 1 January 2008.
2 The originating application seeks judgment in the sum of AUD300,000 against Messrs Semaan and Fairfax, together with Pacific Fiji, or damages.
Background
3 Northpoint and Fenwick seek to recover against all the defendants in respect of claims for demurrage under a charter party entered into by Northpoint, through the agency of Fenwick, with Safe Pacific Shipping (Hong Kong) Ltd, the fifth defendant. The fixture note for the charter of Kuanyin between Northpoint and Safe Pacific provided for demurrage to be payable at the rate of USD5,500 per day pro rata. A company associated with members of the group of companies controlled by, among others, Mr Semaan and Mr Fairfax, known as the "PBS Group", arranged for the shipment of a cargo on Kuanyin between Suva, Fiji and Betio, Kiribati.
4 On 17 December 2015, Northpoint, as carrier, issued a bill of lading for the cargo to be carried on Kuanyin under which Pacific Marine & Civil Solutions Limited, the first defendant, a company in the PBS Group also incorporated in Fiji, was the shipper. The bill of lading incorporated on its face a provision that freight was payable as per the charter party dated 22 October 2015, which was the source of a demurrage claim.
5 There were delays at the loading port that resulted in Northpoint making a demurrage claim for about USD192,000 most of which was paid, leaving a small amount owing being about USD2,154.78. When the ship arrived at the discharge port on 11 January 2016, she went on demurrage that lasted until 8 March 2016. The total demurrage incurred for that period of the charter was USD321,319.72. The total of the two amounts for demurrage of USD323,474.50 is the sum period for which Northpoint and Fenwick seek judgment against Pacific Marine and Safe Pacific. This application does not concern that claim.
6 As the time during which the ship was on demurrage in Betio mounted, Mr Rabbidge began negotiating with members of the PBS Group, principally through emails he sent to Carl Probert, who was designated as "Group Asset/Logistics Manager" of the PBS Group at the foot of emails that he sent and copied to Mr Semaan. Under Mr Probert's signature block appeared "PBS Group" together with a logo, an address, phone and other contact details. Immediately below that material appeared the logos, business and domain names of five entities, including "Pacific Building Solutions" and "Pacific Marine & Civil Solutions", without any indication as to whether each entity was a corporation, such as by the use of the word "Limited" or "Incorporated".
7 On 23 January 2015, Mr Probert emailed Mr Rabbidge, under the subject line "Guarantee for Demurrage Payment", writing that he had copied in:
Rob Semaan PBS Group Chairman and Simon Ahearn, Group Operations. I have forwarded your request for a direct guarantee from us because we were concerned with the Chinese broker.
Sounds like a notarised company guarantee is what you are after, but please advise if you require a different guarantee.
Again, thanks for working with us to keep this discharge progressing.
8 Mr Rabbidge replied on 25 January 2016 "yes, that is the sort of thing" and that Northpoint and Fenwick would not ask for a bank guarantee. Mr Semaan then emailed Mr Rabbidge on 26 January 2016 asking whether "a guarantee like this" would avoid the need for "us needing to pay for demurrage every week or so".
9 Subsequently on 1 February 2016, Mr Rabbidge attached to an email he sent to Mr Semaan, Mr Probert and Mr Ahearn a draft deed of undertaking of two pages that had the heading at its top "on letterhead of company giving the undertaking", that Mr Rabbidge said in the email "we ask PBS to provide". The draft deed named Northpoint and Fenwick as the parties to whom it was addressed. The email also said that the letter "needs to be on company letterhead and originally signed/witnessed by two directors. pls [sic] send us a scanned copy and send original letter by courier to us." He gave Fenwick's address in Australia.
10 The significance of the failure to identify the covenantor under the proposed deed is crucial. Following his sending that email on 1 February 2016, Mr Rabbidge communicated by email with Mr Semaan, Mr Probert and Mr Ahearn about the wording of the proposed deed, but at no point did Mr Rabbidge's correspondence state a proposal that identified a covenantor different to "PBS" as the party to the deed.
11 After more drafting exchanges between the four men, on 9 February 2016, Mr Rabbidge sent a final draft to Messrs Semaan, Probert and Ahearn and followed up by email, on 11 February 2016, seeking provision of the deed asking whether it could be executed as soon as possible. Mr Semaan replied that he was hoping to do so that day between travels.
12 Finally, late on 12 February 2016, Mr Semaan, from the email address "[email protected]" sent an email to Mr Rabbidge stating simply: "Chris, attached", and sent copies to Mr Probert and Mr Ahearn at the same domain name email address. The email attached a copy of the final version of the deed dated 12 February 2016. It was on the letterhead of Pacific Marine & Civil Solutions Inc (Pacific Inc) a company incorporated, according to its letterhead, in Port Vila, Vanuatu and was executed by Mr Semaan and Mr Fairfax, under each of whose name appeared "Director". Mr Ahearn witnessed their signatures.
13 The deed provided a guarantee for demurrage that was limited to AUD300,000 "including interest plus legal costs" and, near the conclusion a covenant that:
C. we warrant that the signatories below have the Authority to instruct lawyers and execute this document. (emphasis added)
14 Immediately underneath that covenant, the deed stated that it was governed by Australian law and that "any dispute arising out of or in any way connected with this letter of undertaking should be subject to the exclusive jurisdiction of the Federal Court of Australia in Sydney".
15 At the foot of the deed, underneath the signatures, in small print and having the appearance of being a footer at the end of the page appeared the name "Pacific Marine & Civil Solutions Inc". That name could appear to relate to the status of the signatures, as "Director" of Mr Semaan and Mr Fairfax above it, but there was no corporate seal affixed nor statement of the "directors" executing the deed on behalf of a company. That may not have been necessary in any event for the document to operate at common law as a deed given by the company: cf Norton on Deeds (Sweet & Maxwell, 1928, 2nd ed) at 7, and, of course, it is not necessary under ss 127(1) and 129(5) of the Corporations Act 2001 (Cth).
16 However, the problem with the document was that, according to company searches in Vanuatu, Pacific Inc had been struck off the register of corporations on 12 November 2014 and hence did not exist as a corporation at the time at which Mr Semaan provided Mr Rabbidge with the deed that he and Mr Fairfax had executed as its directors.
17 The deed also acknowledged that, first, no demurrage had been paid as at 12 February 2016, secondly, the total demurrage then payable at the discharge port was USD115,069.72 and, thirdly, that the demurrage was continuing to accrue at the rate of USD5,500 per day pro rata.
18 After Mr Rabbidge received the email attaching the executed deed in Australia, Northpoint and Fenwick caused the cargo to be discharged from Kuanyin and refrained from continuing to exercise their lien over the cargo.
19 Northpoint and Fenwick allege, in the statement of claim, that in the circumstances, each of Mr Semaan, Mr Fairfax and Pacific Fiji had warranted that, first, Pacific Inc was an incorporated entity (i.e. had a present existence as a corporation), secondly, Mr Semaan and Mr Fairfax were authorised by that entity to sign the deed and, thirdly, that entity was guaranteeing the demurrage payable to Northpoint and Fenwick in accordance with the terms of the deed (i.e. up to the amount of AUD300,000).
20 In the events that transpired, Northpoint and Fenwick claim the whole of the amount of AUD300,000 the subject of the guarantee as damages against each of Mr Semaan, Mr Fairfax and Pacific Fiji. In the alternative, Northpoint and Fenwick allege that Messrs Semaan and Fairfax and Pacific Fiji engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of ss 18 and or 29(1)(d) of the Australian Consumer Law (Cth) in Sch 2 to the Competition and Consumer Act 2010 (Cth). Relevantly, s 29(1)(d) provides that:
29(1) A person must not, in trade or commerce, in connection with the supply or possible supply of β¦ services β¦
(d) make a false or misleading representation that a particular person has agreed to acquire β¦ services.
21 The statement of claim appears to allege that each of Mr Semaan, Mr Fairfax and Pacific Inc represented that he or it had agreed to acquire the services of Northpoint and Fenwick arranging for the discharge of the cargo at Betio. Alternatively, the damages claim against each of Mr Semaan, Mr Fairfax and Pacific Fiji is not limited to the amount of the guarantee.
Consideration
22 The principles upon which leave to serve outside the jurisdiction under r 10.43 of the Federal Court Rules 2011 (Cth) is granted are well settled: Ho v Akai Australia Pty Limited (In Liq) (2006) 24 ACLC 1526 per Finn, Weinberg and Rares JJ; see also Beluga Shipping GmbH & Co KS "Beluga Fantastic" v Headway Shipping Limited (No 2) (2008) 251 ALR 620 at 627-628 [32]-[33] per Rares J and Jasmin Solar Pty Limited v Trina Solar Australia Pty Limited (2015) 331 ALR 108 at 117 [50]-[52] per Edelman J.
23 I am satisfied by the evidence of Drew James, in his affidavit of 6 July 2016 that Northpoint and Fenwick propose to serve Mr Semaan, Mr Fairfax and Pacific Fiji in Fiji by personal service and that that method of service is permitted under the law of Fiji. Mr James has ascertained that Fiji is neither a party to the Hague Convention nor any other convention with Australia permitting service of curial documents. Fijian law permits service in Fiji of documents from a foreign court by personal service.
24 I am satisfied that the court has jurisdiction in the proceeding for the purposes of r 10.43(4), that the proceedings are of a kind mentioned in r 10.42 and that Northpoint and Fenwick have a prima facie case for some of the relief claimed in the proceeding.
25 In reciting facts for the purposes of giving these reasons, I take at face value the currently unanswered material in Mr James' affidavit. However, that material may well be seen in another light during the course of a contested hearing and necessarily does not present whatever defences or evidence might be called by the defendants. I have not formed any final view about the nature of the proceedings. However, on the material before me, I am satisfied that Northpoint and Fenwick have established a prima facie case sufficient to establish what is necessary to justify the grant of leave to serve out of the jurisdiction within the principles explained at in Ho 24 ACLC at 1529 [9]-[10], 1535 at [45]-[46]. Those principles are that a prima facie case for relief for the purposes of r 10.43(4) is one that establishes on the material before the Court that inferences are open which, if translated into findings of fact, would support the relief claimed. Moreover, it is only necessary that a prima facie case for relief be shown to exist for any one of the causes of action relied upon for the relief so sought: Ho 224 ACLC at 1535 [45]-[47].
26 On the material before me, I am satisfied that there is a prima facie case that when Mr Semaan sent his email on 12 February 2016, attaching the deed of undertaking on the letterhead of Pacific Inc, using his email address that appeared to be that of Pacific Fiji, he, Mr Fairfax and Pacific Fiji gave the express warranty of authority to execute the deed that it contained in covenant C. The principles applicable to instantaneous communications of a contractual nature, including in respect of documents in the nature of the deed dated 12 February 2016 give rise to the prima facie inference that the deed was delivered in Australia when Mr Rabbidge received that email: Brinkibon Limited v Stahag Stahl und Stahlwarenhandels GmbH [1983] 2 AC 34 at 42E, per Lord Wilberforce, following Entores Limited v Miles Far East Corporation [1955] 2 QB 327.
27 In Voth v Manildra Flour Mills Pty Limited (1990) 171 CLR 538 at 568, Mason CJ, Deane, Dawson and Gaudron JJ said (and see too: Sydbank Soenderjylland A/S v Bannerton Holdings Pty Limited (1996) 68 FCR 539 at 547E-G, per Beaumont, Drummond and Sundberg JJ):
If a statement is directed from one place to another place where it is known or even anticipated that it will be received by the plaintiff, there is no difficulty in saying that the statement was, in substance, made at the place to which it was directed, whether or not it is there acted upon.
28 In my opinion, there is a prima facie case that the alleged warranty of authority was made and breached by the transmission to, and receipt by, Mr Rabbidge in Australia of Mr Semaan's email of 12 February 2016 attaching the deed of undertaking from the non-existent Pacific Marine & Civil Solutions Inc (i.e. Pacific Inc). In those circumstances, I am satisfied that the proceeding is based on a cause of action arising, and a tort committed, in Australia within the meaning of each of items 1 and 4 in the table to r 10.42. In addition, for the same reasons, I am satisfied that a prima facie case exists that the representation, the subject of the allegations of misleading and deceptive conduct amounting to a contravention of s 18 of the Australian Consumer Law, was made in Australia and falls within items 1 and 12 (the latter relating to a proceeding based on a contravention of an Act that is committed in Australia).
29 Mr James' evidence demonstrated that, through email exchanges between Mr Rabbidge, Mr Probert and Mr Semaan, the ship was still on demurrage as at 4 March 2016. On 6 April 2016, the lawyers acting for Northpoint and Fenwick sent a letter of demand by email to Pacific Fiji, Mr Semaan, Mr Probert and Mr Fairfax invoking the provisions of the deed. The letter attached a demurrage invoice dated 18 March 2016 and a statement of fact time sheet dated 8 March 2016. The letter demanded payment of the sum of USD323,474.50 and that the addressees appoint a lawyer in Sydney to accept service.
30 Mills Oakley, a firm of Australian solicitors, responded to that letter, saying that they had been instructed by Pacific Inc in relation to it but that they did not have instructions to accept service of any proceedings. Subsequently, on 12 May 2016 Mills Oakley wrote to the solicitors acting for Northpoint and Fenwick and stated, on behalf of "our client" that Pacific Inc: "β¦ is a shell company which holds no assets and we have no instructions to accept service in any proceedings commenced against it".
31 I have not for the purpose of these reasons considered whether the terms of the deed as signed by Mr Semaan and Mr Fairfax themselves constituted a contractual undertaking by each of those individuals to Northpoint and Fenwick.
Conclusions
32 For these reasons, I will order that Northpoint and Fenwick have leave, pursuant to r 10.43 to serve on each of Mr Semaan, Mr Fairfax and Pacific Fiji in Fiji, the originating application, statement of claim and the orders made and that the costs of the interlocutory application be costs of Northpoint and Fenwick in the cause.
I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.
Associate:
Dated: 29 August 2016
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Evolution Precast Systems Pty Ltd v Chubb Insurance Australia Limited [2020] FCA 1690
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2020/2020fca1690
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2024-09-13T22:47:12.392151+10:00
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Federal Court of Australia
Evolution Precast Systems Pty Ltd v Chubb Insurance Australia Limited [2020] FCA 1690
File number: NSD 706 of 2020
Judgment of: DERRINGTON J
Date of judgment: 24 November 2020
Catchwords: INSURANCE β defence costs β construction of policy β whether insured entitled to payment of defence costs prior to determination that third party claim is covered by policy β whether defence costs clause conditional upon a claim made against insured falling within general insuring clause β whether clause requires that the putative liability of insured is not within exclusions
Legislation: Corporations Act 2001 (Cth)
Cases cited: Allianz Australia Insurance Ltd v Certain Underwriters at Lloyd's of London Subscribing to Policy Number B105809GCOM0430 [2019] NSWCA 271
Australasian Correctional Services Pty Limited v AIG Australia Limited [2018] FCA 2043
Bank of Queensland Ltd v Chartis Australia Insurance Limited [2012] QSC 319
Charter Reinsurance Co Ltd v Fagan [1997] AC 313
CIC v Insurance Ltd v Bankstown Football Club Ltd (1995) 8 ANZ Ins Cas 61-232
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640
Fitzpatrick v Job (2007) 14 ANZ Ins Cas 61-731
Hawkins v Bank of China (1992) 26 NSWLR 562
HDI Global Specialty SE v Wonkana No. 3 Pty Ltd [2020] NSWCA 296
John Connell Holdings Pty Ltd v Mercantile Mutual Holdings Ltd (1999) 10 ANZ Ins Cas 61-454
John Wyeth & Brothers Ltd v Cigna Insurance Company of Europe SA/NV [2001] Lloyd's Rep IR 420
Karenlee Nominees Pty Ltd v ACN 004 312 234 Ltd (1994) 8 ANZ Ins Cas 61-236
Major Engineering Pty Ltd v CGU Insurance Ltd (2011) 35 VR 458
Onley v Catlin Syndicate Ltd (2018) 360 ALR 92
Power v Markel Capital Ltd (2007) 14 ANZ Ins Cas 61-742
Reardon Smith Line v Hansen-Tangen [1976] 3 All ER 570
Rich v CGU Insurance Ltd; Silbermann v CGU Insurance Ltd (2005) 214 ALR 370
Sherlex Pty Ltd v Thornton [2003] QCA 461
Travelers Insurance Company Ltd v Advani [2012] EWHC 623 (QB)
Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance (2018) 359 ALR 314
Wesfarmers Federation Insurance Ltd v Wells [2008] NSWCA 186
White v Overland [2001] FCA 1333
Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522
Birds J, Lynch B, Paul S, MacGillivray on Insurance Law (14th ed, Thomson Reuters, 2018)
Derrington DK and Ashton RS, The Law of Liability Insurance (3rd ed, LexisNexis Butterworths, 2013)
Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
Number of paragraphs: 76
Date of hearing: 12 November 2020
Counsel for the Applicant: Mr D Williams SC with Mr M Newton
Solicitor for the Applicant: Johnson Winter & Slattery
Counsel for the Respondent: Mr M Jones SC with Mr E Ball
Solicitor for the Respondent: Meridian Lawyers
ORDERS
NSD 706 of 2020
BETWEEN: EVOLUTION PRECAST SYSTEMS PTY LTD ABN 17 608 136 518
Applicant
AND: CHUBB INSURANCE AUSTRALIA LIMITED
Respondent
order made by: DERRINGTON J
DATE OF ORDER: 24 november 2020
THE COURT ORDERS THAT:
1. In relation to the following question raised for determination:
Is Chubb presently obliged by Extension clause 4.1 of the Policy to pay Defence Costs:
(i) that have been incurred by the Applicant; and
(ii) as and when they are incurred by the Applicant,
unless and until there is:
β¦
(iv) a judicial determination that Exclusion clause 3.13 applies?
Answer, "No".
2. The applicant is to pay the respondent's costs of the application.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
DERRINGTON J:
Introduction
1 On 30 October 2020, the Chief Justice made orders for the expedition of the hearing of a separate question in issue between the parties in these proceedings concerning the applicant's entitlement to the payment of defence costs pursuant to a policy of insurance issued by the respondent, Chubb Insurance Australia Limited (Chubb). The relative urgency arises because the applicant, Evolution Precast Systems Pty Ltd (Evolution), is presently a cross-respondent in two significant pieces of litigation in the Supreme Court of New South Wales arising out of the damage sustained to the building known as "Opal Tower" in Sydney. It claims advance payment of the defence costs cover from Chubb in relation to those proceedings. For its part, Chubb has declined to make any payment of defence costs in relation to the action and asserts that it is not obliged to do so on the basis that the claims made against Evolution are not within the policy's cover by reason of its professional liability exclusion.
The background facts and questions to be determined
The policy of insurance
2 It is not in dispute that Evolution entered into a Broadform Liability Insurance policy with Chubb (the Policy) on or around 1 February 2018 in respect of its liability for, inter alia, property loss arising in the course of its business in the period from 1 February 2018 to 1 February 2019. The policy limits were $20,000,000 per claim and in total. The insured's business was identified in the policy schedule as being, "Principallly [(sic.)] Pre Cast Panel Manufacturer & Delivery, Installers, Property Owners and any other activity incidental thereto".
3 The general insuring clause provided:
Insuring Agreement
1.1 Chubb shall indemnify the Insured against all sums which the Insured shall become legally liable to pay as Compensation in respect of:
a) Personal Injury
b) Property Damage
c) Advertising Injury
first happening during the Policy Period within the Policy Territory as a result of an Occurrence in connection with the Business.
4 Relevant to that clause are the following definitions:
2.4 Business means:
All activities and operations of the Business stated in the Schedule and that shall include: β¦
2.5 Compensation means
Monies paid or payable by judgment or settlement together with any liability on the Insured's part to pay legal costs and expenses (other than Defence Costs).
2.7 Defence Costs means
All reasonable legal costs and expenses incurred by Chubb or by the Insured with the written agreement of Chubb:
a) in defending or appealing a claim against the Insured; and
b) for legal representation of the Insured at any coronial inquest or other fatal accident inquiry.
2.12 Occurrence means
An event including continuous or repeated exposure to substantially the same general conditions which results in Personal Injury or Property Damage or Advertising Injury neither expected nor intended from the standpoint of the Insured. All events of a series consequent on or attributable to one source or original cause are deemed one Occurrence.
2.19 Property Damage means
a) physical damage to, destruction of or loss of tangible property including the loss of use thereof at any time resulting therefrom;
b) loss of use of tangible property which has not been physically damaged or destroyed, provided such loss of use is caused by physical damage of other tangible property.
5 The exclusions section of the policy included the following:
Exclusions
This Policy does not indemnify the Insured or any third party beneficiary for any liability directly or indirectly caused by, arising out of or in any way connected with:
β¦
3.13 Professional Liability
the rendering of or failure to render professional advice or service by the Insured, but this Exclusion 3.13 only applies to:
a) β¦; or
b) professional advice or service given for a fee.
6 The Policy also provided a number of extensions which included the following:
Extensions
Each of the following Extensions automatically applies unless otherwise stated in the endorsements. Each Extension is, unless otherwise stated, subject to the Insuring Agreement and all other terms, exclusions and limitations of this Policy, including any applicable limit of liability.
4.1 Defence Costs
In respect of any liability for Compensation indemnifiable under this Policy, Chubb will pay Defence Costs, subject to the following:
a) Chubb is not obliged to pay any Defence Costs or to defend any suit after the Limits of Liability has been exhausted;
b) If a payment exceeding the Limits of Liability has to be made to dispose of a claim, the liability of Chubb for Defence Costs is limited to the proportion that Chubb's liability to indemnify the Insured for Compensation under this Policy bears to that payment; and
c) In the event of a claim being made against the Insured in any Court or before any other legally constituted body in the United States of America, Canada or their respective protectorates and territories, the total amount payable by Chubb in respect of any one Occurrence including Defence Costs will not exceed the Limit of Liability.
7 Clause 5.3 concerned the manner in which Chubb might exercise its right to defend claims against Evolution:
5.3 Right to defend, assistance and co-operation of the Insured
a) In respect of any Occurrence covered under this Policy, Chubb has the right, if it so elects, to defend any suit against the Insured seeking Compensation or reimbursement of expenses for an Occurrence and to bring any cross claim in the name of the Insured even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient; but Chubb is not obligated to pay any claim or judgment or to defend any suit after Chubb's liability under this Policy in respect of the claim has been exhausted.
b) If the cost of any Occurrence and Defence Costs are not likely to exceed the Deductible, Chubb may elect not to defend the suit. In these circumstances and, subject to the provisions of this Policy, the Insured is responsible for the handling and payment of the claim and its Defence Costs up to the amount of the Deductible.
c) The Insured must co-operate with Chubb and comply with the terms and conditions of this Policy, and assist as necessary in enforcing any right to contribution or indemnity from any person, corporation or organisation.
The Opal Development and the making of claims
8 On around 29 October 2015, the building company, Australia Avenue Developments Pty Ltd (AA Developments) entered into a contract with Icon Co (NSW) Pty Ltd (Icon) pursuant to which Icon agreed to design and construct a high rise, mixed residential and commercial development known as Opal Tower Development at Sydney Olympic Park (the Opal Tower Development).
9 On 31 August 2016, Icon and Evolution entered into a subcontract pursuant to which Evolution agreed to provide pre-cast concrete works, including design, manufacture and installation services for pre-cast wall panels in relation to the Opal Tower Development. That agreement is referred to in these reasons as the "Evolution Subcontract". Evolution performed its obligations under that agreement in the period between September 2016 and November 2017.
10 It is a matter of public knowledge that in around late 2018 some not insignificant cracking commenced or was first observed in the structure of the Opal Tower Development, which resulted in the evacuation of its residents.
11 On 27 February 2019, AA Developments and its parent company, Ecove Pty Ltd, commenced an action in the Supreme Court of New South Wales against Icon and others for loss and damage arising from the cracking. This is referred to as the "Developer Proceedings". One of the defendants in the action was WSP Structures Pty Ltd (WSP), which had been the structural and civil consulting engineers engaged by Icon in relation to the project.
12 Subsequently, on 26 July 2019, Terry Walter Williamson and Helen Therese Williamson commenced a separate proceeding, also in the Supreme Court of New South Wales, against the Sydney Olympic Park Authority. That action was brought on their own behalf and as a representative proceedings under Part 10 of the Civil Procedure Act 2005 (NSW) on behalf of other persons who owned one or more units in the Opal Tower Development as at 24 December 2018. Those proceedings are referred to as the "Representative Proceedings". WSP is also a defendant in those proceedings.
13 On 9 August 2019, WSP filed a cross-claim against Evolution in the Developer Proceedings seeking, inter alia, indemnity, contribution or damages for any liability which it might have to Icon in that action. It also filed a cross-claim against Evolution in the Representative Proceedings on 20 December 2019, seeking similar relief.
14 Likewise, Icon filed a cross-claim against Evolution in the Representative Proceedings on 20 March 2020, seeking indemnity or damages for loss which it claimed to have suffered in connection to the damage to the Opal Tower Development, including any liability which it might have to the plaintiffs in that action. On 9 April 2020, it made a similar cross-claim against Evolution in the Developer Proceedings.
15 Evolution made a claim on Chubb under the Policy for payment of its reasonable defence costs as they are incurred in defending the cross-claim in each action.
16 Chubb has accepted that the cross-claims against Evolution as they are formulated fall within the broad ambit of clause 1.1 of the Policy, being the Insuring Agreement, but asserts that each is excluded by the professional liability exclusion in clause 3.13. It therefore denies that the policy responds to the claim and, consequently, that it is obliged to pay Evolution's defence costs, either until the veracity of its declinature is determined or at all.
The agreed question
17 The question which has been agreed upon between the parties is as follows:
In circumstances where:
1. The Applicant is an Insured under the Policy;
2. On 9 August 2019, the Applicant was joined to the Developer Proceedings by cross-claim brought by WSP;
3. The Applicant notified Chubb of that cross-claim by WSP;
4. In August 2019, Chubb appointed solicitors, Gilchrist Connell, to act for the Applicant in the Developer Proceedings on a reservation of rights basis while it investigated whether WSP's cross-claim fell within the scope of the Policy;
5. By letter dated 21 November 2019 (Crittenden 10/9/20, p 366), Chubb communicated to the Applicant that:
a. it accepted that WSP's cross-claim in the Developer Proceedings fell within the Insuring Clause of the Policy; and
b. its position was that WSP's cross-claim in the Developer Proceedings was excluded from cover under the Professional Liability Exclusion (clause 3.13) of the Policy and on that basis it was unable to indemnify the Applicant in respect of that claim (but, also, that Chubb's declinature should not be seen as limiting its entitlement to decline indemnity on the basis of other provisions of the Policy including other Policy exclusions);
6. Following that letter, Chubb ceased providing instructions to Gilchrist Connell and did not accept responsibility for their costs;
7. By letter dated 3 December 2019 (Crittenden 10/9/20, p 378), Chubb communicated to the Applicant that:
a. it had reviewed its declinature of indemnity; and
b. its position remained that WSP's cross-claim in the Developer Proceedings was excluded from cover under the Professional Liability Exclusion (clause 3.13) of the Policy, and for that reason it was unable to indemnify the Applicant in respect of that claim (but, also, that Chubb's declinature should not be seen as limiting its entitlement to decline indemnity on the basis of other provisions of the Policy including other Policy exclusions);
8. On 20 December 2019, WSP filed a cross-claim against Evolution in the Representative Proceedings;
9. The Applicant notified Chubb of the filing of that cross-claim by WSP;
10. By letter dated 22 January 2020 (Crittenden 10/9/20, p 387), Chubb communicated to the Applicant that its Internal Dispute Resolution Service had reviewed, and agreed with, Chubb's determination that the Professional Liability Exclusion applied to WSP's crossclaim in the Developer Proceedings, for the reasons set out in its letters dated 21 November 2019 and 3 December 2019 and, accordingly, that the Applicant was not entitled to be indemnified under the Policy in respect of WSP's cross-claim in the Developer Proceedings;
11. By letter from its solicitors dated 28 February 2020 (Crittenden 10/9/20, p 391), the Applicant:
a. stated that it assumed Chubb's stated position applied to WSP's cross-claim in the Representative Proceedings;
b. requested that Chubb review its decision on indemnity under the Policy; and
c. requested confirmation of cover, including for its defence costs for WSP's crossclaims;
12. On 20 March 2020, Icon filed a cross-claim against Evolution in the Representative Proceedings;
13. On 9 April 2020, Icon filed a cross-claim against Evolution in the Developer Proceeding;
14. The Applicant notified Chubb of the cross-claims filed by Icon;
15. By letter from its solicitors dated 22 May 2020 (Crittenden 10/9/20, p 406), Chubb stated that it:
a. remained firmly of the view that the Professional Liability Exclusion in clause 3.13 of the Policy applied to exclude the claims against the Applicant; and
b. maintained its declinature of indemnity under the Policy;
16. On 29 June 2020, the Applicant commenced this proceeding against Chubb in reliance upon Extension clause 4.1 of the Policy and seeking declaratory relief and damages relating to its costs and expenses of defending the Claims;
17. It remains the case that Chubb does not dispute, that if the Applicant is found to be liable under the Claims to pay Compensation (as defined in the Policy), the liability will be of a character that satisfies the requirements of Insuring Clause (clause 1.1) of the Policy,
then, upon the proper construction of the Policy and by reason of s 54(1) of the Insurance Contracts Act 1984 (Cth):
Is Chubb presently obliged by Extension clause 4.1 of the Policy to pay Defence Costs:
(i) that have been incurred by the Applicant; and
(ii) as and when they are incurred by the Applicant,
unless and until there is:
(iii) both:
(A) a liability for the Claims ascertained by judgment, award or settlement; and
(B) a judicial determination that the liability so established is excluded from cover under the Policy by operation of Exclusion clause 3.13;
or,
(iv) a judicial determination that Exclusion clause 3.13 applies?
Definitions
Policy means the Broadform Liability Insurance Policy numbered 02CL018969 issued by Chubb for the period 1 February 2018 to 1 February 2019, both days at 4.00pm Melbourne standard time.
Chubb means the Respondent to this proceeding.
Claims means the cross-claims brought against the Applicant by WSP and Icon in the Developer Proceedings and the Representative Proceedings.
Defence Costs means reasonable legal costs and expenses the Applicant has incurred and will incur in defending the Claims.
Developer Proceedings means the case numbered 2019/64406 in the Supreme Court of New South Wales.
Icon means Icon Co (NSW) Pty Ltd.
Representative Proceedings means the case numbered 2019/232749 in the Supreme Court of New South Wales.
WSP means WSP Structures Pty Ltd.
18 In the course of the hearing of the application, Mr Williams SC for Evolution acknowledged that it was not necessary for the Court to deal with the alternative issue specified in subparagraph (iii) of the separate question. That included subparagraph (A) relating to whether Chubb was obliged to pay defence costs until Evolution's liability on the cross-claims was established by judgment award or settlement. It was submitted that it was sufficient for the Court to answer the question based on subparagraph (iv) alone. As a result, the question before the Court is confined to determining whether Chubb is presently obliged to pay Evolution's defence costs unless and until there is a judicial determination that exclusion clause 3.13 applies.
Consideration
19 The essential dispute between the parties is of a not uncommon nature. The Chubb Policy contains a promise by Chubb to pay defence costs, although there is no express undertaking to pay them "in advance" or "up front" and it presently denies any obligation to do so. Nevertheless, the two actions in the Supreme Court of New South Wales are continuing and Evolution seeks a reliable source of funds for the costs of its legal representation in defending the cross claims. It says that it is entitled to receive payment of such costs from Chubb until there has been a judicial determination as to Chubb's obligations under the policy.
20 As at this time, it is of course uncertain whether Evolution will be liable to one or more of the third parties or, if it is, whether its liability will be covered by the Chubb Policy. In these circumstances, the essence of the issues between the parties is when, if at all, Chubb is obliged to pay the costs and expenses incurred by Evolution in defending the claims against it.
The general scope of the contending submissions
21 The operative words of the defence costs clause are, "In respect of any liability for Compensation indemnifiable under this Policy, Chubb will pay Defence Costs", and of that it is the first eleven words upon which most attention was focused. From that clause, as informed by the definitions of the defined terms used in it, and by reference to the word "indemnifiable", the parties contend that the occasion for and timing of the performance by Chubb of its obligation to pay defence costs can be identified. They, of course, disagree as to what that occasion is.
22 There is no need in this case to consider whether the defence costs clause is tightly confined to those circumstances where the insured is actually liable to the third party claimant (as was advanced by the insurers in Fitzpatrick v Job (2007) 14 ANZ Ins Cas 61-731 (Fitzpatrick v Job); Sherlex Pty Ltd v Thornton [2003] QCA 461 and Wesfarmers Federation Insurance Ltd v Wells [2008] NSWCA 186; see also the discussion in the successive editions of MacGillivray on Insurance Law, in particular see Birds J, Lynch B, Paul S, MacGillivray on Insurance Law (14th ed, Thomson Reuters, 2018) p 1026, 30-051). Chubb acknowledges that, prima facie, the clause may operate when a claim is brought against Evolution which, either by reason of the manner of its formulation or by its substance, comes within the general insuring clause. However, it submits that the insuring clause is qualified by the professional liability exclusion and is triggered only if Evolution's putative liability to a third party is not within its scope. It further submits that it has no additional obligation to meet Evolution's legal costs and expenses of the current proceedings pending any adjudication of whether that exclusion operates to deny indemnity in respect of the claims made in the Developer Proceedings or the Representative Proceedings.
23 Evolution's submissions differ by reference to the temporal operation of the defence costs clause. It submits that the clause commences to have effect when a claim is made against it which, if it were successful, would be within the scope of the insuring clause. So the argument goes, this is sufficient to trigger Chubb's obligation to pay defence costs which continues unless and until it is established by curial determination that the exclusion relied upon by Chubb applied in the particular circumstances. In particular, Evolution sought to draw parallels between the present matter and the decision of the High Court in Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522 (Wilkie v Gordian Runoff Ltd), where the policy's provisions deferred the operation of an exclusion clause until the facts underpinning it were admitted or determined by adjudication. The relevance of this decision is discussed in detail below.
Some brief principles on the construction of insurance policies
24 There was no dispute between the parties as to the principles relevant to the construction of insurance policies. They were concisely stated by the Full Court in Onley v Catlin Syndicate Ltd (2018) 360 ALR 92 at 100 β 101 [33]:
The Applicants' arguments before this Court concern the interpretation of the Advancement Extension in the context of the policy and, to some degree, the existence of an implication preventing the insurer from exercising its entitlements under s 28. Such arguments call for the application of the well-established principles concerning the construction of policies of insurance as commercial contracts. Those principles were not in dispute between the parties. Necessarily, a policy of insurance is assumed to be an agreement which the parties intend to produce a commercial result: Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640; 306 ALR 25; [2014] HCA 7 at [35]: as such, it ought to be given a businesslike interpretation being the construction which a reasonable business person would give to it: Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 343 ALR 58; [2017] HCA 12 (Ecosse Property Holdings) at [17]; Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; 339 ALR 200; [2016] HCA 47 at [78]; Todd v Alterra at Lloyd's Ltd (on behalf of underwriting members of Syndicate 1400) (2016) 239 FCR 12; 330 ALR 454; 112 ACSR 1; [2016] FCAFC 15 at [42]; Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance [2018] NSWCA 100 at [52]. The contract is naturally enough interpreted, in a temporal sense, as at the date on which it was entered into: Ecosse Property Holdings at [16] per Kiefel, Bell and Gordon JJ; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; 325 ALR 188; [2015] HCA 37 (Mount Bruce Mining) at [47]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; 211 ALR 342; [2004] HCA 52 at [40]. The Courts frequently have regard to the contextual framework in which a contract is formed, to the extent to which it is known by both parties, to assist in identifying its purpose and commercial objective: McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; 176 ALR 711; [2000] HCA 65 per Gleeson CJ at [22]; Mount Bruce Mining at [47]; Franklins Pty Ltd v Metcash Ltd (2009) 76 NSWLR 603; 264 ALR 15; [2009] NSWCA 407 per Allsop P at [19]. It goes without saying that a construction that avoids capricious, unreasonable, inconvenient or unjust consequences, is to be preferred where the words of the agreement permit.
25 It is appropriate to add that ascertaining the commercial purpose of the agreement and obtaining an appreciation of its purpose or objects is facilitated by an understanding of "the genesis of the transaction, the background, the context [and] the market in which the parties are operating": Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, 656 β 657 [35], citing Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 350, citing Reardon Smith Line v Hansen-Tangen [1976] 3 All ER 570, 574. Indeed, this principle may apply with substantially more force in relation to insurance policies than in other areas of commerce.
Are the claims against Evolution in respect of any liability for Compensation indemnifiable under the Policy?
The claims are within the scope of the general insuring clause
26 The parties were agreed that a primary requirement for the operation of the defence costs clause was the existence of a claim against the insured which came within the general insuring clause in clause 1.1. This is necessarily required by the circumstances on which the defence costs extension is conditioned, namely, "in respect of any liability for Compensation indemnifiable under this Policy", and although the parties differed as to the full meaning of "indemnifiable", there was consensus that, at least, it required the existence of a claim against the insured which, if it were successful, would fall within the general insuring promise. The parties also appeared to be in agreement that, although relevant, the manner in which the claim against the insured was formulated was not determinative, and it was sufficient if the substance of the claim was within the scope of the insuring clause. In Major Engineering Pty Ltd v CGU Insurance Ltd (2011) 35 VR 458 (Major Engineering v CGU), Bongiorno JA referred to the liability asserted by the third party claimant against the insured as a "notional liability". Mr Jones SC adopted the use of that expression in the course of submissions and it is similarly adopted for the purposes these reasons.
27 On the facts advanced for the purposes of the separate question it was agreed that Evolution's notional liability in relation to the Developer's Proceedings and the Representative Proceedings were within the scope of the liability covered by the Insuring Agreement in clause 1.1. See items 5a and 17 of the circumstances supporting the agreed questions.
Does "indemnifiable" require consideration of the operation of exclusion clauses?
28 To a degree, Evolution accepts that the concept of a liability which is "indemnifiable" requires a consideration of the operative effect of the policy's exclusion clauses: see in particular paragraph 26 of its written submissions. The essential point of departure was its submission that until there has been a curial determination of whether an identified exclusion clause excluded cover under the policy, the defence costs clause obliges Chubb to meet its legal costs. Although in this respect it asserts that clause 4.1 used the expression "indemnifiable" (meaning capable of being indemnified) as opposed to "indemnified" (meaning actually within the indemnity), it appears that it sought most support for its submission from Chubb's obligation to "pay" defence costs and from the terms of the definition of "Defence Costs", as opposed to the terms of clause 4.1.
29 Mr Jones SC, on behalf of Chubb, submitted that the word "indemnifiable" referred to a liability that is both within the general insuring clause, in the sense that the insured has a notional liability to the third party, and is not excluded by the operation of an exclusion clause: see a similar use of the word by Meagher JA in Allianz Australia Insurance Ltd v Certain Underwriters at Lloyd's of London Subscribing to Policy Number B105809GCOM0430 [2019] NSWCA 271 [74]. There is force in this submission. In general terms, the ascertainment of the scope of liability cover provided by the policy requires a consideration of both the insuring clause and the exclusions. It is a basic rule of construction that the policy must be read as a whole. That is made clear in this case by the introductory words of the Policy Wording to the effect that the agreement is subject to the terms, conditions and limitations of the policy. It is also made clear by the introductory words to the exclusions section which state that the "Policy does not indemnify the Insured⦠for any liability directly or indirectly caused by, arising out of or in any way connected with" the matters enumerated therein. On its face it would seem to be unusual to construe the word "indemnifiable" inconsistently with these indicators such that the insured's relevant notional liability was only required to be within the scope of the general insuring clause.
30 In response, Mr Williams SC for Evolution submitted the exclusion clauses do not "directly" impact upon the operation of the defence costs clause because they are only referable to Chubb's obligation to provide an indemnity. So, the submission went, clause 4.1, by its terms, requires Chubb "to pay" defence costs and there is no suggestion of an indemnity being granted in relation to those expenses. On that basis, an exclusion clause limiting Chubb's obligation to indemnify leaves the obligation in clause 4.1 undisturbed. Whilst it can be accepted that the policy's exclusions do not directly impact upon Chubb's obligation to make payments which are not in the nature of an indemnity, the exclusions do have an indirect effect on the operation of the obligation in clause 4.1. That arises by use of the expression "indemnifiable" which necessarily directs attention to the scope of the indemnity provided by the policy. Where, as here, that includes both the Insuring Agreement and the exclusions, if a relevant exclusion applies in the circumstances it will necessarily prevent the clause from operating.
31 On the ordinary meaning of the wording of the Chubb Policy, the construction ascribed by Chubb to the word "indemnifiable" as it is used in clause 4.1 should be accepted. Importantly, "indemnifiable" is used as the touchstone for Chubb's obligation to pay defence costs such that, on its construction, it is only obliged to pay them in relation to claims which, if successful, will come within the Insuring Agreement and are not the subject of an exclusion. In those circumstances the notional liability is capable of indemnification under the policy and will be indemnified if the Third Party's claim succeeds. This results in a sensible commercial construction, that the provision of defence costs will be confined to those claims against the insured which would be indemnified, if the third party established their cause of action. Whilst uncertainty remains as to whether there will be a liability to be indemnified under the policy, the defence costs are applied to support the mutually beneficial outcome of defeating the third party's claim, but only if the insurer would be liable to provide indemnity. Absent that liability, there would be no benefit to the insurer, and if the insured sought to have the indemnity for costs without cover for third party liability, an unusual situation, or wished to have it advanced despite the insurer's challenge to the cover, that benefit could have been purchased specifically.
32 The construction advanced by Evolution involves some difficulties. For instance, it would be an unusual interpretation that results in the insured's notional liability being regarded as "indemnifiable" or capable of being indemnified when it has engaged an exclusion. Ex hypothesi, it is never capable of being indemnified. It also has the further difficulty that it would result in the notional liability's being "indemnifiable" when the parties are in dispute about an operative exclusion clause though not indemnifiable if the insured rightly accepted the insurer's assertion that it applied. It is unlikely that the parties intended that the operation of the defence costs clause was dependent upon the insured's attitude, advanced in good faith or otherwise, to the insurer's rightful invocation of an exclusion clause. That would be commercially unrealistic but it is the necessary consequence of Evolution's submissions.
33 Evolution's construction requires the word, "indemnifiable", to do a lot of work. Whereas, in the initial stage (being prior to the resolution of the rights between the insured and insurer) it would refer to a claim for which there is notional liability to the third party, once it is determined that an exclusion applies, it means that the notional liability must not be within an exclusion. To put it another way, its construction ascribes to it a description of a liability which is within the general insuring clause unless and until there is a judicial determination or an agreement between the parties that an exclusion applies.
34 The construction advanced by Chubb avoids these difficulties. On its construction, its obligation arises when the insured has a notional liability within the insuring promise and no exclusion clause operates to change that. Whilst, in some cases, there may be some uncertainty as to whether the insurer's assertion of an operative exclusion clause is correct, on Chubb's interpretation it will not be obliged to pay the costs of litigation which will only inure for the benefit of the insured because it is in respect of a claim not covered by the policy.
35 As Mr Jones SC quite correctly submitted, the operation of a defence costs clause in the above manner is far from unusual. In Major Engineering v CGU, the relevant clause provided "In the case of β¦ a claim of Public Liability or Products Liability being made against You β¦ for which indemnity is, or would be, available under this Policy, We will pay Your Legal Costs". As it was, the insured had successfully defended a third party claim which had been brought against it, although the costs which it incurred had been considerable and it sought recovery of the amount from the insurer. The dispute involved, in part, whether the claim which had been brought against the insured was within the scope of the policy as being one "for which indemnity β¦ would be available". Bongiorno JA (at 466 [27]) (with whom Hansen JA and Kyrou AJA agreed) held that, in order for the defence costs extension to apply, the insured had to establish that the third party's claim, being either as formulated or by its true nature, was one which, if successful, would engage the indemnity. That was an issue different from the issue here, but his Honour added (at 470 [42]) that in order for a liability to be one for which indemnity was available under the policy, it had to be one for which indemnity was not excluded. On the facts before the Court, the insurer had not discharged its onus of establishing that any of the relevant exclusions on which it had relied were applicable, such that the claim was one in respect of which the defence costs extension applied.
36 The import of this is that the basis on which the defence costs clause was held to operate was consistent with that which Chubb submits should operate in the present case. That is, it is engaged only where the insured's notional liability is not excluded from cover by any exclusion clause. That is not to conflate the wording from the two policies, albeit that they have similarities, but simply to observe that Chubb's interpretation does not result in an uncommercial operation.
37 Chubb also relied upon the decision in Fitzpatrick v Job. In that case the relevant legal costs extension provided, "In addition we will also pay legal costs, charges and expenses incurred as a result of your entitlement to indemnity under this Optional Benefit and incurred with our written consent." Pullin JA held (at [178]) that the clause imposed an obligation on the insurer to pay defence costs if the claims made against the insured were of a kind which, if established, would entitle it to indemnity under the policy. Similarly, in Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance (2018) 359 ALR 314, Meagher JA (at 316 [6]) construed the defence costs extension which applied "in relation to a claim covered under this Policy" as requiring that the third party's claim against the insured was both within the insuring clause and not within an exclusion clause. Again, whilst acknowledging the different policy wordings, there is a consistency in the operation of the clause with that under consideration in this matter.
38 In this context, Mr Williams SC for Evolution relied upon the decision in Karenlee Nominees Pty Ltd v ACN 004 312 234 Ltd (1994) 8 ANZ Ins Cas 61-236 (Karenlee Nominees). There, the insurer asserted that the defence costs extension responded only where there existed an actual liability of the insured to a third party to which the policy responded. A claim had been made against the insured for property damage but had ultimately failed. Hedigan J held that the third party's claim fell within the general insuring clause providing cover for legal liability for compensation in respect of property damage, and that the policy exclusions which applied to the indemnity for liability to pay compensation were irrelevant to the insurer's obligation to pay defence costs with the result that the defence costs extension applied. Mr Williams SC's submission that the clause in the present matter operated in a similar manner should be rejected. In Karenlee Nominees, the defence costs extension was in somewhat expansive terms and provided that "GRE will pay all law costs, charges and expenses incurred β¦by β¦ the insured β¦ in settlement or defence of claims for compensation". It is apparent that the operation of that extension was conditioned upon the making of a claim for compensation and not, as in the present case, upon the existence of an asserted liability which, if established, will entitle the insured to indemnity under the policy. The decision cited does not assist in the resolution of the issues before this Court.
39 Mr Williams SC submitted that the use of the word, "indemnifiable" as distinct from "indemnified" was significant and supported Evolution's construction. The simple response lies in the recognition that it was used in respect of the promise to indemnify for putative costs in respect of putative liability which may only possibly be incurred. In that case, it was logically appropriate to speak in the hypothetical, "indemnifiable". Further, the expression must be read as a whole, being "indemnifiable under this Policy". Relevantly, the word "indemnifiable" is not limited by reference to "indemnifiable under the general insurance promise."
The insurer's onus to prove the operation of an exclusion clause
40 Also in the context of this issue, Mr Williams SC submitted that Evolution's preferred construction of "indemnifiable" was congruent with the insurer's well known onus of proof or risk of non-persuasion with respect to an exclusion clause: Major Engineering v CGU, 470 [47] per Bongiorno JA. In effect, the submission was that, given that onus, the insurer ought not to be entitled to rely upon an exclusion until it has established an entitlement to do so by a judicial determination. In other words, the insurer is required to perform its obligations under the policy if a claim was made which fell within the insuring clause, and continue to do so until it obtains a determination that the exclusion clause operated. Albeit an argument with some superficial attraction, if not only for its ingenuity, it cannot be accepted. The onus borne by an insurer is concerned with its evidential and persuasive onus in adjudicative proceedings between it and the insured in relation to their respective rights. It does not exist to create some free-standing obligation on an insurer who wishes to rely upon an exclusion to seek a determination of its rights and, in the mean-time, to perform the policy despite having no legal obligation to do so. It is entitled to stand on its rights, as it sees them, and to bear the appropriate onus should the insured seek to enforce its rights, as it sees them. Nor in that respect does the onus affect the construction of the relevant provision, the contractual terms on which the obligation to pay defence costs rests, nor the meaning of the expressions used. The issues do not intersect.
Is the defence costs extension the same as a duty to defend?
41 Evolution also sought to equate the operation of the defence costs clause to that of clauses which impose a duty to defend on the insurer. In particular, it relied on the observations of Allsop CJ in Australasian Correctional Services Pty Limited v AIG Australia Limited [2018] FCA 2043 [37] (Australasian Correctional Services v AIG). There, the Chief Justice considered the scope of the insurer's obligations pursuant to a clause imposing a duty to defend and, in doing so, said (at [37]):
It is a not unusual feature of liability litigation that claims against the insured in a suit may contain claims that are covered and claims that are not covered by relevant liability policy. One response to the difficulties that can arise from such circumstances can be to place the contractual responsibility on the insurer to defend the suit and pay all expenses of that defence of the whole suit. That is what occurred here. In such a clause, the duty to defend is broader, and differently expressed, to the obligation to indemnify. The duty to defend arises and attaches until there is no basis for considering that the cover responds to any claim. The duty to defend is the provision of a service, not the granting of indemnification of third party liability. For that reason it is not necessarily logically connected with, or limited by, the structure of the indemnity for liability. It is controlled by the words of the contractual responsibility to defend. The responsibility is to defend a suit; that some allegations forming part of the suit may not be covered by the policy must often be a real possibility. There is no apparent reason to lessen or qualify the unambiguous operation of the obligation to defend the suit and pay all expenses in so doing, unless the words of the policy require it.
(Emphasis added).
42 The relevant clause in that case required the insurer to "Defend in their name and on their behalf any suit against the Insured alleging such Personal Injury or Property Damage and seeking damages on account thereof, even if such suit is groundless, false or fraudulent". The point in issue and the description of the trigger to defend was different in terms and purpose from the issue here. It is apparent that the trigger of the insurer's obligation to defend was the bringing of a suit and not the assertion of a liability which, if successful, would be indemnifiable under the policy. This is entirely consistent with the Chief Justice's observations in the quoted passage and, especially, those emphasised. The particular clause in that case (and duty to defend clauses generally) is of a nature substantially different from that presently under consideration. The duty to defend is, as his Honour observed, the provision of a service which commences with the bringing of a requisite claim against the insured and, usually, continues until the insurer is able to "confine" the claim outside the coverage: citing John Wyeth & Brothers Ltd v Cigna Insurance Company of Europe SA/NV [2001] Lloyd's Rep IR 420, 451 [32]. In essence, the insurer's obligation is the provision of first party litigation insurance for specified claims such that, even if the claim fails and is, therefore, not within the scope of that cover, the insurer's obligation remains. But if the claim is outside the litigation cover because it is limited to indemnifiable compensation under a third party claim, and it is not indemnifiable because it is excluded from the cover, the insurer's obligation does not arise. The observations of the Chief Justice were addressed to a situation where the obligation had been triggered because some claims were within the cover. If there were none, the obligation would not be triggered at all. That is manifest, and there is no reason why the absence of cover should not be attributable to an exclusion as well as to the insuring promise. Classically, exclusions shape the cover by modifying the broad insuring promise, and the two are not to be artificially dissociated. The necessary consequence of that is that reimbursement of the costs expended is not usually available for the insurer if it transpires that the claim made is outside of the cover.
Temporal indicators as to the payment of defence costs?
43 It was submitted on behalf of Evolution that when the terms of the definition of "Defence Costs" were read into and with clause 4.1, the clause, taken as a whole, necessarily implied that Chubb was obliged to pay Evolution's expenses of defending any claim as the action progressed and that obligation remained until a curial determination that an exclusion applied in respect of the third party's claim. This submission conflates two issues. The first is the timing of the performance of Chubb's obligation to pay defence costs. The second is whether the policy imposes any superadded duty on Chubb to make payments which it disputes, even with full justification, until its denial of the obligation to pay is adjudicated.
44 In relation to the first issue it can be accepted that the definitional terms of "Defence Costs" do indicate that, if and when clause 4.1 applies, Chubb's obligation is to pay Evolution's legal costs and expenses as they are incurred in the course of the litigation. That is the position irrespective of the presence of the words, but that temporal issue depends on the insurer's liability to indemnify at all. When it should pay is a different and later issue from whether it should pay at all. So this issue is inconsequential if the compensation for the claim is not indemnifiable under the Policy. However, as the matter has been fully argued, and perhaps to assist with later proceedings, it is desirable to discuss the arguments.
The phrase, "incurred by"
45 Firstly, Evolution relied upon the use of the word "incurred" in the definition of "Defence Costs" which referred to "all reasonable legal costs and expenses incurred by ⦠the Insured". It submitted that its use was an indication that Chubb's obligation was to pay defence costs "as and when" they are incurred. Reference was made to the decision in Wesfarmers Federation Insurance v Wells, where the legal costs clause obliged the insurer to pay the "reasonable legal costs incurred⦠in defending or settling the claim". Basten JA (at [92]) considered that, in the circumstances of the policy under consideration, the use of the word "incurred" carried with it the obligation to pay the costs as they were incurred. However, this analysis was in support of the conclusion that the insurer's obligation arose in respect of a third party claim which, if successful, would be within the scope of the policy rather than only in relation to an actual liability of the insured which was covered by the policy. There, the insured had defeated the third party's claim and the insurer denied that it was obliged to pay legal costs on the basis that there was no liability to be indemnified under the policy. Basten JA's observations were made in the context of ascertaining whether the defence costs clause was conditioned upon actual liability or liability for a claim which would, if successful, be covered by the policy. His Honour determined that it was the latter. This was a different issue which did not touch the question as to the time for payment if the obligation had not been triggered, and there is nothing in his Honour's reasons which suggests that if the condition did not exist, such as because the relevant claim was within an exclusion, the insurer would nevertheless have been obliged to pay defence costs.
46 Evolution relied on the observations of Fryberg J, in dissent, in John Connell Holdings Pty Ltd v Mercantile Mutual Holdings Ltd (1999) 10 ANZ Ins Cas 61-454, to the effect that the concept of incurring a cost or expense covers the incurring of a liability to pay a cost or expense and does not require the actual payment of the liability. It sought to support this by reliance upon the observations of Gleeson CJ in Hawkins v Bank of China (1992) 26 NSWLR 562, 572 that:
Similarly, the word "incurs" takes its meaning from its context and is apt to describe, in an appropriate case, the undertaking of an engagement to pay a sum of money at a future time, even if the engagement is conditional and the amount involved uncertain. Once it is accepted that "debt" may include a contingent debt then there is no obstacle to the conclusion that, in the present context, a debt may be taken to have been incurred when a company entered a contract by which it subjected itself to a conditional but unavoidable obligation to pay a sum of money at a future time. This is such a case.
It further referenced the observations of Kirby P in the same case at 576:
The expression "incurs a debt" in s 556(1) is, in isolation, entirely apt to describe an act on the part of a corporation whereby it renders itself liable to pay a sum of money in the future as a debt.
47 However, these observations do not address the present point as to whether costs should be paid if the obligation to do so is not triggered. The concept of incurring a debt under s 556(1) of the Corporations Act 2001 (Cth), does not greatly assist in the construction of the present matter. To incur a debt is to cause circumstances to happen where a liability arises.
48 Further reliance was placed on the observations of Kirby P in CIC v Insurance Ltd v Bankstown Football Club Ltd (1995) 8 ANZ Ins Cas 61-232 (a decision reversed on appeal), in which it was said in relation to an insurer's obligation to indemnify in respect of the costs of reinstatement of property damage for costs which have actually been "incurred", that the insurer's obligation arose once liability to pay money for reinstatement work was incurred. That would include agreeing to pay money for the repairs. This suffers from the same want of identity to the present issue.
49 It follows that there should be acceptance of Evolution's submission that the use of the word "incurred" has a temporal indication that, when Chubb's obligation is triggered, Chubb is required to pay its legal costs and expenses as and when its obligation in relation to them arises.
The obligation to "pay" the defence costs incurred
50 Evolution also submitted that the use of the word "pay" in clause 4.1, when read together with the words of the definition of defence costs, requires Chubb to meet the expenses of defending a claim immediately upon the insured becoming liable to pay them. For this it also relied upon the observations of Basten JA in Wesfarmers Federation Insurance v Wells and particularly at [92] and [96] where his Honour observed that the obligation to "pay" legal costs, rather than to indemnify the insured after they were met, indicated that the clause was to operate immediately rather than any obligation being suspended until the proceedings had been resolved such that it could be known whether the insured was, in fact, liable to the third party. Again, this went to the question of whether the obligation to pay legal costs was conditioned upon a relevant claim being made or upon the existence of actual liability to the third party.
The phrase, "in defending or appealing claim"
51 It can be added that in Wesfarmers Federation Insurance v Wells, Basten JA also emphasised (at [96]) that the clause in question obliged the insurer to pay the costs incurred "in defending or settling" the claim and that the use of the participle in each instance suggested a contemporaneous liability to pay as costs are incurred. Here, the definition of "Defence Costs" also refers to "in defending or appealing" a claim and, similarly, the use of the present as opposed to the past participle tends to suggest that the costs and expenses to be paid are those incurred in defending an indemnifiable claim as they are being undertaken rather than after the event. Nevertheless, it is predicated upon a claim that is indemnifiable under the policy.
References to "claims" or "suits"
52 Reference was also made to clause 5.3, relating to Chubb's right to elect to defend any suit against Evolution. It was submitted that if Chubb takes over the conduct of the defence, its obligation to pay defence costs will arise in the defence of the suit or claim as they are incurred by it. In reliance on this it is said that the identification in the definition of "Defence Costs" of the temporal requirement for the payment of costs and expenses incurred applied equally regardless of whether it was Chubb or the insured engaged in the defence of the third party's claim. This was said to provide further support for the conclusion that Chubb's obligation was to pay the costs of defending a claim prior to the resolution of any uncertainty as to the operation of an exclusion.
Conclusion as to the temporal indicators in the words used in the definition.
53 Ultimately, there was no real dispute as to the temporal operation of clause 4.1 once the obligation to pay defence costs has been enlivened. The use of the word "pay" in clause 4.1 and the terms of the definition of "Defence Costs", such that Chubb is to "pay" costs and expenses which are "incurred" by the insured "in defending" a "claim", all indicate that when the obligation arises, Chubb must pay those costs and expenses as the insured incurs liability for them, even before payment. There is nothing which suggests that, if the claim is within the policy's cover, Chubb is entitled to await the outcome of the proceedings to ascertain whether the insured has any liability to the third party. Chubb did not suggest to the contrary.
54 Despite these conclusions, there is nothing in the temporal operation of clause 4.1 to suggest that Chubb is obliged to pay defence costs when, in fact, it has no obligation to do so. The matters relied upon by Evolution to identify the timing of the performance of the obligation to provide defence costs do not create any additional obligation on it to pay defence costs in respect of claims which will not be covered by the policy. That is so even if the asserted obligation is limited to the time prior to which Chubb's actual liability is determined.
55 If it were obliged to pay defence costs by reason of the existence of a covered claim, it is contractually required to do so even where, in good faith, it disputes the insured's entitlement on its mistaken belief that an exclusion applies. On any default, it becomes liable, enforceable by judgment, to pay not only the costs which should have been paid but also damages for any loss caused by its breach. However, the temporal nature of that obligation does not generate some further or additional covenant on Chubb's part to advance defence costs when it disputes its obligation to do so and that is so even where non-payment will put it in breach of its contract.
Wilkie v Gordian Runoff Ltd
56 At this point it is appropriate to turn to the decision in Wilkie v Gordian Runoff Ltd, which was heavily relied upon by Evolution as supporting its construction of the Policy. As appears from the following discussion, that reliance was misplaced.
57 In that case, the D & O policy was substantially different from the Chubb Policy in a number of important respects. In particular, the defence costs extension was not conditioned upon "indemnifiability" under the policy, but on the making of a claim alleging a "Wrongful Act" as defined. Moreover, the insurer in that case was unable to rely upon the relevant exclusion (Exclusion 7) relating to loss arising out of any claim based upon, inter alia, any deliberate breach of statute, regulation or contract, unless the breach had been established "in fact". The concept of "in fact" was defined as being marked by either the making of an admission or a determination by adjudication in any court, tribunal or arbitrator that the relevant conduct had occurred. The High Court held that until the facts relied upon by the insurer to invoke the exclusion were established in the manner described, the clause did not have effect to negate the obligation to advance payment of defence costs. In the structure of the policy, any nullifying effect of the exclusion did not directly relate to the payment of defence costs because the exclusions did not, by their terms, apply to that extension. The exclusions could have impacted upon the operation of the defence costs clause in another way. It was conditioned upon the insurer not having declined indemnity and, in the matter before the Court, the insurer had purported to do so in reliance on Exclusion 7. Nevertheless, the Court held that any declinature had to be soundly based and unless and until the circumstances underpinning the exclusion were established "in fact" (as defined), the insurer was disentitled from relying on it to deny indemnity and, in the interim, was obliged to pay the insured's legal costs.
58 The result in that case was a direct consequence of the nature of the policy terms and specifically, the fact that the insurer's entitlement to rely upon the exclusion in question was expressly deferred until adjudication or admission by the insured. The High Court's decision does not provide any general guidance for the interpretation of defence costs clauses in policies which are not similarly worded or structured.
59 However, it is not irrelevant that the extension relied upon in Wilkie v Gordian Runoff Ltd was entitled "Advance Payment of Defence Costs" and the Court held (at 533 [34]) that the obligation required the insurer to "make advance payments of Defence Costs at times when, by hypothesis, the liability to indemnify" may be uncertain. The concept of "advancing" defence costs, being the payment of them before the issue of whether the insured's claim is covered is well known: Derrington DK and Ashton RS, The Law of Liability Insurance (3rd ed, LexisNexis Butterworths, 2013) p 2399, 11-250.
60 Further, although the insurer in Wilkie v Gordian Runoff Ltd had submitted that the insured's construction would result in a temporal "gap" between its obligation to pay defence costs and its knowledge of whether it would be liable to pay them, this was answered by the presence of a provision for its express entitlement to recover the amount paid if it was subsequently established that the insured was not entitled to indemnity under the policy by reason of the operation of the exclusion. The majority of the Court said (at 534 [39]):
That "gap" between present uncertainty and ultimate resolution is met in the second paragraph of Extension 9. This reserves to GIO a right of recovery if it be subsequently established that the appellant was "not entitled to indemnity under this policy" because, for example, GIO had made good its denial based on Exclusion 7.
61 The insurer's express entitlement to recover the amount paid was coherent with both its obligation to pay defence costs "as and when" they were incurred and that Exclusion 7 only became efficacious once the identified matters were established by admission or adjudication.
62 Contrary to Evolution's submissions, the High Court's decision, if anything, highlights differences between the policies which are of such significance as to render the same outcome most unlikely. Indeed, it adversely reflects on Evolution's position. It is appropriate to discuss each of those differences in turn.
No express requirement for curial determination
63 The Chubb Policy contains no provision by which it is required to seek an adjudication of any matter before the exclusion clause relating to professional liability has operative effect. That is significant given Evolution's assertion that the separate question requires an answer to the effect that Chubb is required to pay defence costs unless and until there is a curial determination that its liability is excluded by the operation of clause 3.13 of the exclusions. Whereas such a result was found to exist in Wilkie v Gordian Runoff Ltd, it was founded upon the express deferral of the relevant exclusion clause until, amongst other things, the existence of curial determination. Here there is no limitation on Chubb relying upon the professional liability exclusion and, if as Chubb alleges, it applies in the present circumstances, Evolution is not entitled to indemnity under the policy.
No obligation to "advance" defence costs
64 Unlike the policy considered in Wilkie v Gordian Runoff Ltd, the Chubb Policy makes no reference to any obligation to "advance" defence costs. The use of that or a similar expression would have facilitated the identification of a requirement imposed on Chubb to make payments prior to any determination of whether the claim was within the scope of the general indemnity: cf Bank of Queensland Ltd v Chartis Australia Insurance Limited [2012] QSC 319 [16] (where the defence costs clause expressly obliged the insurer to advance and pay defence costs as incurred until the operation of any exclusion was confirmed by a curial determination).
65 The context in which the Chubb Policy is to be construed includes the fact that there exists a clear and commonly used method of providing for the advance of defence costs despite the existence of disputes between insurer and insured concerning the policy's coverage. The fact that the method was not adopted is an indication that the parties did not intend that obligation to exist. At the very least, it is consistent with the above conclusion to that effect.
66 There is nothing uncommercial in the absence of an express provision for the advance of costs despite the insurer's invocation of an exclusion, which would support a benign construction of the policy's terms in favour of the insured. There are many, perhaps the majority of, policies which do not carry such a provision, and it is not suggested that their terms imply such a positive benefit. Further, the cost of an additional component in the premium in consideration of such a benefit may well commercially disincline a purchaser to include it as part of the cover purchased.
The absence of any obligation on the insured to reimburse
67 It is also noteworthy that there is an absence of any express obligation on the insured to reimburse Chubb for the costs of defending the action if it transpires that the claim was not within the scope of the policy. Had such a clause existed it might have furthered a construction of the policy which required the insurer to advance the costs until it had been determined that it had no liability under the policy: see for instance Travelers Insurance Company Ltd v Advani [2012] EWHC 623 (QB); Power v Markel Capital Ltd (2007) 14 ANZ Ins Cas 61-742 [11] ("Insurers shall pay Defence Costs on behalf of the Insured(s) on an ongoing basis as they are incurred prior to the final payment or settlement of any Claim provided that⦠such advance payments by the Insurers shall be repaid to Insurers in the event that the Insured(s) shall not be entitled to payment of any Loss or receipt of any benefit under this Policy"); Wilkie v Gordian Runoff Ltd [29] ("GIO reserves the right to recover any Defence Costs paid under this extension from the Insured⦠in the event and to the extent that it is subsequently established by judgment or other final adjudication, that they were not entitled to indemnity under this policy"); Rich v CGU Insurance Ltd; Silbermann v CGU Insurance Ltd (2005) 214 ALR 370 [11] ("The Insurer reserves the right to recover any Defence Costs⦠in the event and to the extent that it is subsequently established by judgement or other final adjudication that the Directors and Officers and/or the Corporation were not entitled to the Defence Costs so advanced"). Its absence, however, is consistent with the absence of any obligation to advance defence costs prior to the resolution of disputes between the insured and insurer.
68 Here, Evolution's preferred construction would require Chubb to advance defence costs to it in circumstances where, in fact, it may well have had no entitlement to indemnity under the policy by reason of the professional liability exclusion and would be obliged to continue to do so until there was a curial adjudication that the exclusion applied, and, once the adjudication was made, there would be no express contractual obligation for Evolution to repay them. This would be a somewhat uncommercial construction and, if it was intended that Chubb was obliged to advance defence costs one might have expected the adoption of one of the clear expressions available and the correlative entitlement to reimbursement.
69 Just as the issue of when costs that are payable are to be paid is basically different from the issue of whether they are payable or not, so the issue as to whether they are payable and when if liability to pay them is contested is basically different from the issue of when they are payable if there is no dispute. The authorities on one issue are not transportable to the other. The primary premise is different.
Conclusion as to the operation of the defence costs clause
70 It follows from the above discussion that Chubb's obligation to pay defence costs pursuant to clause 4.1 is conditioned upon the existence of the assertion of a liability by a third party against the insured which, if successful, would be indemnifiable under the policy. That necessarily entails that the manner in which the claim is formulated or its substance is in respect of a liability that falls within the Insuring Agreement in clause 1.1, and that it is not the subject of any of the exclusions.
71 In this case, Chubb asserted that the insured is not entitled to indemnity under the policy because the claim is within an exclusion. If that assertion is correct, with the consequence that it has no obligation to pay defence costs, there is nothing in the policy or its terms, including those used in the definition of "Defence Costs", to suggest that it is nevertheless obliged to pay them until there is an adjudication that its refusal to pay was justified. That is fortified by the absence of any express obligation to "advance" defence costs or any entitlement to reimbursement.
72 If Chubb's declinature is incorrect it would render it liable to be ordered to make the payments for which it is liable and to pay damages for breach of contract. However, it did not covenant to accept any additional obligation to make those payments despite its denial of an obligation to do so. Evolution is no doubt entitled to join Chubb to the proceedings brought against it or to otherwise seek relief in separate proceedings and, whilst in the circumstances of this case, that entitlement may be of little value on this issue, it is all that it may do at this stage. It is undoubted, and Chubb did not contend to the contrary, that at any trial of the question of its obligation to pay defence costs, it will bear the onus of establishing the operative effect of any exclusion on which it relies. However, the existence of that onus in those proceedings does not require that until the hearing is finalised Chubb is obliged to make payments in respect of a liability not covered by the policy.
73 There is no doubt that for Evolution the policy does not operate in a manner which best serves its interest in relation to the substantial claims now being made against it. A different policy with terms which require the advancing of defence costs by an insurer despite its denials of any obligation to do so would serve it better, but to construe the Chubb Policy in that way would amount to a substantial rewriting of the agreement. In this respect it is apt to refer to the observations of Lord Mustill in Charter Reinsurance Co Ltd v Fagan [1997] AC 313, 388:
There comes a point at which the court should remind itself that the task is to discover what the parties meant from what they have said, and that to force upon the words a meaning which they cannot fairly bear is to substitute for the bargain actually made one which the court believes could better have been made. This is an illegitimate role for a court.
74 This passage was recently cited with approval by Meagher JA and Ball J in HDI Global Specialty SE v Wonkana No. 3 Pty Ltd [2020] NSWCA 296 [46].
Answer to the question posed
75 The question posed to the Court tends to assume that Chubb is presently obliged to pay defence costs or that the matter now before the Court includes the question of whether it is so obliged. The parties made submissions about this issue and it is apparent that they did not intend that any such issue be determined. The quintessential question was whether the policy operated such that Chubb was obliged to pay defence costs in advance of a judicial determination that clause 3.13 applied and that question should be answered in the negative.
A note of appreciation to the legal representatives
76 It would be remiss not to commend the legal practitioners involved in this matter for the exemplary manner in which it was conducted. This is hard fought litigation in which the stakes for the parties are particularly high. Mr Jones SC, his junior and instructing solicitors on the one hand, and Mr Williams SC, his junior and instructing solicitors on the other, made every appropriate argument and took every necessary step in the advancement of their respective client's interests. Whilst fully performing their duties to their clients, they nevertheless acted appropriately and co-operatively to identify the real issues in dispute and, through that, brought the matter on for determination in a most efficacious manner. That is the approach to modern litigation expected by the Courts as observed by Allsop J in White v Overland [2001] FCA 1333 [4], and the professionalism displayed by the lawyers in this matter ought to serve as an example to the profession in general.
I certify that the preceding seventy-six (76) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Derrington.
Associate:
Dated: 24 November 2020
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2012-10-12 00:00:00
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The State of Victoria v Sportsbet Pty Ltd [2012] FCAFC 143
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FEDERAL COURT OF AUSTRALIA
The State of Victoria v Sportsbet Pty Ltd [2012] FCAFC 143
Citation: The State of Victoria v Sportsbet Pty Ltd [2012] FCAFC 143
Appeal from: Sportsbet Pty Ltd v The State of Victoria [2011] FCA 961
Parties: THE STATE OF VICTORIA v SPORTSBET PTY LTD (ABN 87 088 326 612), EUREKA HOTEL HOLDINGS PTY LTD (ACN 135 267 597), TABCORP HOLDINGS LIMITED (ABN 66 063 780 709) AND THE VICTORIAN COMMISSION FOR GAMBLING REGULATION
TABCORP HOLDINGS LIMITED (ABN 66 063 780 709) v SPORTSBET PTY LTD (ABN 87 088 326 612), EUREKA HOTEL HOLDINGS PTY LTD (ACN 135 267 597), THE STATE OF VICTORIA AND THE VICTORIAN COMMISSION FOR GAMBLING REGULATION
File numbers: VID 1000 of 2011
VID 1002 of 2011
Judges: EMMETT, KENNY AND MIDDLETON JJ
Date of judgment: 12 October 2012
Date of Corrigendum 23 October 2012
Catchwords: Constitutional law β Trade and commerce between the Northern Territory and a State β Northern Territory respondent bookmaker contravened offence provisions of Victorian legislation by installing an electronic device for betting in an hotel in Victoria β Whether respondent engaged in trade and commerce between the Territory and a State β Whether offence provisions imposed a discriminatory burden of a protectionist kind on out-of-state trade and commerce β Whether a licensee holding a statutory monopoly was a proxy for intrastate trade β reasonably necessary and appropriate and adapted β Northern Territory (Self-Government) Act 1978 s 49 β Commonwealth Constitution s 92.
Legislation: Constitution ss 92, 109
Corporations Law 1989 (Cth)
Northern Territory (Self-Government) Act 1978 (Cth) s 49
Betting Act 1853 (16 & 17 Vict c 199)
Casino Control Act 1991 (Vic)
Gambling Regulation Act 2003 (Vic) ss 2.1.2, 2.5.1, 2.5.2, 2.5.14, 2.6.1, 4.2.1, 4.2.2, 4.3.1, 4.3.3, 4.5.3, 4.5.6, 4.7.2, 10.5.9(1)(c) Gaming and Betting Act 1994 (Vic) Liquor Control Reform Act 1998 (Vic) s 115
Corporations (Northern Territory) Act 1990 (NT)
Interpretation of Legislation Act 1984 (Vic)
Lotteries Gaming and Betting Act 1966 (Vic) s 66B
Police Offences Statute Amendment Act 1872 (Vic) Racing Act 1958 (Vic) s 4 Racing and Betting Act 1983 (NT)
Racing (Totalizators Extension) Act 1960 (Vic)
Unlawful Betting Act (NT) ss 31, 33
Cases cited: AMS v AIF (1999) 199 CLR 160
APLA Ltd v Legal Services Commissioner (NSW) (2005) 224 CLR 322
Australian Coarse Grains Pool Pty Ltd v Barley Marketing Board (1985) 157 CLR 605
Bank of New South Wales v The Commonwealth (1948) 76 CLR 1
Barley Marketing Board (NSW) v Norman (1990) 171 CLR 182
Bath v Alston Holdings Pty Ltd (1988) 165 CLR 411
Bayside City Council v Telstra Corporation Limited (2004) 216 CLR 595
Betfair Pty Limited v Racing New South Wales (2012) 286 ALR 221
Betfair Pty Limited v Western Australia (2008) 234 CLR 418
Betfair Pty Ltd v Racing New South Wales (2010) 189 FCR 356
Bond v Foran (1934) 52 CLR 364
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424
Castlemaine Tooheys Limited v South Australia (1990) 169 CLR 436
Clark King & Co Pty Ltd v Australian Wheat Board (1978) 140 CLR 120
Cole v Whitfield (1988) 165 CLR 360
Dearman v Dearman (1908) 7 CLR 549
Fox v Percy (2003) 214 CLR 118
Grain Pool of Western Australia v Commonwealth (2000) 202 CLR 479
HC Sleigh Ltd v South Australia (1977) 136 CLR 475
Hogan v Hinch (2011) 85 ALJR 398
Kartinyeri v Commonwealth (1998) 195 CLR 337
Lamshed v Lake (1958) 99 CLR 132
Menashe Business Mercantile Ltd v William Hill Organisation Ltd [2003] 1 WLR 1462
Miller v TCN Channel Nine Pty Ltd (1986) 161 CLR 556
Minister for Immigration and Multicultural Affairs v Jia Legeng (2001) 205 CLR 507
Mulholland v Australian Electoral Commission (2004) 220 CLR 181
North Eastern Dairy Co Ltd v Dairy Industry Authority of NSW (1975) 134 CLR 559
O Gilpin Ltd v Commissioner for Taxation (NSW) (1940) 64 CLR 169
Racing NSW v Sportsbet Pty Ltd (2010) 189 FCR 448
Sportsbet Pty Ltd v Harness Racing Victoria (No 6) [2012] FCA 896
Sportsbet Pty Ltd v New South Wales (2012) 286 ALR 404
Sportsbet Pty Ltd v Victoria (2011) 282 ALR 423
Sportsbet v Harness Racing Victoria and Anor (No 6) [2012] FCA 896
Sportsbet v NSW and Betfair Pty Ltd v Racing New South Wales (2012) 286 ALR 221
Sportsodds Systems Pty Ltd v New South Wales (2003) 133 FCR 63
Street v Queensland Bar Association (1989) 168 CLR 461
Thomas v Mowbray (2007) 233 CLR 307
Uebergang v Australian Wheat Board (1980) 145 CLR 266 Hospital Provident Fund Pty Ltd v Victoria (1953) 87 CLR 1
Bell AS, "Section 92, Factual Discrimination and the High Court" (1991) 20 FL Rev 240
Hutchinson G (ed), They're Racing! The Complete Story of Australian Racing (Penguin Books Australia Ltd, 1999)
Lewis GD, A Report on Integrity Assurance in the Victorian Racing Industry, 1 August 2008
O'Hara J, A Mug's Game. A History of Gaming and Betting in Australia (New South Wales University Press, 1988)
Pacini J, A Century Galloped By. The First Hundred Years of the Victoria Racing Club (Victoria Racing Club, 1988)
Simpson A, "Grounding the High Court's Modern Section 92 Jurisprudence: the Case for Improper Purpose as the Touchstone" (2005) 33 FL Rev 445
Sonter D, "Intention or Effect? Commonwealth and State Legislation after Cole v Whitfield" (1995) 69 ALJ 332
Date of hearing: 20 β 22 February 2012
Date of last submissions: 7 September 2012
Place: Melbourne
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 325
VID 1000 of 2011:
Counsel for Appellant: Mr S McLeish SC, Solicitor-General for the State of Victoria with Dr S Donaghue SC and Mr P Herzfeld
Solicitor for the Appellant: Victorian Government Solicitor
Counsel for the First and Second Respondents: Mr N Young QC with Mr T North SC and Mr R Niall SC
Solicitor for the First and Second Respondents: Fitzpatrick Legal
Counsel for the Third Respondent: Mr P Brereton SC with Dr R Higgins
Solicitor for the Third Respondent: Herbert Smith Freehills
The Fourth Respondent submitted to any order the Court might make, save as to costs.
VID 1002 of 2011:
Counsel for the Appellant: Mr P Brereton SC with Dr R Higgins
Solicitor for the Appellant: Herbert Smith Freehills
Counsel for the First and Second Respondents: Mr N Young QC with Mr T North SC and Mr R Niall SC
Solicitor for the First and Second Respondents: Fitzpatrick Legal
Counsel for the Third Respondent: Mr S McLeish SC, Solicitor-General for the State of Victoria with Dr S Donaghue SC and Mr P Herzfeld
Solicitor for the Third Respondent: Victorian Government Solicitor
The Fourth Respondent submitted to any order the Court might make, save as to costs.
FEDERAL COURT OF AUSTRALIA
The State of Victoria v Sportsbet Pty Ltd [2012] FCAFC 143
CORRIGENDUM
1. In paragraph 180 of the Reasons for Judgment, in the fourth sentence, the word "Tabcorp" should read "Sportsbet" so that the sentence reads: "The possibility of totalisator manipulation cannot be discounted, as Sportsbet sought to do."
I certify that the preceding one (1) numbered paragraph is a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justices Kenny and Middleton.
Associate:
Dated: 23 October 2012
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION VID 1000 of 2011
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: THE STATE OF VICTORIA
Appellant
AND: SPORTSBET PTY LTD (ABN 87 088 326 612)
First Respondent
EUREKA HOTEL HOLDINGS PTY LTD (ACN 135 267 597)
Second Respondent
TABCORP HOLDINGS LIMITED (ABN 66 063 780 709)
Third Respondent
THE VICTORIAN COMMISSION FOR GAMBLING REGULATION
Fourth Respondent
JUDGE: EMMETT, KENNY AND MIDDLETON JJ
DATE OF ORDER: 12 OCTOBER 2012
WHERE MADE: MELBOURNE
THE COURT ORDERS THAT:
2. Within seven days, the appellant in appeal VID 1000 of 2011 file short minutes giving effect to the reasons for judgment herein.
3. If the parties in appeal VID 1000 of 2011 are unable to agree within seven days on the appropriate costs orders for the proceeding before the primary judge and for the appeal, within a further seven days, the appellant in appeal VID 1000 of 2011 file and serve its written submissions as to the appropriate costs orders and, within seven days thereafter, the respondents in appeal VID 1000 of 2011 file their written submissions. In either case the submissions should not exceed three pages.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION VID 1002 of 2011
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: TABCORP HOLDINGS LIMITED (ABN 66 063 780 709)
Appellant
AND: SPORTSBET PTY LTD (ABN 87 088 326 612)
First Respondent
EUREKA HOTEL HOLDINGS PTY LTD (ACN 135 267 597)
Second Respondent
THE STATE OF VICTORIA
Third Respondent
THE VICTORIAN COMMISSION FOR GAMBLING REGULATION
Fourth Respondent
JUDGE: EMMETT, KENNY AND MIDDLETON JJ
DATE OF ORDER: 12 OCTOBER 2012
WHERE MADE: MELBOURNE
THE COURT ORDERS THAT:
1. Within seven days, the appellant in appeal VID 1002 of 2011 file short minutes giving effect to the reasons for judgment herein.
2. If the parties in appeal VID 1002 of 2011 are unable to agree within seven days on the appropriate costs orders for the proceeding before the primary judge and for the appeal, within a further seven days, the appellant in appeal VID 1002 of 2011 file and serve its written submissions as to the appropriate costs orders and, within seven days thereafter, the respondents in appeal VID 1002 of 2011 file their written submissions. In either case the submissions should not exceed three pages.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION VID 1000 of 2011
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: THE STATE OF VICTORIA
Appellant
AND: SPORTSBET PTY LTD (ABN 87 088 326 612)
First Respondent
EUREKA HOTEL HOLDINGS PTY LTD (ACN 135 267 597)
Second Respondent
TABCORP HOLDINGS LIMITED (ABN 66 063 780 709)
Third Respondent
THE VICTORIAN COMMISSION FOR GAMBLING REGULATION
Fourth Respondent
GENERAL DIVISION VID 1002 of 2011
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: TABCORP HOLDINGS LIMITED (ABN 66 063 780 709)
Appellant
AND: SPORTSBET PTY LTD (ABN 87 088 326 612)
First Respondent
EUREKA HOTEL HOLDINGS PTY LTD (ACN 135 267 597)
Second Respondent
THE STATE OF VICTORIA
Third Respondent
THE VICTORIAN COMMISSION FOR GAMBLING REGULATION
Fourth Respondent
JUDGES: EMMETT, KENNY AND MIDDLETON JJ
DATE: 12 OCTOBER 2012
PLACE: MELBOURNE
REASONS FOR JUDGMENT
emmett j
INTRODUCTION [1]
THE IMPUGNED PROVISIONS [12]
TABCORP [16]
SPORTSBET [30]
The betbox [49]
THE DECISION OF THE PRIMARY JUDGE [61]
RELEVANT LEGAL PRINCIPLES [69]
APPLICATION OF SECTION 49 OF THE SELF-GOVERNMENT ACT [83]
CONCLUSION [110]
INTRODUCTION
1 These appeals, and the proceeding from which they are brought, demonstrate the absurdity that, in the worldwide economy of the 21st century, the legal system of the great nation of Australia is still complicated by wrangling between polities that grew out of the former British colonies that combined to form the Commonwealth of Australia in 1901. This proceeding is concerned specifically with the regulation of wagers and bets placed with a Northern Territory registered bookmaker by punters physically located in the State of Victoria. It is a blight on our nationhood and a travesty of sensible administration and good government that there are eight different regulatory regimes concerning lawful gambling in Australia, with an overlay of federal intervention, both actual and threatened.
2 The draughtsmen of the Constitution saw the need for the new nation to be absolutely free from inter-colonial rivalries, at least in relation to trade, commerce and intercourse. Thus, s 92 of the Constitution relevantly provides that trade, commerce and intercourse among the States is to be absolutely free. When self-government was conferred on the Northern Territory, that principle was extended. Section 49 of the Northern Territory (Self-Government) Act 1978 (Cth) (the Self-Government Act), which is an act of the Commonwealth parliament, relevantly provides that trade, commerce and intercourse between the Northern Territory and the States is also to be absolutely free. The jurisprudence that has arisen in connection with s 92 is applicable to the construction and operation of s 49 of the Self-Government Act (see AMS v AIF (1999) 199 CLR 160 at 175-176 [35]-[36]). To the extent that a law of Victoria is inconsistent with s 49 of the Self-Government Act, that law would, by the operation of s 109 of the Constitution, be invalid.
3 Section 92 of the Constitution refers to trade, commerce and intercourse by means of internal carriage or ocean navigation. That was probably intended to cover the field of the means by which trade, commerce and intercourse among the States might take place. The concept of trade, commerce or intercourse by means of digital electronic communication, such as is involved in the present dispute, was not conceived of by those responsible for the drafting of the Constitution.
4 The particular dispute in question in these appeals is principally between two corporate bookmakers, namely, Sportsbet Pty Limited (Sportsbet) and Tabcorp Holdings Limited (Tabcorp). Each of those companies has its central management and control in Victoria, although Sportsbet is a Northern Territory company. Both companies operate in a gambling market that is Australia-wide and is, in some respects, worldwide. Each engages in gambling activities in Victoria.
5 Sportsbet is Australia's largest corporate bookmaker. Sportsbet uses computer equipment that is located in the Northern Territory that communicates, by means of the internet, with a device known as a Betbox, which is located in Victoria. The devices are accessible to, and are used for the purpose of wagering with Sportsbet by, persons located distant from the Northern Territory, in Victoria.
6 In May 2010, a Betbox owned by Sportsbet was installed by Sportsbet in the Eureka Stockade Hotel in East Ballarat, Victoria (the Hotel), which is owned by Eureka Hotel Holdings Pty Limited (Eureka). Eureka is the licensee of the Hotel under the Liquor Control Reform Act 1998 (Vic) (the Liquor Act) and the Hotel constitutes licensed premises under the Liquor Act. Sportsbet entered into contracts with Eureka for the installation of a Betbox at the Hotel. It then installed and used the Betbox in the Hotel and accepted wagers over the internet by means of that Betbox from persons physically located in the Hotel in Victoria.
7 The present dispute is concerned more specifically with the seizure in July 2010 of the Betbox located in the Hotel by officers of the Victorian Commission for Gambling Regulation (the Gambling Commission). The officers were acting under s 10.5.9(1)(c) of the Gambling Regulation Act 2003 (Vic) (the Gambling Act), which authorises the seizure of any machinery, equipment or records for the purpose of obtaining evidence of the commission of an offence.
8 The State of Victoria and the Gambling Commission contend that the installation and the operation of the Betbox in the Hotel gave rise to offences under several laws of Victoria (the Impugned Provisions) as follows:
Section 2.5.2 of the Gambling Act, which prohibits a person from opening, keeping or using a betting house or place of betting;
Section 2.6.1 of the Gambling Act, which prohibits a person from possessing an instrument of betting not authorised by the Gambling Act; and
Section 115 of the Liquor Act, which generally prohibits the holder of a licence under the Liquor Act from allowing a person to bet on licensed premises.
9 Sportsbet and Eureka contend that the Impugned Provisions are invalid in so far as they affect the installation and use by Sportsbet and Eureka of the Betbox. Accordingly, following the seizure of the Betbox, Sportsbet and Eureka commenced a proceeding in the Court against the State of Victoria (the State) and the Gambling Commission, seeking an order for the return of the Betbox to Sportsbet or, alternatively, to Eureka. As well as the return of the Betbox, Sportsbet and Eureka claimed declarations that each of the Impugned Provisions is invalid to the extent that it would apply to installation and use of a Betbox in Victoria. Subsequently, Tabcorp was joined as a respondent to the proceeding.
10 On 9 September 2011, for reasons published on 22 August 2011, a judge of the Court ordered that the Betbox be returned to Eureka at the Hotel. The primary judge also declared that each of the Impugned Provisions is invalid to the extent that it applies to the installation and use in Victoria by Sportsbet and Eureka of the computer device known as a Betbox.
11 By notice of appeal filed on 13 September 2011, the State appealed from those orders. Sportsbet, Eureka, Tabcorp and the Gambling Commission are respondents to the State's appeal. By notice of appeal filed on the same day, Tabcorp also appealed from those orders. Sportsbet, Eureka, the State and the Gambling Commission are respondents to Tabcorp's appeal. In each appeal, the appellant seeks an order that the appeal be upheld, that the orders made by the primary judge be set aside and that the proceeding brought by Sportsbet and Eureka be dismissed.
THE IMPUGNED PROVISIONS
12 Section 2.5.2(1) of the Gambling Act relevantly provides that a person must not:
open, keep or use a betting house or place of betting; or
being the owner or occupier of a house or place, knowingly and wilfully permit the house or place to be opened, kept or used by any other person as a betting house or place of betting.
Under s 2.5.1(1), a betting house or place of betting is a house or place that is open, kept or used, relevantly, for the purpose of betting with any persons, whether in person or by messenger, agent, post, telephone or otherwise or for the purpose of taking instructions for the placement of bets on behalf of any person. A betting house or a place of betting is declared by s 2.5.1(2) to be a public nuisance and contrary to law.
13 However, under s 4 of the Racing Act 1958 (Vic) (the Racing Act), it is not a contravention of the Gambling Act for a registered bookmaker to take bets on certain events, including thoroughbred, harness and greyhound races, while present at a racecourse licensed under the Racing Act either:
during the holding of a race meeting, from a punter present on the racecourse; or
at any time, from a punter off the racecourse by means of a method of communication approved by the Minister.
A registered bookmaker is a person who is the holder of a current certificate of registration as a registered bookmaker under the Gambling Act. Sportsbet is not a registered bookmaker and has never sought registration under the Gambling Act.
14 Section 2.6.1(1) of the Gambling Act relevantly provides that a person must not possess an instrument of betting not authorised under the Gambling Act. Under s 2.6.1(2), possession includes actual physical possession, as well as custody or control, and an instrument of betting is taken to be in a person's possession if it is on land or in premises occupied, used or controlled by the person. Under s 2.1.2(1), instrument of betting relevantly includes a mechanical, electrical, telephonic, electronic or other equipment or device or any access to such equipment or device used, apparently used or likely to be used in carrying on or in connection with betting on a sporting event, being betting that is not authorised by any Act. It is common ground that the Betbox is an instrument of betting within the meaning of that provision. It is also common ground that the Betbox seized from Eureka was likely to be used in carrying on, or in connection with, betting on sporting events. The Betbox is not authorised under the Gambling Act.
15 Section 115(1) of the Liquor Act relevantly provides that a licensee of licensed premises must not bet or allow a person to bet on the licensed premises. However, under s 115(2), that prohibition does not apply to betting on licensed premises if, relevantly:
the premises are on a licensed racecourse and the betting is engaged in during the holding of a race meeting on the licensed racecourse; or
a betting facility of the holder of the wagering licence or of the wagering operator is established in the premises and the betting takes place through that licence holder or wagering operator.
At the present time, Tabcorp is the holder of the wagering licence, as referred to in s 115(2), and Tabcorp Manager Pty Limited (Tabcorp Manager), a wholly owned subsidiary of Tabcorp, is the wagering operator, as referred to in s 115(2). The term betting facility, as referred to in s 115(2), is not defined.
TABCORP
16 Until the late 1950s, offcourse wagering was prohibited in Victoria. Oncourse wagering was permitted with registered bookmakers and with a totalisator operated by a racing club.
17 Generally, wagering with registered bookmakers was fixed odds wagering. A fixed odds bookmaker is one who makes up a book on all the contestants in a given race, adjusting the odds and the volume of money taken on any particular contestant, so that, if the adjustments made by the bookmaker are correct, at the end of the race, no matter which contestant wins, the book would show a profit for the bookmaker. While oncourse bookmakers competed with each other by offering differing fixed odds for each contestant in a race, such that the odds would vary during the lead up to the start of the race as the bookmaker made the book, a punter was guaranteed the odds at which the wager was made, irrespective of variations in the odds being offered after the wager was made.
18 Wagering with a totalisator, on the other hand, was on the pari-mutuel basis. That is to say, the balance of the total pool of wagers made with the totalisator, after deducting a fixed proportion of the wagers for the totalisator operator, was divided among the successful wagerers. Thus, the odds that would be paid on a successful wager with a totalisator would not be known until after the start of the race, when betting closed and the total pool was ascertained.
19 While offcourse wagering was prohibited, it was widespread. Generally, offcourse wagering was with unregistered, unlicensed bookmakers and was, for the most part, limited to starting price wagers. The odds for each contestant at the close of betting on a race, which were published after the event, were the odds at which starting price wagers were determined. Thus, as with a totalisator, the odds that would be paid on a successful wager would not be known until after the start of the race, when betting closed.
20 A significant difference between the totalisator operator and the bookmakers, whether fixed odds or starting price, is that the totalisator operator cannot lose. An oncourse licensed bookmaker, offering fixed odds, was generally required to accept any wager, up to predetermined limits. A competent bookmaker, by adjusting the odds for each runner in a race, assuming a minimum number of wagers, could make a book so as to ensure a profit on most races. A starting price bookmaker could not adjust the odds, but had some control, in so far as the bookmaker could refuse to accept a bet. However, a profit is never guaranteed for either a fixed odds or starting price bookmaker.
21 In 1959, a report to the Victorian government recommended the legalising in Victoria of offcourse betting, by means of the establishment of an offcourse totalisator. Following that recommendation, an offcourse totalisator was established under the Racing (Totalizators Extension) Act 1960 (Vic) (the 1960 Act). The offcourse totalisator was operated by the Totalizator Agency Board (the TAB), a statutory body corporate created by the 1960 Act. Until 1994, offcourse wagering could be conducted in Victoria legally with the TAB, but not otherwise.
22 In 1994, the Victorian government decided to privatise the operations of the TAB. To that end, Tabcorp was incorporated as the entity that would acquire the operations of the TAB. The Gaming and Betting Act 1994 (Vic) (the 1994 Act) provided for the grant of a single licence to conduct pari-mutuel betting on thoroughbred, harness and greyhound racing and on approved betting competitions. The single licence, together with a concurrent gaming licence, was granted to Tabcorp on 28 June 1994 for a period ending in August 2012. At the same time, Tabcorp acquired the operations of the TAB, including its assets and staff. The consideration paid by Tabcorp for the operations of the TAB and for the grant of the licence was approximately $600 million. Tabcorp raised those funds by the issue of shares to the public. In effect, from 1994, Tabcorp stepped into the shoes of the TAB, and the operations of the TAB were thereby effectively privatised.
23 At the same time, Tabcorp entered into joint venture arrangements with VicRacing Pty Limited (VicRacing), a representative body of the Victorian racing industry. The arrangements gave effect to a memorandum of understanding made between the Victorian government and representatives of the racing industry. Tabcorp was obliged to make substantial payments to fund VicRacing and was subjected to various other restrictions, limitations and obligations, including obligations that allow VicRacing to have strategic and operational oversight of, and input into, the operations of Tabcorp.
24 The 1994 Act was repealed by the Gambling Act, with effect from 1 July 2004. One of the main purposes of the Gambling Act was stated to be to re-enact and consolidate the law relating to various forms of gambling. Its main objectives were said to include:
to foster responsible gambling in order to minimise harm caused by problem gambling and accommodate those who gamble without harming themselves or others;
to ensure that other forms of gambling permitted under Victorian Acts of parliament are conducted honestly and that their management is free from criminal influence and exploitation; and
to promote tourism, employment and economic development generally in Victoria.
25 Another purpose of the Gambling Act was stated to be to impose a general prohibition on gambling and to create certain offences, including those created by ss 2.5.2 and 2.6.1. Section 2.5.2 is derived directly from the Police Offences Statute Amendment Act 1872 (Vic), which amended the Betting Act 1853 (Vic). Section 2.6.1 was first enacted in 1986 as s 66B of the Lotteries Gaming and Betting Act 1966 (Vic). Thus, the Gambling Act carries on the scheme previously existing under the 1994 Act, which, in turn, broadly reflected the scheme introduced by the 1960 Act.
26 Section 4.2.1 of the Gambling Act provides that the conduct of wagering or approved betting competitions is lawful when conducted in accordance with a licence or permit granted under Chapter 4. Such wagering and approved betting competitions are not a public or private nuisance and a place in which such wagering or approved betting competitions is conducted is not a common gaming house or place. Wagering is defined as pari-mutuel betting on a horse race, harness race or greyhound race. An approved betting competition on a horse, harness or greyhound race is one approved by the Minister under s 4.5.3 of the Gambling Act or by the Gambling Commission under s 4.5.6. Under s 4.5.3, the Minister may approve a betting competition on an event or contingency, or a class of event or contingency, of or relating to a horse race, harness race or greyhound race.
27 Under s 4.3.3 of the Gambling Act, there can be only one wagering licence at any given time. Under s 4.3.1, the wagering licence authorises the licensee and the wagering operator to conduct both wagering and approved betting competitions. Tabcorp is the licensee, since it is deemed to be the holder of the wagering licence. The licence that had been granted to Tabcorp on 28 June 1994 under the 1994 Act was continued under the Gambling Act. Tabcorp Manager is deemed to be appointed as the wagering operator under s 4.3.1 of the Gambling Act.
28 The effect of those provisions is that a place in which wagering or an approved betting competition is conducted by Tabcorp or Tabcorp Manager, in accordance with the licence granted to Tabcorp, is taken outside the scope of the various offences concerning common gaming houses or places, including the offences in s 2.5.2. The consequence is that only Tabcorp may establish in Victoria a retail presence for betting. That is described as offcourse retail exclusivity.
29 Sections 2.5.14 and 4.7.2 of the Gambling Act prohibit conduct of various kinds in relation to use of a scheme of pari-mutuel betting, whether conducted by means of an instrument or contrivance known as a totalisator or otherwise. However, under s 4.2.2 of the Gambling Act, the use of a totalisator as provided by Chapter 4 is lawful, and a person who uses or conducts a totalisator as provided by Chapter 4 is not guilty of an offence at common law or under any Act by reason of so using or conducting a totalisator. Further, wagering or betting by means of a totalisator does not constitute an offence at common law or under any Act, is not a ground for any house or place being taken to be a common gaming house or place and is not a public nuisance. Chapter 4 of the Gambling Act contemplates the use of a totalisator by Tabcorp and Tabcorp Manager, as the holder of the licence and the wagering operator, respectively. The consequence is that, within Victoria, only Tabcorp or Tabcorp Manager may operate a totalisator. That is described as totalisator exclusivity.
SPORTSBET
30 Sportsbet was registered on 29 June 1999 and is taken, under the Corporations Act 2001 (Cth), to be registered in the Northern Territory. Sportsbet is recorded as having a registered office and principal place of business in the Northern Territory.
31 Sportsbet holds a licence under the Racing and Betting Act 1983 (NT) (the Territory Betting Act) to conduct the business of a sports bookmaker in the Northern Territory. That licence, which was granted on 2 July 2010, requires that Sportsbet take bets from its premises situated at the Fannie Bay Racecourse, near Darwin in the Northern Territory. Sportsbet is permitted a more flexible approach under its licence to the marketing of its services than it would be permitted in other places in Australia. Specifically, Sportsbet is permitted to offer a much wider range of bets to punters than is permitted under the law of Victoria. Further, under the law of the Northern Territory, Sportsbet is permitted to provide credit to punters. That is contrary to the position anywhere else in Australia.
32 The information reporting system relating to the operation of Northern Territory sports bookmakers includes a full independent audit log of all wagering and financial transactions. The purpose of the audit log is to provide the Northern Territory Racing Commission (the NT Commission) with the data necessary to resolve any dispute between a sports bookmaker and a customer and to provide the NT Commission with information necessary to enable it to monitor all financial and betting transactions. Sports bookmakers in the Northern Territory, as part of the conditions of their licences, are required to record and maintain betting and financial information and supply that information to the NT Commission. Voice recordings are made of all communications with customers over the telephone and the recordings must be made available on request from the NT Commission.
33 Each sports bookmaker in the Northern Territory must comply with a mandatory code for responsible gambling and is required to establish account opening procedures and steps designed to ensure accounts cannot be opened by under-age customers. Each sports bookmaker must ensure that all senior personnel, directors and major shareholders have undergone police checks and have not been found guilty of any offence in the previous 10 years. Each sports bookmaker must have systems in place to record bets properly and to monitor unusual betting patterns and must report unusual betting patterns and circumstances to the NT Commission.
34 Standard condition 8 of Sportsbet's licence under the Territory Betting Act provides that Sportsbet may accept bets at its designated premises on approved sporting events, by use of the telephone, internet, facsimile or any other electronic means approved by the NT Commission. Standard condition 11 provides that Sportsbet must record details of bets made by telephone, facsimile and internet. Special condition 24 provides that Sportsbet must ensure that any of its premises that are not situated on a racecourse are not open to the public to attend in person for the purposes of placing a bet.
35 Sportsbet has not applied for approval for the use of a Betbox in the Northern Territory. Accordingly, the NT Commission has not approved the use of a Betbox by Sportsbet. Indeed, Sportsbet is prohibited under its current licence from installing a Betbox in the Northern Territory.
36 Under s 31 of the Unlawful Betting Act (NT), a person, other than a lawful bookmaker, who acts as, or holds himself or herself out to be, a bookmaker is guilty of an offence. Under s 33 of that Act, a person commits an offence if the person carries on the business of bookmaking other than as a lawful bookmaker or in accordance with any other law in force in the Northern Territory. A lawful bookmaker is a person licensed or registered as a bookmaker under the Territory Betting Act. Bookmaking is defined as the business of receiving or negotiating bets or wagers. So long as Sportsbet conducts its business at its premises within the Fannie Bay Racecourse, it does not offend s 31 or s 33.
37 While Sportsbet has a registered office and premises in the Northern Territory, it has much larger premises in Melbourne. It occupies three floors in a building at 367 Collins Street, Melbourne, where some 150 to 200 employees operate. Sportsbet's business is managed from those Melbourne premises.
38 The total operating expenses of Sportsbet are around $100 million a year. Approximately a quarter of those expenses are attributable to the operations in the Northern Territory. To the extent that Sportsbet employs persons in the Northern Territory, police checks are conducted in Darwin. Probative verifications for those in Melbourne are prepared in Melbourne.
39 There are up to 50 staff in Sportsbet's Northern Territory premises, most of whom are telephone operators. There are also about five IT staff and two or three administrative staff. The work in the Northern Territory is seasonal and, on occasions, there are fewer than 40 people in those premises. Mr Nicholas Tyshing, who has been the chief financial officer of Sportsbet since July 2006 and the chief operating officer of Sportsbet since July 2009, spends no more than three to four days a month in the Northern Territory. His superior, Mr Tripp, spends a similar amount of time in the Northern Territory. Both of them spend most of their time managing Sportsbet's business in Melbourne.
40 Sportsbet's marketing department, production department, IT department and human relations department, all of which are staffed by highly qualified people who earn substantial salaries, are located in the Melbourne premises. Financing support and administrative support for Sportsbet's business are also conducted from its Melbourne premises, and the people working in those areas are highly qualified. Sportsbet has a dedicated risk management department and a dedicated fraud department, which are the two most important functions in the business of betting. Both departments operate in the Melbourne premises. Checking with respect to money laundering is conducted by personnel in Melbourne. No personnel in the Northern Territory check for money laundering.
41 At its Northern Territory premises, Sportsbet accepts bets by telephone and over the internet from registered customers situated throughout Australia, including Victoria. The contingencies on which registered players bet include thoroughbred, harness and greyhound racing conducted in each State and Territory and sporting events conducted in each State and Territory and internationally. A person wishing to place a bet with Sportsbet must first register and acknowledge Sportsbet's terms and conditions.
42 The process of becoming a customer of Sportsbet is automated to a large extent. A prospective customer completes details online, either on the internet or on a Betbox, and transmits the details. If the details are verified by the system in the Northern Territory, the customer will automatically be accepted as a customer of Sportsbet and the system will generate a welcome pack letter and pamphlets about the Sportsbet business, together with a pre-branded card similar to a credit card. The customer can swipe that card on a Betbox in order to log on to the Sportsbet system.
43 Customers of Sportsbet may establish a credit balance with Sportsbet. Customers use credit cards to replenish their credit balances. Checks on credit cards are carried out in Melbourne. Decisions to accept customers of Sportsbet are made in Melbourne. While system interfaces with customers flow through Sportsbet's Northern Territory premises, any notification is triggered in Melbourne and notification of acceptance of a customer emanates from Melbourne.
44 Sportsbet reserves the right to decline a deposit from a customer if it determines that the funds are not genuinely for the purposes of betting. Such determinations are made in Melbourne. Sportsbet also reserves the right to close a customer's account. Such decisions are made in Melbourne. A decision to suspend a customer's account is also made in Melbourne. Sportsbet has a discretion to permit a customer to establish a credit facility. The credit facility is approved or not approved by a third party credit reporting agency in Melbourne. The customer is contacted by Sportsbet by email or mail when the credit facility is approved or not approved. That contact comes from Melbourne. Sportsbet may choose to approve or decline an application for a credit facility. That decision to approve or decline is made in Melbourne. Sportsbet may terminate a credit facility. The decision to terminate a credit facility is made in Melbourne.
45 Approximately 40 highly qualified bookmakers are the risk managers of Sportsbet's business. They work in a room on one of the floors in the Melbourne premises, where there are numerous screens. A task of the bookmakers is to monitor Sportsbet's books and manage the risk of Sportsbet's business. They do so by watching, on the screens in front of them, the bets that are being placed. Sportsbet's computer system is configured so that, when a bet is placed, it can be observed in Melbourne. While bets are received in the Northern Territory, they can be seen on the screens in Melbourne a millisecond or so after they are received in the Northern Territory. The purpose in having such a system in place is to enable the bookmakers in Melbourne to monitor Sportsbet's book. Monitoring the book is one of the most fundamental functions of a bookmaker.
46 The fixed odds offered by Sportsbet on a particular event or contingency are determined by Sportsbet's bookmakers in Melbourne. The odds are placed on the servers in Melbourne and transmitted to the Northern Territory. The odds are then capable of being accessed anywhere in the world through Sportsbet's website. As bets are taken on a particular event, such as a thoroughbred, harness or greyhound race, the shape of the book and the nature of the bets are monitored in Melbourne for the purpose, if necessary, of adjusting the odds. When the odds are adjusted, they are adjusted in Melbourne. The bookmakers in Melbourne not only monitor the odds for fixed odds betting but they also monitor the odds on the totalisator. Depending on the shape of the book, the bookmakers may choose to lay off part of Sportsbet's risk. The laying off of risk is an important area in the business of betting. The decision to do that is made in Melbourne.
47 Sportsbet holds money in a trust account on behalf of its customers. It does not maintain separate accounts for each customer. Customers are grouped by type, such as post-paid customers and pre-paid customers, and there is one trust account referrable to each type of customer. Thus, there is one account for pre-paid customers, in which all pre-paid customers' funds are mixed. The bank account is an account with National Australia Bank in the Northern Territory.
48 When a customer wins a bet, the account of that customer is credited with the amount of the win. The customer must have an account with Sportsbet. If the customer requests money to be transferred out of the account, the transfer to the customer is effected in Melbourne.
The betbox
49 The primary judge found, quite correctly, that the sole, dedicated and public use of the Betbox is to facilitate betting. It is not merely the means by which the wager is communicated, but is also the means by which the wager is selected, placed and its acceptance is notified. There are distinct and significant differences between the function of the Betbox when a punter places a wager with Sportsbet using the Betbox, on the one hand, and the function of a telephone or personal computer when a punter places a wager with Sportsbet using the telephone or personal computer, on the other.
50 The Betbox is a computer terminal that allows a punter, by means of a touch screen, to communicate with Sportsbet's computer servers located at Fannie Bay Racecourse in the Northern Territory, for the purpose of placing bets. On approaching a Betbox situated in Victoria, a punter accesses information on the website maintained by Sportsbet and selects a race on which to place a bet. The punter then selects the wager that the customer wishes to make and sends that as a request, which is received by Sportsbet on its server located at Fannie Bay Racecourse.
51 A bet placed by means of the Betbox in Victoria is received in the Northern Territory and is accepted or rejected by means of the automated computer system in the Northern Territory. There are certain predetermined bet limits and acceptance levels for which the Sportsbet computer system is programmed. If a bet received is within those predetermined limits and levels, the system will automatically accept the bet without any human intervention. If a bet or series of bets exceeds a certain tolerance threshold, the bet will be automatically denied. The server automatically communicates Sportsbet's acceptance or rejection of the wager, in a manner that is capable of being shown on the Betbox in Victoria.
52 Sportsbet's computer system uses proprietary software developed by Sportsbet to process bets, including receiving bets, processing payouts, maintaining ledgers and other processes. Access to the system in the Northern Territory, in order to place a bet, is achieved by means of the internet. Sportsbet operates two channels through which data is exchanged, one a web browser and the other a web services client.
53 In order to access the system, either through a web browser or through a web services client, it is necessary for a customer to authenticate access by means of a unique ID and password. From the perspective of Sportsbet's system, there is no difference between a member gaining access through a web browser or gaining access through a web services client. There is no difference between the two in function, in that both allow the customer access to Sportsbet's computer system. However, the computer processes that lie behind the two processes are different.
54 A web browser, such as Internet Explorer or Firefox, allows the user to access the Sportsbet website by means of a personal computer connected to the internet. That, in turn, allows an authenticated person access to the system for the purpose of placing bets and accessing that person's account. In the case of web browser access, the servers in the Northern Territory operate both front end and back end operations. The system sends out HTML files that are received and interpreted by the web browser. The web browser receives the messages and displays them as a web page. The customer then navigates the web page in order to review the customer's account or to place a wager. All of the data, including the graphics, emanate from the computer servers in the Northern Territory. When a wager is placed, it is processed in the Northern Territory and the computer system either accepts or rejects the wager. When it is accepted, a bet number is transmitted over the internet and can be read on the screen at the customer's terminal. Although there are several processes involved, the transaction is very fast. The customer can subsequently track the bet over the internet using the bet number allocated to the bet.
55 A web services client enables the user to access Sportsbet's computer system by means of a Betbox. Once the customer enters the customer's unique identifier and password, the customer is able to access the customer's account and place a wager. The Betbox does not record or save any data in the Betbox itself. It is solely a communication device to allow the customer to access the computer system maintained by Sportsbet in the Northern Territory.
56 The key technical difference between web browser access and web services client access, from an information-processing standpoint, is that the web services client, stored on the Betbox, processes the graphics. The Betbox receives XML code from the computer server and uses software to present graphical images. A web services client is used for Betbox access rather than a web browser because the web services client interacts better with the touch screen technology used in the Betbox.
57 Thus, a Betbox operates in a similar way to a web browser on a personal computer, although it uses different software. The Betbox performs the same computing function as a personal computer, or mobile telephone with internet capabilities. The Betbox is designed to use an ADSL telephone connection to the internet. However, it could also be set up to use a 3G modem connection, such as is commonly used on mobile telephones and personal computers. The Betbox provides convenience for the customer and is designed to operate at high speeds, but does not differ from a personal computer or mobile phone in a functional sense.
58 The Sportsbet website advertises all available selections that operate on the Sportsbet system. A customer can log on to Sportsbet's website either by use of the internet with a unique identifier and password or by use of a telephone or facsimile machine. The customer then nominates a bet by selecting the preferred event, the bet type and the bet amount. The customer can transmit that information to Sportsbet at its premises in the Northern Territory from a location anywhere in the world, either orally over the telephone or electronically by way of the internet. If the bet is received orally over the telephone or by facsimile, the bet is manually entered into the Sportsbet computer system located in the Northern Territory by an operator in the Northern territory premises. When a bet is accepted orally over the telephone, the operator informs the customer that the bet has been accepted. If Sportsbet accepts a bet, it places a bet confirmation number on Sportsbet's website and the customer can check to see whether the bet has been accepted. The Impugned Provisions do not impose any restrictions on a person in Victoria betting by telephone or facsimile or by means of a personal computer in the way just described.
59 Tabcorp employs a device known as an EasyBet Terminal. EasyBet Terminals are widely distributed throughout licensed premises in Victoria. The function of an EasyBet Terminal is similar to the function of a Betbox, which is described in more detail below. The use of an EasyBet Terminal by Tabcorp or Tabcorp Manager is lawful if it is conducted in accordance with s 4.3.1 of the Gambling Act, because it is betting of a kind authorised by s 4.2.1.
60 There is an iPhone application called TAB iPhone. Once loaded onto an iPhone, that application allows the user to access Tabcorp's website for the purpose of placing bets. Like a Betbox, an iPhone uses a touch screen interface. The function performed by the application is identical to the function performed by the Betbox.
THE DECISION OF THE PRIMARY JUDGE
61 The primary judge found that there is a national wagering market and that wagering services on racing and sporting events are supplied to users of those services throughout Australia by means of telephone and the internet. Her Honour found that competition in that market has been increasing for at least 10 years and that the competition is now fierce. Sportsbet competes in that market with Tabcorp, which accepts bets through its EasyBet Terminals, as well as over the internet. Tabcorp has also established a Northern Territory subsidiary to compete with Sportsbet and other corporate bookmakers offering wagering products. Sportsbet also competes with licensed bookmakers in Victoria operating at racecourses, who accept bets by punters present on the racecourse, over the telephone and by means of the internet.
62 The Betbox that was installed in and operated from the Hotel was intended to attract customers for Sportsbet and to attract patrons to the Hotel. Patrons who came to the Hotel would be able to have a drink, watch television, eat a meal and place bets by means of the Betbox. The licence for the use of the Betbox granted by Sportsbet to Eureka included a requirement that the Betbox be located in a prominent and visible position adjacent to the main bar. Sportsbet paraphernalia was disseminated throughout the bar in order to attract customers.
63 The primary judge found that the Betbox is an instrument of betting and that its sole, dedicated and public use is to facilitate betting. It is not merely the means by which a bet is communicated but is also the means or mechanism by which the bet is selected by the punter, placed with Sportsbet and its acceptance is notified by Sportsbet. When a bet is placed on a Betbox in Victoria, the Betbox is the indispensable or essential means for so placing the bet. By installing the Betbox in the Hotel, Sportsbet localised the Hotel as the stand or pitch where bets are executed. Further, the Betbox, including the computer terminal located within it, constitutes a physical presence of Sportsbet within the Hotel.
64 The primary judge held, correctly, that s 2.6.1, by its express terms, is directed at physical possession, custody or control of, or access to, an instrument of betting in Victoria. It is not concerned with a wagering contract, or the proper law or governing law of a wagering contract, but with the physical instrument and its possession or deemed possession in Victoria. The prohibition in s 2.6.1 has nothing to do with Sportsbet's computer system in the Northern territory. Rather, it is directed at prohibiting the physical presence in Victoria of an instrument that is used in carrying on, or in connection with, betting on a sporting event and possession by a person of that instrument. The prohibition operates, in the present case, on possession of the Betbox, which is the means or mechanism by which a wager is selected, placed and its acceptance is notified, at the Hotel. Possession of the Betbox enables any one of those objectives to be achieved.
65 In those circumstances, the primary judge found that the installation and use of the Betbox in the Hotel contravened the Impugned Provisions. However, her Honour found that a contract made between a punter and Sportsbet by means of a Betbox, by its nature, involves the movement, from a place in Victoria to a place in the Northern Territory, of things tangible or intangible. Her Honour concluded therefore, that the business of Sportsbet, in accepting wagers placed through its Betbox situated in Victoria, constitutes trade and commerce between the Northern Territory and Victoria and that the Impugned Provisions impose on that trade and commerce a discriminatory burden that is protectionist in nature.
66 The primary judge considered that, once it was accepted that the Impugned Provisions constitute a relevant burden, the State had the onus of establishing that the burden was appropriate and adapted to a legitimate end. Her Honour considered that, in determining whether a particular provision is appropriate and adapted to a legitimate end, the burden imposed must be no more than is reasonably necessary, in that there must be an acceptable explanation or justification for the identified discriminatory treatment of trade and commerce between the Northern Territory and Victoria. That is to say, it is not necessary to show that the burden is absolutely necessary to achieve the relevant end.
67 Two overlapping ends had been identified by the State as being legitimate. They were as follows:
funding the operation of the racing industry in Victoria by means of taxes and charges imposed in respect of the sole offcourse wagering and betting business authorised to be conducted in Victoria; and
the regulation, control and restriction of offcourse betting, including totalisator wagering and other betting, in Victoria.
The primary judge found that the Impugned Provisions were not appropriate or adapted to any legitimate end. Accordingly, her Honour concluded that the Impugned Provisions offended s 49 of the Self-Government Act.
68 The State and Tabcorp contend that the primary judge erred in her conclusions concerning the application of s 49 of the Self-Government Act. Thus, three broad questions were raised in the appeals as follows:
whether the placing and acceptance of wagers by means of the Betbox, including associated financial transactions and the commercial arrangements for the installation of the Betbox in the Hotel, constitute trade and commerce between the Northern Territory and Victoria;
whether the prohibitions contained in the Impugned Provisions impose on that trade and commerce a discriminatory burden that is protectionist in nature; and
whether any such burden is appropriate and adapted to a legitimate non-protectionist end.
Before dealing with those questions, it is necessary to say something about the relevant legal principles.
RELEVANT LEGAL PRINCIPLES
69 The establishment of a monopoly by statute does not, of itself, engage s 92 of the Constitution or s 49 of the Self-Government Act. Where a statutory monopoly exists, no person is permitted to compete with the monopolist. In such a case, the statute discriminates between the monopolist, on the one hand, and all others, on the other hand. It does not discriminate against trade or commerce between a Territory and a State (see Barley Marketing Board (NSW) v Norman (1990) 171 CLR 182). A licensing scheme does not prima facie discriminate against trade and commerce between States or between a State and Territory. Rather, it discriminates between the holders of a licence and all others. Unless it can be shown that the practical operation of such a scheme is such that it can be inferred that the true purpose of the establishment of the scheme was to discriminate against trade and commerce between State and Territory or between States, neither s 92 nor s 49 will be attracted.
70 Section 49 is not concerned with the individual rights of entities that engage in trade or commerce that extends over State or Territory boundaries. It does not extend to a burden on trade or commerce in which an entity engages or seeks to engage simply because that entity happens to operate from, or have a place of business, outside the borders of the State or Territory that imposes the burden. It does not extend to a burden imposed by the law of a State or Territory simply because the burden affects competition between participants in a national market, even if those participants happen to be located on different sides of a State or Territory boundary (Betfair Pty Limited v Western Australia (2008) 234 CLR 418 at [26] (Betfair v WA) and Castlemaine Tooheys Limited v South Australia (1990) 169 CLR 436 at 471 and 474 (Castlemaine Tooheys).
71 The new economy, both Australia-wide and worldwide, facilitates the ability of those who are physically located outside the geographical area of a particular jurisdiction to compete with those physically located wholly within the geographical area of that jurisdiction. That, in turn, has facilitated the development of national markets in circumstances where, previously, only local markets might have existed. Thus, the factual context within which s 49 operates has changed. Nevertheless, while the factual context has changed, the legal questions posed by s 49 remain the same.
72 The purpose of s 92 of the Constitution was the achievement of freedom of trade and commerce among the States that succeeded the former colonies. The purpose of s 49 of the Self-Government Act is the achievement of freedom of trade and commerce between the Northern Territory and the States. However, it is necessary to identify the kinds of burdens, restrictions, controls and standards from which freedom is guaranteed by the provisions. Both s 92 and s 49 require only that trade and commerce be immune from discriminatory burdens of a protectionist kind. That is to say, the object of both s 92 and s 49 is the elimination of protectionism. Both provisions are designed to prevent the use of State and Territory boundaries as trade borders or barriers for the protection of participants in a market, who are within a State or Territory, from competition from participants in that same market, who are not in that State or Territory. The means by which that object is achieved is a prohibition of measures that burden trade and commerce between State and Territory and that have the effect of conferring protection on intrastate trade and commerce of the same kind (Cole v Whitfield (1988) 165 CLR 360 at 392-394 (Cole v Whitfield), Betfair v WA at [36]).
73 In considering the application of s 49 to a particular law, one must first consider the nature of that law. If, on its face, it applies to all trade and commerce, both between State and Territory and intrastate, it is less likely to be protectionist than if discrimination appears on its face. However, even if the law does not, on its face, discriminate in favour of intra-State trade, it will nevertheless offend s 49 if, in its effect, it discriminates in favour of intra-State trade and the discrimination is of a protectionist character. On the other hand, a law will not ordinarily be characterised as protectionist if its real object is the prescription of a standard for a product or service or a norm of commercial conduct for all participants in a market (Cole v Whitfield at 408).
74 Even though a particular measure may unquestionably constitute a burden on trade and commerce between State and Territory, of a particular kind, it will not necessarily bear the character of being discriminatory against that trade and commerce if the burden applies equally to intrastate trade and commerce and to trade and commerce between State and territory. If the burden created by the law does not give intrastate trade and commerce a competitive or market advantage over trade and commerce between State and Territory, there will be no offending against s 49 (Cole v Whitfield at 409).
75 A law will be discriminatory if it operates by reference to a distinction that some overriding law decrees to be irrelevant or by reference to a distinction that is, in fact, irrelevant to the object to be attained. Even if a law operates by reference to a relevant distinction, it will be discriminatory if the different treatment thereby assigned is not appropriate and adapted to the difference or differences that support that distinction. A law will also be discriminatory if, although there is a relevant difference, it proceeds as though there is no such difference. That is to say, a law will be discriminatory if it treats equally things that are unequal unless there is no practical basis for differentiation (Castlemaine Tooheys at 478).
76 Section 49 will not invalidate a burden on trade and commerce between State and Territory that disadvantages that trade in competition with intrastate trade, if the imposition of the burden is reasonably necessary or appropriate for the protection of the people of the State from a real danger or threat to its wellbeing. The question whether a particular legislative enactment is a necessary, or even a desirable, solution to a particular problem is, in large measure, a political question, best left for resolution by the political process. It would be intolerable for the judiciary to sit in judgment on a legislative decision, since to do so would give a new and unacceptable dimension to the relationship between the judiciary and the legislature. The judiciary would be placed in an invidious position if it were only such regulation of interstate trade as is, in fact, necessary for the protection of the community that was consistent with the freedom ordained by s 92 (Castlemaine Tooheys at 472-473).
77 Even if a measure is legitimately directed to a perceived threat to the integrity of an industry in a State, the method of countering it must be non-discriminatory regulation. If the choice taken is not necessary for the protection of the integrity of that industry in the State, in that prohibitions contained in the measure are not appropriate and adapted to guarding against the threat to the integrity of that industry in a non-discriminatory manner, the provision will offend s 92 (Betfair v WA at [109]-[110]). Further, revenue protection cannot justify a law that discriminates against interstate trade, since such a justification, if allowable, would support the reintroduction of customs duties at State and Territory borders (Betfair v WA at [108]).
78 A measure may burden trade and commerce between State and Territory, both directly and indirectly. It will do so directly if it denies to a trader outside the State the use of an element in that trader's operations. It will do so indirectly if it denies to the customers of the out-of-State trader receipt and consideration of information required by those customers that would otherwise be available to them by accessing the trader's website or by communication with its telephone operators. If such effects operate to the competitive disadvantage of the trader outside the State and to the advantage of in-State traders, the measure may impose a discriminatory burden of a protectionist kind on trade between State and Territory (Betfair v WA at [118]).
79 A measure that prohibits a person in a State from engaging in a particular form of transaction by means of a cross-border electronic communication and renders an out-of-State trader liable for aiding or abetting an offence by a person in the State, may be a discriminatory burden on interstate trade of a protectionist kind, even if all of the acts of the out of State trader occur outside the State and that particular form of transaction is also denied to in-State operators and their customers. However, such a measure will only be a discriminatory burden on interstate trade of a protectionist kind if it operates to protect established trading operations in the State from the competition that the out-of-State trader would otherwise present. If the discrimination in a measure is between different but competing forms of transaction and the effect of the measure is to prohibit an out-of-State trader from providing a service to persons in the State, leaving in-State operators able to supply customers with their services without the competition to their revenue that the out-of-State trader would present, the measure will impose a discriminatory burden of a protectionist kind (Betfair v WA at [120]-[122]).
80 Before there will be a contravention of s 49, it is necessary to point to a relevant differential treatment that is likely to discriminate in a protectionist sense between interstate and intrastate wagering transactions that employ technology such as the Betbox (Betfair Pty Limited v Racing New South Wales (2012) 286 ALR 221 at [31] (Betfair v Racing New South Wales). Not every measure that has an adverse effect between competitors will attract the operation of s 49. A measure will not contravene s 49 unless its practical effect is to discriminate against interstate trade and thereby protect intrastate trade of the same kind (Betfair v WA at [11] and Betfair v Racing New South Wales at [36]). The concept of protectionism supplies the criterion by which discriminatory laws may be classified as rendering less than absolutely free trade and commerce among the States and between the Northern Territory and the States. The requirement of protectionism is essential to the attraction of s 92 or of s 49 (Betfair v Racing New South Wales at [36]).
81 Emphasis upon the circumstances of particular traders, and upon features that may be accidental to those circumstances and to interstate transactions in which those traders may engage, carries the risk of erroneously characterising an impugned law by its effect on particular traders and not by its effect upon interstate trade (Betfair v Racing New South Wales at [46]). The subject of s 49 is trade between the Northern Territory and the States, not traders, whose transactions may or may not consist wholly of inter-State transactions or intra-State transactions (Betfair v Racing New South Wales at [50]).
82 The fact that a trader has its principal place of operation in a State where its business receives protection by the law of that State does not necessarily lead to the conclusion that that trader is engaged only in intrastate trade. Where the central management and control of a trader is located in one state but it carries on, in other States, the business of selling goods, the essence of which consists of the contracts with buyers, the trader should not be classified as being engaged in intrastate trade (Betfair v Racing New South Wales at [48]-[49]).
APPLICATION OF SECTION 49 OF THE SELF-GOVERNMENT ACT
83 The declarations made by the primary judge, which were the declarations sought by Sportsbet and Eureka, were that the Impugned Provisions are invalid to the extent that they apply to the installation and use in Victoria by Sportsbet and Eureka of the computer device known as a Betbox. The basis for the invalidity is that they offend against s 49 of the Self-Government Act, in that they impose an impermissible burden on trade and commerce between the Northern Territory and Victoria.
84 Those declarations are specifically concerned with activities of Sportsbet and Eureka. In concluding that, by accepting wagers by means of the Betbox, Sportsbet is engaged in interstate trade and commerce, the primary judge regarded several facts and matters as being critical.
85 Firstly, Sportsbet is registered in the Northern Territory and has a registered office and principal place of business in the Northern Territory. However, the following facts make it clear that the real central control and management of Sportsbet's business is in Victoria:
While Sportsbet has a registered office in Darwin, it has much larger offices in Melbourne.
A substantial part of Sportsbet's business is conducted in Melbourne, including its IT, marketing, human relations, finance and administration departments, its bookmakers, the risk management department, real-time client bet monitoring and the fraud department, including anti-money laundering checking.
The management of Sportsbet's business is conducted in Melbourne and there is a far greater concentration of senior and other staff in Melbourne.
Sportsbet's senior managers spend most of their time in Melbourne and are resident in Melbourne.
Sportsbet's Northern Territory licence does not confer any right, and does not purport to confer any right, on Sportsbet to engage in bookmaking activities in Victoria.
By installing the Betbox in the Hotel and its display of logos and advertising, Sportsbet had a physical presence in Victoria and, in substance, betting and wagering transactions occurred within Victoria.
86 Secondly, her Honour had regard to the fact that Sportsbet has a registered licence business that operates from specific premises in the Northern Territory under the Territory Betting Act. Its licence permits Sportsbet a more flexible approach to marketing than other places in Australia. It permits Sportsbet to offer a much wider range of bets to punters than is permitted under Victorian law. It permits Sportsbet to provide credit to punters. Sportsbet cannot do that anywhere else in Australia. One of the conditions of Sportsbet's licence is that Sportsbet take bets from the Fannie Bay racecourse in Darwin.
87 In that regard, it is relevant that there is a developed market throughout Australia for the provision by bookmakers and totalisators, by means of telephone and the Internet, of wagering services on racing and sporting events. Indeed, such a market may be international. Such events may take place in one State or Territory, the punter may be in another State or Territory and the bookmaker or totalisator may be in a third State or Territory. The inhibition to competition presented by geographic separation between rival suppliers and between supplier and customer in such a market is reduced by the existence of the Internet and the ease of its use, together with other means of electronic communication, such as wireless telephones (Betfair v WA at [114]).
88 However, even if the facts and matters relied on by the primary judge might lead to the conclusion that Sportsbet is engaged in trade and commerce in a market that extends to the Northern Territory and other parts of Australia and the world, including Victoria, that is not to the point. The question is whether the installation and use of the Betbox and the transactions that are undertaken by means of the Betbox constitute trade between the Northern Territory and Victoria. It is not sufficient to conclude that Sportsbet is engaged in interstate trade and commerce between Victoria and the Northern Territory. It is necessary to consider whether the Impugned Provisions impose a relevant burden on that trade and commerce.
89 The relevant transactions that Sportsbet says constitute the trade and commerce between Victoria and the Northern Territory that is burdened by the Impugned Provisions occur when a punter places a wager with Sportsbet using the Betbox in the Hotel in Victoria. In those circumstances, the punter is present in the Hotel; so is Sportsbet, by reason of the location of the Betbox in the Hotel. Thus, the relevant transactions occur between Sportsbet, through the Betbox, and the punter, within the Hotel in Victoria. The question is whether those transactions are properly to be characterised as trade and commerce between Victoria and the Northern Territory. That question is not answered by considering the business of Sportsbet or the business of Eureka in broad terms. It is necessary to examine the precise conduct involved.
90 The Betbox, located in Victoria, is the means whereby a customer of Sportsbet places a wager with Sportsbet in Victoria. The fact that the wager is subsequently accepted or rejected in Darwin does not detract from the fact that the Hotel is a place of betting within the meaning of s 2.5.2(1)(a). The Betbox, and the place where it is located within the Hotel, are both places to which punters resort for the purposes of wagering with Sportsbet. The function and purpose of the Betbox at the Hotel is to enable Sportsbet to accept instructions from punters in Victoria for the placing of bets with Sportsbet. By installing the Betbox in the Hotel, Sportsbet has localised a stand or pitch where wagers were to be executed (see Bond v Foran (1934) 52 CLR 364 at 370). That stand or pitch is in Victoria.
91 In so far as Sportsbet engages in trade and commerce in a market that extends beyond the borders of the Northern Territory, it does so by means of the internet and other technology, such as personal computers and mobile telephones. Competition in that regard is fierce. However, s 49 does not afford Sportsbet an immunity to conduct business as it pleases in Victoria simply because there are some aspects of its activities that might fairly be characterised as trade and commerce that go beyond the boundaries of the Northern Territory and might fairly be described as trade and commerce between the Northern Territory and Victoria. The Impugned Provisions do not prevent Sportsbet from doing what it does in the Northern Territory in accordance with its licence. Nor do they prevent Sportsbet from engaging in its business beyond the border of the Northern Territory by means of the internet and other technology, such as personal computers and mobile telephones.
92 Finally, the primary judge had regard to the fact that the significant part of Sportsbet's computer system is located in Darwin and that Sportsbet's customers, including customers in Victoria, interact with Sportsbet through its computers located in the Northern Territory. However, the facts summarised above demonstrate that the computer system and employees in the Northern Territory operate under the control and management of the senior management of Sportsbet located in Victoria. The Impugned Provisions prohibit activities that are distinctly Victorian. The use of the Betbox is essentially Victorian. Any trade and commerce that is affected by the Impugned Provisions, including the installation and use of the Betbox in the Hotel, occurs within Victoria.
93 Accordingly, there are cogent reasons for concluding that the primary judge erred in concluding that the installation and the use of the Betbox in the Hotel, as described above, constitutes trade or commerce between the Northern Territory and Victoria. Having regard to the location in Victoria of the management of Sportsbet, the Betbox, the Hotel and a punter who uses the Betbox in the Hotel for the purpose of making a wager or bet with Sportsbet, there are good grounds for concluding that it is trade and commerce wholly within Victoria. The connection with Sportsbet's computer system in the Northern Territory is no more than incidental to the particular transactions in question. It would follow that the Impugned Provisions impose no burden or restraint on trade and commerce between Victoria and the Northern Territory.
94 However, even if the particular conduct in question constitutes trade and commerce between the Northern Territory and Victoria, the critical question is whether the Impugned Provisions constitute a burden of the relevant kind on that trade and commerce, namely, a discriminatory burden of a protectionist kind. The Impugned Provisions do not have a discriminatory effect in relation to Sportsbet qua interstate trader, because there is no competition between Sportsbet and Tabcorp on equal terms. Sportsbet would have a huge advantage over Tabcorp if it were allowed to operate the Betbox without having to bear all of the obligations undertaken by Tabcorp. The obligations undertaken by Tabcorp are the quia pro quo for all of the rights granted by its licence.
95 Discrimination involves the unequal treatment of equals or the equal treatment of unequals (Bayside City Council v Telstra Corporation Limited (2004) 216 CLR 595 at 629-630). However, Sportsbet is treated in precisely the same way as every other person in the world, other than Tabcorp. While Tabcorp and Sportsbet may be competitors, they are not equals. The grant of the wagering licence to Tabcorp was conferred only on the basis that Tabcorp would accept substantial burdens, principally directed to the advancement of the Victorian racing industry. Those burdens do not fall upon Sportsbet or upon anybody else. Tabcorp is sui generis.
96 It is not possible to conclude, simply from the differential treatment afforded to Tabcorp, by reason of its exemption from the Impugned Provisions, that the Impugned Provisions discriminate in favour of intrastate trade. Tabcorp is in a position relevantly different from all other bookmakers, both Victorian and Northern Territory. It is the holder of a licence for which it paid approximately $600 million, being a licence that grants to it the privilege of totalisator exclusivity and offcourse retail exclusivity. As a condition of the grant of that licence and of the privileges that it entails, Tabcorp was required to, and did, enter into arrangements that were satisfactory to the racing industry, being arrangements that substantially fund the racing industry. Tabcorp is subject to special and distinct regulatory requirements by reason of its status as the holder of that licence. The differences between the legislative treatment of Tabcorp, on the one hand, and the legislative treatment of all other entities, on the other, are a reflection of the value of the privileges for which Tabcorp paid substantial consideration.
97 In their terms, the Impugned Provisions treat all bookmakers other than Tabcorp equally, whether they are based in the Northern Territory or Victoria and whether they engage in trade and commerce between the Northern Territory and Victoria or intrastate trade and commerce. Unless registered under the Gambling Act, no person can operate as a bookmaker in Victoria. If registered under the Gambling Act, a person may engage in such business while at a licensed race course in Victoria. There is nothing to preclude bookmakers who wish to engage in trade and commerce between the Northern Territory and Victoria, or who have connections with the Northern Territory, from becoming registered under the Gambling Act. However, even if so registered, no bookmaker other than Tabcorp, whether wholly Victorian or otherwise, can conduct offcourse business by means of a service such as the Betbox. On the other hand, there is no prohibition on Sportsbet receiving bets from persons located in Victoria by means of telephone or personal computer and the internet.
98 If Sportsbet or any other Northern Territory based bookmaker sought to be registered in Victoria, it would be in exactly the same position as all other bookmakers registered in Victoria, other than Tabcorp. The fact that the Impugned Provisions preclude Sportsbet from conducting business in Victoria by means of the Betbox is not of itself sufficient to engage s 49 of the Self-Government Act. Sportsbet must demonstrate discrimination of a protectionist kind, not just an adverse effect on a particular aspect of its business. Section 49 does not protect the particular business model that a trader seeks to employ.
99 If the requirement of the Impugned Provisions that all bookmakers conducting business in Victoria must do so only at particular locations offended s 49, the consequence would be that the State could regulate where and how Victorian bookmakers can conduct their business in Victoria but could not regulate where and how non-Victorian bookmakers can conduct their business in Victoria. Section 92 of the Constitution, in its emanation in s 49 of the Self-Government Act, does not afford Sportsbet an immunity to conduct business as it pleases in a State simply because it has a licence in the Northern Territory and it processes, on its computer system in the Northern Territory, wagering transactions that emanate from Victoria.
100 The Impugned Provisions apply only if a bookmaker seeks to establish a physical presence in Victoria, as Sportsbet seeks to do by means of the Betbox. The question is whether, once a bookmaker has a physical presence in Victoria, the requirement that the bookmaker be present at a racecourse, rather than some other place, is more difficult to meet for Northern Territory bookmakers than it is for Victorian bookmakers. There is no reason to suppose that it is. There is, therefore, no discrimination of a protectionist kind that affects trade and commerce between the Northern Territory and Victoria.
101 Protectionism is the economic policy of restraining trade from foreign competitors in order to shield intrastate trade from the full rigours of that competition. The vice in such a policy is said to be that it discourages specialisation in areas of comparative advantage and fosters inefficiency. Protectionism ordinarily involves giving assistance to a specific inefficient domestic industry to the detriment of a specific more efficient foreign industry. That results in a loss to overall welfare. Motivation to engage in protectionism comes about from a perception that the protected industry will add to the wellbeing of the domestic jurisdiction.
102 However, the Impugned Provisions impose a blanket prohibition. A prohibition that outlaws all trade in a market, both domestic and foreign, is not protectionist. If the prohibition attaches to all, no intrastate trade and no intrastate traders are being protected. The predecessors of the Impugned Provision could not be characterised as protectionist, since they applied to the whole world. There was no exception until the TAB was created. Neither s 92 nor s 49 could possibly be attracted unless an exception to the blanket prohibition was created. However, the mere creation of an exception does not render the prohibition protectionist.
103 The blanket prohibition of offcourse wagering was qualified when the TAB was established and was continued when the operations of the TAB were privatised in 1994 by being transferred to Tabcorp. The privatisation did not simply involve granting a permit to a new private entity to engage in offcourse wagering. The scheme that operated to prevent the use of the Betbox in the Hotel was established in 1994 for a defined and finite term, on specified conditions. The scheme then established included the following elements:
Tabcorp acquired a wagering licence for a finite period, for which it paid a substantial consideration, replacing the TAB as sole provider of offcourse retail wagering services.
In taking on the wagering licence and entering into mandatory related commercial arrangements, Tabcorp became burdened by the obligation to make financial contributions to the Victorian racing industry at a substantially higher effective rate than any other person or entity and was also burdened by the need to operate a totalisator as a core element of its wagering service, involving significant expense not borne by non-totalisator wagering service providers.
104 The removal of one of the benefits afforded to Tabcorp, while retaining the corresponding burdens, would result in market distortion. Sportsbet would have the benefit of the payments made by Tabcorp to the racing industry without bearing the burden of making payments at the level that Tabcorp is obliged to make such payments. Sportsbet would take the benefit of Tabcorp's financial contribution to the racing industry without bearing an equal burden. The retail exclusivity provisions that benefit Tabcorp do not deny market access to persons who are more efficient than Tabcorp. Rather, they prevent a market distortion that would be the consequence of permitting entities to have the benefit of Tabcorp's ongoing payments to the racing industry without requiring such entities to make an equal payment.
105 Sportsbet contends that the Impugned Provisions necessarily target interstate trade because they prevent punters from using the Betbox for communicating from Victoria to the Northern Territory, in circumstances where Tabcorp enjoys the liberty of concluding transactions through the means of its EasyBet terminals, which perform the same function. Sportsbet asserts that the prohibition on using the Betbox as a means of carrying on its business in Victoria demonstrates that the burden falls directly on interstate trade. Sportsbet also points to Tabcorp as being not merely a trader but the single trader that is capable of engaging in the form of communication that is otherwise unlawful. Tabcorp is not subject to the prohibition contained in the Impugned Provisions and can communicate with its Victorian customers by means of EasyBet terminals.
106 However, in so far as the Impugned Provisions prohibit communicating, not only do they prohibit communication from a place in Victoria to the Northern Territory, they prohibit communication from any place in Victoria to any other place in Victoria. The relevant prohibition is not on communicating by means of the Betbox, but on possessing in Victoria an instrument of betting in the form of a Betbox, on opening, keeping or using in Victoria a betting house or place of betting, and on allowing a person to bet on licensed premises in Victoria.
107 Sportsbet's contentions emphasise the real gravamen of its complaint. Its complaint is directed not so much at the Impugned Provisions as at the exemptions granted to Tabcorp by reason of its licence. Sportsbet's true complaint is that an individual trader, namely Tabcorp, is given a preference that is not given to any other trader, whether interstate or intrastate. The real complaint of Sportsbet is that an exception to the long-standing prohibition imposed by the Impugned Provisions was created by the grant of a licence to Tabcorp to engage in offcourse wagering activities. That exception was created more than 50 years ago, in favour of the TAB, Tabcorp's predecessor. Sportsbet says, in effect, that, simply because its manner of doing business involves an element that happens to take place in the Northern Territory, albeit that it could take place in Victoria, it should be exempted from complying with the Impugned Provisions so that it can compete with Tabcorp on a privileged basis. Sportsbet, in effect, seeks to be given a privilege that is not available to any intrastate bookmaker.
108 Thus, whether or not the activities of Sportsbet that are prohibited by the Impugned Provisions could fairly be characterised as trade or commerce between the Northern Territory and Victoria, the prohibitions of the Impugned Provisions do not constitute a discriminatory burden of a protectionist kind. Section 49 is not attracted by any of the Impugned Provisions. In the light of that conclusion, it is not necessary to consider whether any burdens imposed by the Impugned Provisions were appropriate and adapted to achieve legitimate ends.
109 Some months after these reasons were first formulated, the decision in Sportsbet v Harness Racing Victoria and Anor (No 6) [2012] FCA 896 was published, on 21 August 2012. The parties sought and were granted leave to make further brief written submissions in the light of that decision. It was recognised in that decision that the entitlements that Tabcorp enjoys are not because it is an intrastate trader but because of the obligations that it undertook to make substantive contributions to the Victorian racing industry in return for rights correlative to those contributions (at [126]). Tabcorp does not enjoy retail exclusivity because it is an intrastate trader, but rather because of its licence and the obligations imposed on it by the statutory scheme under which the licence is granted. No interstate trader is prohibited from engaging in any conduct by the Impugned Provisions simply by reason of the fact that it is an interstate trader. The reasoning in the decision, if anything, supports the position of Tabcorp and the State of Victoria.
CONCLUSION
110 The Impugned Provisions do not impose a discriminatory burden of a protectionist kind. They impose a restraint on all who wish to engage in certain kinds of wagering activity, other than Tabcorp. Their effect is to give to Tabcorp both totalisator exclusivity and retail exclusivity in certain kinds of wagering activity. However, the restraints do not have the effect of interfering with trade or commerce between the Northern Territory and Victoria in a way that constitutes a discriminatory burden of a protectionist kind. The Impugned Provisions do not offend against s 49 of the Self-Government Act. The primary judge erred in reaching her conclusion to the contrary.
111 Both appeals should be upheld. In lieu of the orders made by the primary judge, there should be orders that the proceeding be dismissed and that the applicants in the proceeding pay the costs of the respondents to the proceeding, except for costs that were the subject of orders for costs made by the primary judge from which there was no appeal. Sportsbet should pay the costs of the State of Victoria and Tabcorp of their respective appeals.
I certify that the preceding one hundred and eleven (111) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.
Associate:
Dated: 12 October 2012
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION VID 1000 of 2011
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: THE STATE OF VICTORIA
Appellant
AND: SPORTSBET PTY LTD (ABN 87 088 326 612)
First Respondent
EUREKA HOTEL HOLDINGS PTY LTD (ACN 135 267 597)
Second Respondent
TABCORP HOLDINGS LIMITED (ABN 66 063 780 709)
Third Respondent
THE VICTORIAN COMMISSION FOR GAMBLING REGULATION
Fourth Respondent
GENERAL DIVISION VID 1002 of 2011
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: TABCORP hOLDINGS LIMITED (ABN 66 063 780 709)
Appellant
AND: SPORTSBET PTY LTD (ABN 87 088 326 612)
First Respondent
EUREKA HOTEL HOLDINGS PTY LTD (ACN 135 267 597)
Second Respondent
THE STATE OF VICTORIA
Third Respondent
THE VICTORIAN COMMISSION FOR GAMBLING REGULATION
Fourth Respondent
JUDGES: EMMETT, KENNY AND MIDDLETON JJ
DATE: 12 OCTOBER 2012
PLACE: MELBOURNE
REASONS FOR JUDGMENT
kenny AND MIDDLETON Jj
INTRODUCTION [112]
DECISION OF THE PRIMARY JUDGE [121]
THE IMPUGNED PROVISIONS [129]
Section 2.5.2 of the GRA β Betting Houses or Places of Betting [129]
Section 2.6.1 of the GRA β Possession of Instrument of Betting [134]
Section 115 of the LCRA β Betting on licensed premises [135]
Tabcorp's exemption from the prohibitions in the impugned provisions [137]
FACTUAL BACKGROUND [140]
Economic, social and cultural significance of the Victorian Racing Industry [142]
Brief history of Tabcorp's exemption from the relevant prohibitions [145]
The business of Tabcorp [164]
Easybet terminals [167]
Totalisator betting [169]
Tabcorp and the current funding of the Victorian Racing Industry [172]
Alternative models for funding the Victorian Racing Industry [186]
The business of Sportsbet [189]
The betbox [195]
The market for wagering service providers [199]
OVERVIEW OF RELEVANT PRINCIPLES [204]
Cole v Whitfield [208]
Bath, Castlemaine Tooheys and Barley Marketing Board [216]
The Betfair cases [225]
QUESTIONS TO WHICH THE RELEVANT PRINCIPLES GIVE RISE [243]
Discrimination against trade or commerce between the Territory and the State [244]
Trade or commerce between the Territory and the State? [244]
The nature of the burden [259]
Discrimination against Territory β State trade [262]
A statutory monopoly is not per se discrimination against out-of-state trade [279]
Protectionism β disadvantaging out-of-state trade or advantaging intrastate trade? [287]
Protectionism β Not reasonably necessary to achieve a legitimate purpose? [303]
Reasonably necessary for the promotion of a successful racing industry, including for the purpose of funding the industry [307]
DISPOSITION [322]
INTRODUCTION
112 These are two appeals from a judgment of a single judge of the Court. For the reasons stated below, we would allow both appeals.
113 The appeals raise the question whether ss 2.5.2 and 2.6.1 of the Gambling Regulation Act 2003 (Vic) (GRA) and s 115 of the Liquor Control Reform Act 1998 (Vic) (LCRA) (together, the impugned provisions) are invalid to the extent that they purport to apply to the installation and use in Victoria by Sportsbet Pty Ltd (Sportsbet) and Eureka Hotel Holdings Pty Ltd (Eureka) of a computer device known as a "betbox". Section 2.5.2 of the GRA prohibits a person from opening, keeping or using a betting house or place of betting. Section 2.6.1 of the GRA prohibits a person from possessing an instrument of betting not authorised under the GRA. Section 115 of the LCRA prohibits a licensee under the LCRA from allowing a person to bet on licensed premises. A betbox is a computer terminal that allows the user, by means of a touch screen, to select and place a bet with Sportsbet and to receive notification of its acceptance, by electronic communications to and from Sportsbet's servers: see Sportsbet Pty Ltd v Victoria (2011) 282 ALR 423 ("Sportsbet v Victoria") at 426 [2] and 434 [40]. The effect of the impugned provisions is to prohibit Sportsbet from installing a betbox device at premises in Victoria.
114 The appellants are, in appeal VID 1000, the State of Victoria (the State) and, in appeal VID 1002, Tabcorp Holdings Limited (Tabcorp). Sportsbet, the first respondent in both appeals, is a company licensed under the Racing and Betting Act 1983 (NT) (RBA (NT)) to operate as a sports bookmaker from premises in Darwin. Sportsbet's servers are located at its licensed premises.
115 The litigation resulting in these appeals arose out of events between May and July 2010. In May 2010, Sportsbet installed a betbox at the Eureka Stockade Hotel (the Hotel) in East Ballarat in Victoria. Eureka, the second respondent in both appeals, is the licensee of the Hotel. In July 2010, officers of the Victorian Commission for Gambling Regulation (VCGR) seized the betbox under s 10.5.9(1)(c) of the GRA, which enabled them to seize equipment if they considered this necessary for the purpose of obtaining evidence of the commission of an offence. The relevant offences were breaches of the impugned provisions.
116 As a consequence, Sportsbet and Eureka instituted proceedings against the State and the VCGR. Tabcorp was subsequently granted leave to intervene and was later joined as a respondent.
117 Tabcorp is the holder of a sole wagering licence (the wagering licence), pursuant to which Tabcorp conducts totalisator (pari-mutuel) and fixed odds betting on horse, harness and greyhound races. Tabcorp accepts bets in various ways, including through "EasyBet" terminals. Provided that it complies with the wagering licence, Tabcorp is exempt from the impugned provisions. Tabcorp is said to enjoy "off-course retail exclusivity". The exclusivity is said to be "off-course" because, subject to the Racing Act 1958 (Vic) (Racing Act), registered bookmakers "on-course" can also take bets, as discussed below.
118 The key question in these appeals arises by virtue of the operation of s 49 of the Northern Territory (Self-Government) Act 1978 (Cth) (the Self-Government Act) and s 109 of the Commonwealth Constitution (the Constitution).
119 Section 49 of the Self-Government Act provides that:
Trade, commerce and intercourse between the Territory and the States, whether by means of internal carriage or ocean navigation, shall be absolutely free.
Section 109 of the Constitution provides that:
When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid.
When read with s 109 of the Constitution, s 49 of the Self-Government Act (s 49) replicates the operation of s 92 of the Constitution (s 92) in relation to trade and commerce between the States and the Northern Territory (the Territory), save that s 109 renders a legislative provision inconsistent with s 49 inoperative, rather than invalid, "to the extent of the inconsistency": compare Sportsbet Pty Ltd v New South Wales (2012) 286 ALR 404 ("Sportsbet v NSW") at 408-410 [9]-[13]. In AMS v AIF (1999) 199 CLR 160 ("AMS v AIF"), the High Court held that s 49 is "to be given an ambulatory interpretation to follow the course of decisions construing s 92": see AMS v AIF at 175-176 [36] per Gleeson CJ, McHugh and Gummow JJ, 211-212 [152]-[153] per Kirby J and 232-233 [221] per Hayne J.
120 The question for determination in both appeals is whether the impugned provisions are rendered inoperative by s 109 of the Constitution by reason of their inconsistency with s 49 of the Self-Government Act. The fact that the impugned provisions apply to Sportsbet's use of a betbox at licensed premises in Victoria but do not apply to Tabcorp's use of Easybet terminals at licensed premises is the basis of the claim that the impugned provisions offend s 49.
DECISION OF THE PRIMARY JUDGE
121 At first instance, Sportsbet and Eureka submitted that, on their proper construction, the impugned provisions did not apply to the installation and use of a betbox. The learned primary judge rejected this submission and held that the impugned provisions applied to the installation and operation of the betbox at the Hotel. This was because:
(a) the betbox was an "instrument of betting", within the meaning of s 2.6.1 of the GRA, being "not merely the means by which the bet is communicated", but "the means by which the bet is selected, placed and its acceptance is notified": see Sportsbet v Victoria at 434 [40].
(b) the betbox and the Hotel in which it was located were both "places to which punters resorted for the purpose of betting with Sportsbet": Sportsbet v Victoria at 439 [66]. Her Honour held that, "[b]y installing the 'betbox' in [the Hotel], Sportsbet had localised a place as the stand or pitch where the bets were executed". Sportsbet v Victoria at 439 [64]. Accordingly, by installing and using a betbox at the Hotel, Sportsbet and Eureka, opened, kept or used a "betting house or place of "betting" within s 2.5.1(1)(a) of the GRA and, for similar reasons, also fell within s 2.5.1(1)(b) and (d) of the GRA: see Sportsbet v Victoria at 439 [63]-[68].
(c) under the LCRA, Eureka was the licensee of a licensed premises β the Hotel β where Sportsbet and Eureka installed the betbox that enabled the Hotel's patrons to bet with Sportsbet in contravention of s 115(1) of the LCRA: see Sportsbet v Victoria at 440 [70]-[71].
122 On appeal, neither Sportsbet nor Eureka challenged the primary judge's rulings on the construction issues. Nor did they challenge her Honour's ruling that Tabcorp's approval to conduct fixed odds betting was a valid approval under s 4.5.3 of the GRA: see Sportsbet v Victoria at 427 [7], 460-463 [161]-[172].
123 As well as arguing at trial that, as a matter of statutory construction, the use of the betbox at the Hotel did not contravene the impugned provisions, Sportsbet and Eureka contended that the effect of the impugned provisions was contrary to the requirement in s 49 of the Self-Government Act that trade and commerce between the Territory and the States be absolutely free and that, in consequence, the impugned provisions were invalid (presumably, in the sense of inoperative) by reason of s 109 of the Constitution.
124 The primary judge accepted this submission: see Sportsbet v Victoria at 427 [7]. Her Honour ruled that the impugned provisions were inconsistent with s 49 and invalid to the extent that they would preclude the operation of the betbox at the Hotel, because:
(a) Sportsbet was engaged in trade and commerce between the Northern Territory and the State (443-445[85]-[93]);
(b) the impugned provisions imposed burdens on trade and commerce between the Northern Territory and the State (446 [95], 448-449 [108], 449 [110]);
(c) these burdens were discriminatory because they did not apply to Tabcorp (447 [101], 449 [109], 449 [110]);
(d) these burdens were also protectionist because they conferred a competitive advantage on Tabcorp over its interstate competitors and imposed a competitive disadvantage on Sportsbet (451 [123], [125]);
(e) the impugned provisions could not be justified as no more than an appropriate and adapted means to a legitimate end β funding the Victorian racing industry and integrity β because:
(i) "the evidence did not disclose whether the funding of the racing industry was presently adequate, inadequate or in excess of what was "adequate" (455 [141], emphasis in original);
(ii) "the evidence did not establish what was the necessary level of funding, and whether that level of funding could only be secured by maintenance of the impugned provisions" (455 [141], 457 [149], 458 [150]);
(iii) "much of the evidence adduced by [the State and Tabcorp] was historical" [but] "the relevant date for construing the impugned provisions is the date when the "betbox" was removed by the VCGR, being the event which underpinned the constitutional challenge" (456 [144]);
(iv) the protection of revenue (including returns to the racing industry) was not a legitimate, non-protectionist purpose (456-457 [145]-[146]);
(v) the State and VCGR did not adduce "any evidence about integrity concerns [to] which the impugned provisions were said to be directed" (459 [158]);
(vi) the relevant witness for the State (Mr Kennedy) "gave evidence that although he considered that an integrity risk exposure existed, in his 30 years experience he could not recall any integrity failure with any corporate bookmaker in the Northern Territory or any other corporate bookmaker" (459 [158]);
(vii) integrity concerns "could be appropriately regulated without resorting to the blanket prohibition contained in the impugned provisions" (459-460 [159]); and
(viii) security concerns about the physical aspects of the betbox, including its weight, access to the internet) and "the differences in responsible gambling regimes as between Victoria and the Northern Territory β¦ could be appropriately regulated without blanket prohibition" (460 [160]).
125 Regarding the funding of the racing industry, the primary judge concluded (at 458 [151]):
The respondents have failed to establish that the burden that the impugned provisions impose on interstate trade and commerce is appropriate and adapted to achieving the funding objective or even the broader objective of promoting a vibrant and successful racing industry, including by materially funding that industry through the totalisator, which generates a stable, commission-based and adequately high source of revenue that is not contingent on outcomes. The respondents did not establish that the impugned provisions are capable of being seen as likely to achieve those identified purpose(s) and, further, did not establish that there were no alternative means to achieve those identified purpose(s) which involve no, or a lesser, burden on interstate trade and commerce than the means adopted. Put another way, there was no evidentiary basis to make the necessary findings that the funding of the racing industry was imperilled by the striking down of the impugned provisions. That conclusion is not surprising. A person can use a mobile phone in a public bar to place a bet with Sportsbet but cannot use a "betbox".
126 The primary judge also rejected the contention that identified security and integrity concerns justifying the prohibitions contained in the impugned provisions, for the reasons referred to in para [124] (e) (v) β (viii) above. In substance, her Honour held (at 427 [7]) that:
The impugned provisions are a burden because in their legal and practical operation they establish Tabcorp as a monopoly provider of off-course betting services in Victoria in what is a national market for the supply and acquisition of off-course betting services. It was not demonstrated that the impugned provisions were no more than an appropriate and adapted means to a legitimate end.
The primary judge made declarations consistent with this ruling and consequential orders, including an order for the VCGR to return the betbox to Eureka.
127 The State and Tabcorp have appealed against the whole of her Honour's judgment upon grounds, which, if accepted, would establish that the impugned provisions were not inconsistent with s 49 of the Self-Government Act and applied to prohibit Sportsbet and Eureka from installing and using the betbox at the Hotel. Sportsbet and Eureka have sought to uphold her Honour's declarations as to invalidity. In each appeal, the VCGR entered a submitting appearance, save as to costs.
128 Before we examine the arguments advanced by the parties, it is necessary to consider the legislative and factual context of the present case in more detail.
THE IMPUGNED PROVISIONS
Section 2.5.2 of the GRA β Betting Houses or Places of Betting
129 Section 2.5.2(1) of the GRA relevantly provides:
A person must notβ
(a) open, keep or use a betting house or place of betting; or
(b) being the owner or occupier of a house or place, knowingly and wilfully permit it to be opened, kept or used by any other person as a betting house or place of betting; or
(c) have the care or management of, or in any manner assist in conducting the business of, a betting house or place of betting.
130 The terms "betting house" and "place of betting" are defined in s 2.5.1(1) of the GRA as:
a house or place (as the case requires) that is opened, kept or usedβ
(a) for the purpose of betting with any persons (whether in person or by messenger, agent, post, telephone or otherwise); or
(b) for the purpose of taking instructions for the placement of bets on behalf of any person; or
(c) for the purpose of any money or valuable thing being received by or on behalf of a personβ
(i) as or for the consideration for any undertaking to pay or give thereafter any money or valuable thing on any sporting event; or
(ii) as or for the consideration for securing the paying or giving by some other person of any money or valuable thing on any such eventβ
except for the purpose of paying or receiving money in settlement of bets lawfully made under the Racing Act 1958 or this Act by or on behalf of a registered bookmaker; or
(d) for the purposes of printing, duplicating or producing lists of persons, animals or things (however identified) for the purpose of such lists being used for or in connection with unlawful betting on a sporting event.
131 Relevantly, "place" is defined as any place, whether or not within a building, on land or water, defined as to area, or on private property, and a "registered bookmaker" as the holder of a current certificate of registration as a registered bookmaker under Pt 5A of Ch 4 of the GRA: see, respectively, ss 2.1.2(1) and 1.3(1).
132 The exception in s 2.5.1(1)(c) picks up s 4 of the Racing Act, which provides that a registered bookmaker may, in certain circumstances, take bets on horse, harness or greyhound races (or certain other events) without contravening the GRA. Section 4 provides that:
(1) Despite anything in the Gambling Regulation Act 2003 (except Divisions 5 and 6 of Part 5 of Chapter 4) or any other law, it is not a contravention of that Act or law, and a racecourse is not a common gaming house or place for the purposes of that Act, if a person bets by way of wageringβ
(a) on any horse race, harness race or greyhound race; or
(b) on any approved betting event; or
(c) on a group of races approved by the Minister under section 2.5.16(1)(b) of the Gambling Regulation Act 2003 or on a race from such a group of racesβ
in accordance with this section.
(2) The racecourse must be licensed under this Part.
(3) The bet must be madeβ
(a) with a registered bookmaker; or
(b) with an approved substituteβ
who is present on the racecourse at the time the bet is made.
(4) The bet must be madeβ
(a) during the holding of a race meeting at the racecourse by a person present on the racecourse; or
(b) at any time by a person not present on the racecourse using a method of communication approved by the Minister under section 4A.
(5) In this section, a reference to a racecourse licensed under this Part includes a reference to land otherwise authorised for the holding of race meetings under this Part or Part III.
133 That is, broadly speaking, a registered bookmaker will not contravene the GRA or the Racing Act by taking bets on certain events (as stated in s 4), including horse, harness or greyhound races, where the registered bookmaker accepts a bet when present on an authorised racecourse when the bet is made: (1) during a race meeting at the racecourse, from a person who is also on the racecourse; or (2) at any time, from a person who is not at the racecourse, by means of an approved method of communication. A racecourse, within the meaning of s 4 of the Racing Act, is a racecourse in Victoria: see Interpretation of Legislation Act 1984 (Vic), s 48(b).
Section 2.6.1 of the GRA β Possession of Instrument of Betting
134 Section 2.6.1(1) of the GRA provides that "[a] person must not possess an instrument of betting not authorised under this Act". The term "instrument of betting" is defined in s 2.1.2(1) as including:
(a) a document;
(b) a card, list, money, paper, record, sheet, table, ticket or other written document;
(c) a mechanical, electrical, telephonic, electronic or other equipment or device or any access to such equipment or device;
(d) a board, chart or screen; or
(e) any form or means of recording, storing or transmitting information or dataβ
used, apparently used or likely to be used in carrying on or in connection with betting on a sporting event (being betting that is not authorised by a gaming Act or any other Act).
The expression "gaming Act" is defined to mean the GRA or the Casino Control Act 1991 (Vic): see GRA s 1.3(1). "Possession" (as defined in s 2.6.1(2)) includes:
(a) actual physical possession; and
(b) custody or control; and
(c) having and exercising access, either solely or in common with othersβ
and an instrument of betting is in a person's possession if it is on land or in premises occupied, used or controlled by the person.
Section 115 of the LCRA β Betting on licensed premises
135 Section 115 of the LCRA provides that:
(1) A licensee or permittee must not bet or allow a person to bet on the licensed premises or any authorised premises.
Penalty: 20 penalty units.
(2) Subsection (1) does not apply to betting on licensed premises or on any authorised premisesβ
(a) ifβ
(i) the premises are on a licensed racecourse within the meaning of the Racing Act 1958; and
(ii) the betting is engaged in during the holding of a race meeting within the meaning of that Act on the licensed racecourse; or
(b) ifβ
(i) a betting facility of the holder of the wagering licence or the wagering operator under Chapter 4 of the Gambling Regulation Act 2003 is established in the premises; and
(ii) the betting takes place through that licence holder or wagering operator; or
β¦ .
136 In summary, the impugned provisions preclude all bookmakers in Victoria except Tabcorp (as to which, see below) from engaging in off-course betting, including by means of a betbox or similar device. Tabcorp apart, providing a bookmaker is registered under the GRA, the bookmaker may take bets in Victoria but only in the circumstances stated in s 4 of the Racing Act. Sportsbet is not registered under the GRA and cannot take bets in Victoria. If it were registered, then Sportsbet would be in the same position in Victoria as other registered bookmakers. As it happens, Sportsbet has not sought registration under the GRA, although it could do so.
Tabcorp's exemption from the prohibitions in the impugned provisions
137 The effect of s 4.2.1(2) of the GRA is that a place in which wagering or an approved betting competition is conducted by Tabcorp or its wholly owned subsidiary, Tabcorp Manager Pty Ltd (Tabcorp Manager), is not to be characterised as a common gaming house or place. This provision thus takes such a place outside the scope of certain offences concerned with common gaming houses or places: see GRA, Pt 5, Div 6. Further, the effect of s 4.2.1(2) and the extended definition of "common gaming house or place" in s 2.5.20(1)(a)(iii) is also to take Tabcorp outside the scope of s 2.5.2. Hence, Tabcorp enjoys a "retail presence" in Victoria that is not enjoyed by other bookmakers.
138 By virtue of s 4.3.1, the wagering licence authorises Tabcorp to conduct wagering and approved betting competitions, subject to the relevant legislation and licence conditions. Providing that Tabcorp's use of Easybet terminals is in accordance with s 4.3.1, then Tabcorp is acting lawfully pursuant to s 4.2.1 and not in breach of s 2.6.1.
139 The effect of s 115(2) of the LCRA (see par [135] above) is to exempt Tabcorp from the prohibition in s 115(1) of the LCRA. Thus, by reason of s 115(2), betting at licensed premises in Victoria will not be unlawful by reason of s 115(1) if the betting is conducted with Tabcorp or Tabcorp Manager through a betting facility of Tabcorp or Tabcorp Manager at the premises.
FACTUAL BACKGROUND
140 In the following discussion, it is helpful to bear in mind the nature of an appeal in this Court. Such an appeal is by way of rehearing: see Minister for Immigration and Multicultural Affairs v Jia Legeng (2001) 205 CLR 507 at 533 [75] and Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 ("Branir") at 434-435 [20]. With respect to an appeal of this kind, the Court is obliged to "give the judgment which in its opinion ought to have been given in the first instance": Dearman v Dearman (1908) 7 CLR 549 at 561, quoted with approval in Fox v Percy (2003) 214 CLR 118 ("Fox v Percy") at 125 [23], where, in explaining the duty of an appellate court, Gleeson CJ, Gummow and Kirby JJ said (at 126-127 [25]):
Within the constraints marked out by the nature of the appellate process, the appellate court is obliged to conduct a real review of the trial and, in cases where the trial was conducted before a judge sitting alone, of that judge's reasons. β¦ In Warren v Coombes [(1979) 142 CLR 531 at 551], the majority of this Court reiterated the rule that:
"[I]n general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge but, once having reached its own conclusion, will not shrink from giving effect to it."
As this Court there said, that approach was "not only sound in law, but beneficial in β¦ operation". (Citations mostly omitted)
141 On these appeals, the appellants did not contest the specific findings of fact that the primary judge made. Instead, they contested the inferences that should properly be drawn from them, the undisputed facts and certain other evidence adduced at trial. No party sought to argue that any assessment of credibility played any real part in her Honour's evidentiary appraisals or conclusions on questions of fact or mixed fact and law. All parties invited the Court to consider as a whole the evidence adduced at trial β a task that, as appears below, proved to be unavoidable, having regard to the parties' submissions upon which the Court must rule.
Economic, social and cultural significance of the Victorian Racing Industry
142 The primary judge described the Victorian racing industry as "successful and prestigious", as the foremost in Australia, and among the best in the world: see Sportsbet v Victoria at 453 [134] and 457 [148]. In the words of a former Chair of VicRacing, Mr Lindsay Maxsted, the Victorian racing industry is "a leader within the thoroughbred racing industry in Australia, with premier racecourses and facilities attracting high quality trainers and racing participants from around Australia and internationally". On account of its success and international prestige, the Victorian racing industry benefitted not only the State but also the Australian racing and wagering industries as a whole.
143 The evidence at trial showed, and the primary judge accepted, that racing contributed to the economy, culture and employment of the State: see Sportsbet v Victoria at 453 [134]. Indeed, racing has played a significant role in the social and cultural life of Victoria since European settlement: see O'Hara J, A Mug's Game. A History of Gaming and Betting in Australia (New South Wales University Press, 1988); Pacini J, A Century Galloped By. The First Hundred Years of the Victoria Racing Club (Victoria Racing Club, 1988); Hutchinson G (ed), They're Racing! The Complete Story of Australian Racing (Penguin Books Australia Ltd, 1999). Race meetings have a social and cultural significance for both metropolitan and regional Victoria. In regional areas, they frequently contribute to the maintenance of local community identity. Race wagering is a popular recreation in the State and contributes to the economy through capital investment, employment and tourism.
144 Like other forms of gambling, however, participation in race wagering has a recognized potential for societal injury. Racing and race wagering are considered susceptible to corruption. As recently as August 2008, following a review sought by the Victorian Minister for Racing, Judge GD Lewis AM reported that "[i]t has been well known, for many years, that relationships exist between those involved in organised crime and the racing industry" and that "the racing industry is fertile ground for dishonesty and illegal manipulation, if it is not properly controlled": see Lewis GD, A Report on Integrity Assurance in the Victorian Racing Industry, 1 August 2008, pp 18, 25.
Brief history of Tabcorp's exemption from the relevant prohibitions
145 Tabcorp's position under the State's current legislation is the outcome of the history of wagering and gaming regulation in the State. Its position is, therefore, most readily understood by a brief reference to this history.
146 By the late 1950s, off-course wagering in Victoria, though unlawful, was widespread. In 1958, the Victorian Government appointed Justice FRB Martin as a Royal Commissioner to inquire whether off-course wagering should be legalised and, if so, by what method. Justice Martin's report, published in 1959, recommended the establishment of an off-course totalisator for off-course wagering in Victoria. Justice Martin considered that a totalisator would be better able to protect the integrity of the racing industry than other proposed methods for regulating off-course wagering, and would generate revenue for the State and the racing clubs. For Justice Martin, the critical difference between totalisator and fixed odds betting was that, in contrast to fixed odds betting, the totalisator operator would take out its share from the pool of bets before ascertaining the payout at the end of the race and, in consequence, the operator would be indifferent to the result of the race. It was this factor that he considered likely to reduce the risk of interference with a race. Justice Martin's report stated that an off-course totalisator system:
would be the one which would give most satisfaction to the community generally, because of the absence of any striving for private gain, of any motive to corrupt police, telephone employees or the connexions of horses, or to interfere with the horses themselves and also because there would be no evasion of tax.
(Report of the Royal Commissioner appointed to inquire into off-the-course betting, together with minutes of evidence, Melbourne, ordered by the Legislative Assembly to be printed 3 March 1959, p 53)
147 In response to Justice Martin's report, the Victorian Parliament enacted the Racing (Totalizators Extension) Act 1960 (Vic). This Act created the Totalisator Agency Board (TAB) as a statutory body corporate to operate an off-course totalisator. As a result, up until 1994, off-course betting could only be lawfully conducted through the TAB. From its establishment until the 1990s, the net profits of the TAB were distributed to Victorian race clubs: see Sportsbet v Victoria at 454 [138]. As the primary judge found, "[t]he possibility of funding the Victorian racing industry through contributions from wagering was one of the reasons for establishing a government owned off-course totalisator agency board": see Sportsbet v Victoria at 454 [137] (emphasis in original).
148 In 1994, the Victorian Government decided to float the TAB as a public company. In order to do so, the Government entered into negotiations with the racing industry as represented by its controlling bodies. The outcome was a Memorandum of Understanding between the State and representatives of the racing industry dated 15 March 1994 (MOU). A purpose of the MOU was, as the MOU stated, "to secure the financial strength and future of the Racing Industry". By the MOU, the parties also stated that they would co-operate to establish a joint venture.
149 Tabcorp was incorporated later in 1994, as the entity to purchase the businesses conducted by the TAB and to acquire the wagering and gaming licences needed to conduct these businesses. In the same year, the Gaming and Betting Act 1994 (Vic) (GBA 1994) was enacted. In the Treasurer's Second Reading Speech on 28 April 1994, the Treasurer stated (at 1314):
New arrangements have been entered into with the racing industry designed to secure the financial health of the industry and to provide for a large degree of self-determination in relation to racing and wagering. β¦ The government will maintain regulation in respect of matters of public interest and probity. The industry will have a participating interest in the Victorian wagering and gaming operations of the privatised TAB through a proposed joint venture, providing a more secure level of income into the future than would be available under a continuation of the current arrangements.
150 The GBA 1994 provided for the grant to Tabcorp of a single licence to conduct wagering (i.e., pari-mutuel betting on horse, harness and greyhound races) and approved betting competitions, and a single licence to conduct gaming: see GBA 1994, ss 6, 7, 8, 11, 12, 13. Both licences were for a term of 18 years: see s 12(2). The Governor in Council was to grant the licences, subject to the recommendation of the Victorian Casino and Gaming Authority (VCGA): see s 12(1). Before making the recommendation in Tabcorp's favour, the VCGA was required to be satisfied of various matters, including that Tabcorp and VicRacing Pty Limited (VicRacing) had concluded a joint venture agreement: see GBA 1994, s 11(2)(e). There were other provisions also directed to ensuring the integrity and probity of the wagering licensee and its operations: see, e.g., ss 11, 27 and 53.
151 The GBA 1994 provided that, notwithstanding any law to the contrary, "the conduct of wagering and approved betting competitions is lawful when conducted in accordance with a licence β¦ granted under this Act": see GBA 1994, s 68(1). There were numerous other provisions governing the conduct of the licensee's business: see, e.g., ss 69, 70, 71, 72, 73, 76.
152 On 25 May 1994, Tabcorp entered into a Joint Venture Agreement (JVA) with VicRacing representing the Victorian racing industry. The JVA entitled VicRacing to a 25% interest in the profits generated by Tabcorp's conduct of the gambling activities previously undertaken by the TAB. Additionally, Tabcorp entered into other agreements, a Product Supply Agreement and a Racing Program Agreement. These two agreements enabled the principal Victorian racing bodies to receive further fees from Tabcorp's conduct of gambling activities previously undertaken by the TAB.
153 On 28 June 1994, Tabcorp was granted the wagering licence and the gaming licence pursuant to s 12 of the GBA 1994. Thereafter, Tabcorp acquired the business formerly conducted by the TAB. Tabcorp appointed Tabcorp Manager as the operator of the wagering licence pursuant to s 22(1) of the GBA 1994.
154 From 1994, pursuant to the GBA 1994, off-course betting was prohibited in Victoria unless conducted by, or through, Tabcorp. At the same time, Tabcorp was obliged to make substantial payments to the Victorian racing industry pursuant to the JVA and the other agreements that it had made with the Victorian racing industry. Tabcorp was, moreover, subject to various controls, limitations and restrictions: see, e.g., GBA 1994, ss 6(d), 12(2)(b), 64, 67, 70, 71, 72.
155 A decade later, the GBA 1994 was repealed, with effect from 1 July 2004, by s 12.1.1(b) of the GRA. The repeal of the GBA 1994 did not, however, mean the abandonment of the regime that had previously operated. The main purpose of the GRA (as stated in s 1.1(1)) was merely "to re-enact and consolidate the law relating to various forms of gambling and to establish a Victorian Commission for Gambling Regulation".
156 As first enacted, the main objectives of the GRA, as stated in s 1.1(2), were:
(a) to foster responsible gambling in order to β
(i) minimise harm caused by problem gambling; and
(ii) accommodate those who gamble without harming themselves or others;
β¦
(b) to ensure that gaming on gaming machines is conducted honestly;
(c) to ensure that the management of gaming machines and gaming equipment is free from criminal influence and exploitation;
(d) to ensure that other forms of gambling permitted under this or any other Act are conducted honestly and that their management is free from criminal influence and exploitation;
(e) to ensure that β
(i) community and charitable gaming benefits the community or charitable organisation concerned;
(ii) practices that could undermine public confidence in community and charitable gaming are eliminated;
(iii) bingo centre operators do not act unfairly in providing commercial services to community or charitable organisations;
(f) to promote tourism, employment and economic development generally in the State. (Emphasis added)
Some of these objectives were relevant here, particularly to the appellants' case on these appeals.
157 The relevant structure of the GRA was straightforward enough. Chapter 2 β entitled "General Prohibition on Gambling" β was intended "to impose a general prohibition on gambling and create certain offences": see s 2.1.1. Elsewhere, the GRA (relevantly, in Ch 4) and the Casino Control Act 1991 (Vic) made certain specified exceptions to the general prohibition in Ch 2 and regulated the excepted gambling activities.
158 When enacted, Ch 4, entitled "Wagering and Betting", stated in s 4.1.1 that its purpose was:
(a) to make provision for the carrying on of licensed wagering and betting, by β
(i) the issuing of a wagering licence;
(ii) the approval of betting competitions;
(iii) the issuing of permits to conduct on-course wagering;
(b) to provide for the issue of a gaming licence in conjunction with the issue of a wagering licence, allowing the licensee to conduct gaming in accordance with Chapter 3.
159 In particular, Ch 4:
(a) gave the Governor in Council, on recommendation from the VCGR and subject to Ministerial satisfaction, power to grant a wagering licence and a gaming licence (s 4.3.8(1) and (2));
(b) provided that the Governor in Council must not grant a wagering licence unless the Minister, after consultation with the VCGR, was satisfied that certain arrangements had been made between the licensee and VicRacing and Racing Products Victoria (s 4.3.8(2));
(c) provided that the conduct of wagering and approved betting competitions was lawful when conducted in accordance with the wagering licence and was not a public or private nuisance (s 4.2.1(1));
(d) provided that any place in which lawful wagering (see s 4.2.1(1)) or an approved betting competition was conducted was not a common gaming house or place (s 4.2.1.(2));
(e) provided for the appointment of a wholly-owned subsidiary of the licensee as operator of the wagering licence, subject to the approval of the VCGR (s 4.3.15);
(f) provided that the use of a totalisator as provided by Ch 4 was lawful, did not constitute a wagering or betting offence, was not a ground for any place to be taken to be a common gaming house or place, and is not a public nuisance (s 4.2.2);
(g) provided that the licensee and the wagering operator must only use equipment in connection with a totalisator or approved betting competition approved by the VCGR (s 4.2.3);
(h) provided that the licensee and the waging operator must not conduct a totalisator or an approved betting competition without betting rules, being rules that met prescribed requirements and which were not disallowed by the VCGR (ss 1.3(1), 4.2.4 to 4.2.6);
(i) provided that the wagering licence authorised the licensee and the waging operator to conduct wagering and approved betting competitions, subject to conditions, the GRA and regulations, and the Racing Act (s 4.3.1);
(j) authorised the operation at the same time of no more than one wagering licence and one gaming licence (s 4.3.3); and
(k) provided that the wagering licence and the gaming licence were each for a term of 18 years, or a longer term as determined by the Governor in Council (s 4.3.9).
160 In the GRA, "wagering" is defined as "pari-mutuel betting on a horse race, harness race or greyhound race" (s 1.3(1)). For a discussion of pari-mutuel (or totalisator) betting, see Betfair Pty Ltd v Racing New South Wales (2010) 189 FCR 356 ("Betfair v RNSW") at 361 [15]. Within Ch 4, "licensee" meant "the holder of the wagering licence and the gaming licence" and "operator" meant "the wagering operator or an operator appointed under section 4.3.15(1)(b)": see s 4.1.2. "Approved betting competitions" were those approved by the Minister under s 4.5.3 in relation to horse, harness and greyhound racing, or the VCGR under s 4.5.6 of the GRA in relation to other events.
161 When the legislative history is considered, it becomes apparent that the scheme enacted under the GRA essentially carried on the scheme that had previously existed under the GBA 1994; and that the scheme under the GBA 1994 was built on, and developed from, the scheme introduced by the Racing (Totalizators Extension) Act 1960 (Vic). Furthermore, the GRA deemed Tabcorp to be the holder of the wagering licence under Pt 3 of Ch 4 of the GRA "for the balance of the term of the licence subject to any conditions to which the licence was subject immediately before that day": see GRA, s 12.2.1, Sch 7, cl 4.2(1). Tabcorp Manager was deemed to be appointed as operator of the wagering licence under s 4.3.15(1) of the GRA: see GRA, s 4.3.15(1), Sch 7, cl 4.2(3). In this way, the wagering licence granted to Tabcorp under the GBA on 28 June 1994 was continued under the GRA.
162 Furthermore, the provisions of Ch 2 with which these appeals are concerned derived from legislation that preceded the GRA. Section 2.5.2 originated with s 4 of the Police Offences Statute Amendment Act 1872 (Vic). Section 2.6.1 was first enacted in 1986 as s 66B of the Lotteries Gaming and Betting Act 1966 (Vic). Section 115 of the LCRA derived from s 97 of the Licensing Act 1906 (Vic), first enacted on 28 December 1906.
163 The offence provisions in Ch 2 of the GRA and s 115(1) of the LCRA apply to all bookmakers who might otherwise want to provide an off-course retail betting service in Victoria, with the exception of the authorised activities of the wagering licensee and the wagering operator. The law of the State thus contemplates that there is only one company with the licence to engage in off-course wagering. The legislative scheme operates so that the sole wagering licence held by Tabcorp authorises only it and Tabcorp Manager to conduct off-course retail betting by means of totalisator wagering and approved betting competitions β the latter currently including fixed odds betting on races and other events: see Sportsbet v Victoria at 462 [170]-[171]. Consequently, only Tabcorp may currently establish an off-course "retail presence" in Victoria for betting: see Sportsbet v Victoria at 431 [22]. As already noted, the licence is for a defined and finite period. In accordance with its wagering licence, within Victoria, only Tabcorp and Tabcorp Manager conduct a totalisator (as defined in s 1.3(1)). This is sometimes called "totalisator exclusivity". Also in accordance with its wagering licence, as already noted, Tabcorp provides various retail betting facilities, including Easybet terminals.
The business of Tabcorp
164 Tabcorp paid approximately $597.2 million for the wagering licence and concurrent gaming licence granted to it in 1994. At the time of the trial, Tabcorp was the largest wagering operator in Victoria, with customers throughout Australia and overseas.
165 Tabcorp remains subject to particular scrutiny under the GRA and, in some instances, regulation by the VCGR. For instance, the VCGR must approve Tabcorp's instruments of betting and betting rules; and Tabcorp must submit to audits and related processes: see GRA, ss 4.2.3, 4.2.6, 4.3.10A and 4.8.2-4.8.6. Under the JVA, the racing industry, represented by VicRacing, scrutinises and has a voice in Tabcorp's activities. Through participation in the Joint Venture Management Committee and the Joint Venture Operations Committee, the racing industry has access to significant information about Tabcorp's Victorian wagering business and can affect the strategic and operational aspects of that business.
166 Punters place bets with Tabcorp in various ways β in person at a Tabcorp retail outlet, whether off-course or on-course; over the telephone; via an internet-enabled mobile phone or an iPhone application; via interactive pay television; via the internet; and via Easybet terminals. The primary judge found that Tabcorp's retail wagering accounted for most of Tabcorp's wagering business: see Sportsbet v Victoria at 455 [139]. At the time of trial, Tabcorp operated about 627 retail outlets in Victoria, 528 of which were licensed venues. Indeed, the primary judge found that Tabcorp had an established network of off-course retail outlets, some staffed and some self-service: Sportsbet v Victoria at 455 [139].
Easybet terminals
167 In cross-examination, Tabcorp's Retail Distribution Manager, Mr Paul Carew, described Easybet terminals as "the future in terms of expanding our footprint in the venues". The primary judge found that Easybet terminals were widely distributed through licensed venues in Victoria (Sportsbet v Victoria at 442 [82]); and, at the time of the trial, betting via Easybet terminals accounted for nearly 50% of all bets sold through Tabcorp outlets. Easybet terminals allowed customers to access software connected to Tabcorp's retail network and, by this means, to view and select from Tabcorp's betting products. Easybet terminals accepted payment for selected products in the form of cash, vouchers, betting tickets and pre-paid in-funds betting accounts. (Tabcorp is unable to extend credit: see GRA, s 4.7.6.)
168 Sportsbet relied on the fact that, whilst Tabcorp was permitted to install Easybet terminals in this way, by reason of the impugned provisions, Sportsbet was unable to install betboxes at licensed premises anywhere in Victoria. This was said to support Sportsbet's claim that the impugned provisions were inconsistent with s 49 of the Self-Government Act.
Totalisator betting
169 Tabcorp's wagering licence permitted it to conduct: (1) totalisator betting off-course and on-course in relation to horse, harness and greyhound racing; and (2) "approved betting competitions", including fixed odds betting on horse, harness and greyhound races, and on various other sporting and non-sporting events. Tabcorp's contribution to the racing industry, discussed further below, was largely derived from totalisator wagering. The evidence at the trial showed that, whilst Tabcorp's engagement in fixed odds wagering had increased, especially since 2008, fixed odds wagering remained only about 20 per cent of its race wagering business.
170 As already indicated, only Tabcorp was able to conduct a totalisator. There was cogent evidence before the trial judge that totalisator wagering was less prone to corruption than other methods of wagering. As Justice Martin had observed in 1959, this was because, unlike a fixed odds operator, the totalisator's return is a fixed proportion of turnover, regardless of the outcome of the event the subject of the wager. Tabcorp's General Manager, Finance, Wagering Division, Mr Douglas Freeman, further explained that "[t]he amount that Tabcorp's Victorian business may deduct as its take-out from the pool [was] limited by a statutory maximum (which flows from the operation of sections 4.2.5(2B) and 4.4.8 of the GRA)".
171 There were also other advantages of totalisator betting. Totalisator betting provided a ready basis for all punters to place bets, irrespective of their betting knowledge. Inexperienced punters could inform their assessments by using the totalisator pool as a reflection of how others viewed the prospects of each entrant in the race. More experienced punters could be confident that large bets would be accepted. Totalisator betting was amenable to auditing. The success of a totalisator depended, however, on characteristics of structure and scale. A single, large totalisator increased the prospect of a good return because there was a substantial pool of money to distribute amongst the successful participants. Since the totalisator was more stable than other forms of wagering, its indicative odds were more accurate. If, however, the totalisator's pool became too small, it became more unstable and more open to manipulation. This last-mentioned characteristic was important in the consideration of alternative models for funding the racing industry.
Tabcorp and the current funding of the Victorian Racing Industry
172 Mr Freeman's unchallenged evidence was that:
A successful racing industry is created and sustained by providing good quality racing events (i.e. a good 'spectacle') through:
(a) securing the best race entrants (i.e. the best horses, dogs, jockeys and drivers, as appropriate);
(b) providing a large 'field' of entrants for each race;
(c) ensuring that the race track and facilities are kept in optimum condition; and
(d) providing high quality on-course entertainment.
Where a racing industry is able to secure a number of consistently good quality racing events, those racing events typically develop the prestige of that industry, which further encourages the participation and involvement of high calibre race entrants and racing industry personnel.
173 The evidence at trial was to the effect that the better the racing industry was funded, the better the spectacle it could afford to stage; and, in any case, to present a high-quality spectacle and a prestigious event, the industry had to be well funded. A number of witnesses gave evidence that the prestige and success of the Victorian racing industry depended on it providing a high quality spectacle; and that, without this spectacle, the industry would not draw top race performers or continue to encourage new breeders, trainers and other participants to enter the industry.
174 Substantial funds were needed, especially for high prize money. The Chief Executive of the Australian Racing Board (ARB), Mr Andrew Harding, and the State's Executive Director of Gaming and Racing in the Department of Justice, Mr Ross Kennedy, both gave evidence that the revenue from wagering determined the prize money that race clubs offered at race meetings, as well as the number of racecourses and race meetings that the clubs could afford to support. The level of prize money affected not only the attraction of races to race entrants but also the prestige of the races. Further, prize money affected other critical aspects of the industry, including the number of horses bred, owned and raced, the number of people employed as trainers, jockeys and stable staff, the size of the race fields, and the scope of associated services such as horse transport and veterinary services.
175 Besides funding prize money, the Victorian racing industry also relied on wagering revenue to cover the costs of its regulatory and stewarding functions, track management and capital works, training and marketing.
176 Tabcorp's relationship with the Victorian racing industry was unique. Mr Kennedy's evidence at trial was that there was "a close symbiosis between the racing industry and race wagering". Most of the Victorian racing industry's revenue derived from distributions by Tabcorp to the industry's controlling bodies under the JVA: see Sportsbet v Victoria at 453 [135]. Racing industry revenue derived from sources other than Tabcorp was significantly less than from Tabcorp: see Sportsbet v Victoria at 453 [135]. The level of distribution of funds from Tabcorp to the Victorian racing industry largely correlated to the level of wagering turnover. Thus, the total contribution from Tabcorp's Victorian business in the financial year ending 30 June 2010 was approximately $338 million (equal to about 45.7% of Tabcorp's Victorian business revenue).
177 The current funding model, which is dependent on the legislative regime of which the impugned provisions form part, has sustained the success of the Victorian racing industry. The primary judge found that the current industry funding model was and remained highly successful. Her Honour acknowledged that Tabcorp's contributions were "an essential part" of keeping the Victorian racing industry "vibrant and successful" and that the industry's position "could not be maintained without substantial funding of the kind it presently receives", which necessarily included contributions from the gambling industry: see Sportsbet v Victoria 454 [136], 457 [148]-[149]. The evidence of numerous witnesses at trial clearly justified these findings. Indeed, Sportsbet's former Chief Executive Officer, Mr Nicholas Tyshing, accepted in cross-examination that the Victorian racing industry could not sustain its current position without funding of the kind it presently received; and that payments by Tabcorp to the racing industry were essential for its continued success.
178 Tabcorp's contribution to the racing industry was largely derived from totalisator wagering, which over time has proved, as Justice Martin predicted, a reliable means of generating funds for the industry. The evidence established, as the primary judge accepted, that totalisator wagering provided greater revenue certainty for the racing industry than revenue based on other forms of wagering: see Sportsbet v Victoria 455 [139]. Various key witnesses gave evidence that a successful totalisator was important for the continued success of the industry. For example, Mr Harding, from the ARB, concluded that "having a successful and stable Tote in each key racing jurisdiction is essential in order for the racing industry to continue to maintain its current level of funding and to continue to perform as it does". This was borne out by the fact that funding through totalisator wagering was also the model "adopted in other Australian jurisdictions and internationally": see Sportsbet v Victoria at 454 [136]. Thus, totalisator wagering was the means used for funding the most significant racing industries in the Asian region (including Hong Kong, Japan, Singapore, South Korea and New Zealand).
179 Further, a number of key witnesses gave evidence that Tabcorp's retail exclusivity was significant in maintaining its funding level for the Victorian racing industry. Because Tabcorp's retail exclusivity prevented Tabcorp losing business to retail competitors, the totalisator pool remained of sufficient size to operate at its optimal level and Tabcorp's financial position continued to ensure that its contributions to the Victorian racing industry were sufficient to sustain a successful industry. As the primary judge noted, the financial viability of the totalisator and its integrity depend on the totalisator retaining a critical pool size for totalisator wagering. The evidence established that the sole wagering licence regime for the provision of off-course retail betting services in Victoria was conducive to the preservation of this critical pool size.
180 Further, given that an ability to manipulate the odds offered by a totalisator increased if the size of the totalisator pool fell below the critical size, the maintenance of the pool size was important for the integrity of totalisator wagering. Mr Kennedy and Mr Freeman both gave unchallenged evidence that: (1) a small totalisator pool was more susceptible to destabilisation through the placement of large wagers than a larger pool; and (2) a smaller totalisator pool was less attractive to high value punters who looked for a larger pool where the weight of investment ensured what Mr Kennedy called "stability of dividends". Thus, Mr Kennedy said:
[A] smaller totalisator pool is β¦ more susceptible to manipulation by bookmakers and punters alike. For example, a bookmaker seeking to reduce his or her liability to punters who have backed a particular horse at totalisator odds can do so by placing a substantial bet on the same horse on the totalisator as it is about to close. Where the totalisator pool is small, this will artificially reduce the dividend that the bookmaker is required to pay out if the punter wins. Conversely, a punter, who has placed a substantial wager on a horse, with a bookmaker at totalisator odds, can enhance the dividend on that horse by making a last minute place bet on other horses on the totalisator. Where the totalisator pool is small, this will artificially depress the totalisator odds on the other horses, while increasing the odds for the horse on which the punter placed the more substantial fixed-odds wager.
The possibility of totalisator manipulation cannot be discounted, as Tabcorp sought to do. Mr Kennedy's evidence was that there had been an instance of pool manipulation within the three or four years preceding the trial.
181 Unsurprisingly, the precise effect of Tabcorp's loss of retail exclusivity on the Victorian racing industry was difficult to quantify. Plainly enough, as the evidence showed, the effect of the loss of retail exclusivity would depend on a number of factors, including the number of corporate bookmakers and others entering the Victorian retail wagering market and their respective business operations. There was, however, evidence that, without retail exclusivity, Tabcorp's financial position would be undermined and its contributions to the industry would decrease. If Tabcorp's contributions decreased, then so too would the available prize money. A fall in the level of prize money would reduce the incentive for owners, breeders and others to participate in the industry.
182 There was also evidence that, without retail exclusivity, the totalisator would be compromised and totalisator wagering would cease to be a significant source of funding for the racing industry. In this regard, there were two relevant factors: first, the need to maintain the size of the totalisator's pool, as explained above; and, second, the prevalence of "tote odds" β a product in which corporate bookmakers such as Sportsbet agreed to match or better the dividends paid by a totalisator in a particular pool. A number of witnesses, including Mr Harding, Mr Maxsted and Mr Freeman, gave evidence that "tote odds" betting would be likely to damage totalisator betting if Tabcorp did not have retail exclusivity. This was largely because corporate bookmakers had lower operational costs than Tabcorp, whose costs included maintaining totalisator betting. In Mr Maxsted's words:
Corporate bookmakers offer a competing totalisator-matching product and can do so because of their lower costs model which in turn is driven in part by lower contributions to the [Victorian racing industry].
183 Mr Harding explained:
Retail betting attracts customers because of its convenience and therefore the exclusive ability to provide retail betting gives the Totes a point of difference that they can use. That point of difference is particularly important in the current environment, where corporate bookmakers mimic the Totes' totalisator service through the provision of a tote odds service, thus eroding any point of difference that the Totes may otherwise have enjoyed based on their totalisator product offering. In these circumstances, a system in where the Tote retains sole authorisation to provide pari-mutuel wagering services but does not have retail exclusivity would have the potential to significantly reduce the funding of Australian racing.
184 Mr Freeman added that:
These products effectively replicate the attraction of a totalisator service by guaranteeing to match (or better) the totalisator's dividends. Corporate bookmakers regularly offer tote odds products and can afford to do so because they do not have the same overheads associated with operating complex totalisator pools and because they can manage their risk by betting back into the totalisator pools if necessary. In view of Tabcorp's funding and other obligations including to the Victorian racing industry, and its totalisator structure, it cannot offer equivalent dividends. In these circumstances, if corporate bookmakers offered tote odds products in a retail setting, this would effectively eliminate Tabcorp's current point of difference and concurrently confer a significant competitive advantage on corporate bookmakers.
185 The evidence of Mr Harding, Mr Freeman and Mr Maxsted showed that the maintenance of a successful totalisator depended on the maintenance of retail exclusivity, not merely totalisator exclusivity. Given the evidence concerning the benefits of totalisator wagering, there was clear evidence that injury to the totalisator might well deprive the industry of some of the inherent and important benefits of totalisator wagering and also reduce the reliability of appropriate funding for a successful industry.
Alternative models for funding the Victorian Racing Industry
186 There was evidence that a different funding model in the United Kingdom has not proved as successful so far as the UK racing industry is concerned. Racing in the United Kingdom is funded by a levy scheme, pursuant to which the industry and wagering operators negotiate annually on the level of a levy for the following year or, absent agreement, a levy is determined by the Secretary for Culture. Most betting in the United Kingdom takes places with off-course corporate bookmakers, operating "high street" betting shops. Under this scheme, wagering funding to the racing industry has varied greatly over the past decade and is apparently in decline, with adverse effect on the industry, including available prize money.
187 The two economists β whose evidence was discussed by the primary judge in Sportsbet v Victoria at 450-451 [118]-[123] β were both unable to proffer a funding alternative for the racing industry that did not contain significant difficulties and inefficiencies. In his report, Mr Derek Ridyard, an economist whose opinion was relied on by the State and Tabcorp, identified and considered three other mechanisms that might be employed instead of the current model, including a uniform fee. Mr Ridyard concluded that each of these other mechanisms were deficient when compared with the current model. In summary, his opinion was that:
[R]etail exclusivity has the advantage of internalising and aligning the incentives of the racing industry and its chosen partner. By making a substantial commitment to a single exclusive retail partner, the State can allow the racing industry to maximise its bargaining power, providing incentives for the chosen retail partner to make financial contributions to the racing industry that it would not have an incentive to concede in the absence of exclusivity. β¦
The main potential disadvantage of retail exclusivity arises from the risk that this model could allow a single retailer to operate free from competitive pressures, e.g. at low levels of efficiency and/or at unduly high rates of profit. β¦ As I have explained above, however, there is a clear incentive for the State and the racing industry to include contractual conditions on Tabcorp to guard against those dangers, and I note the existence of a number of contractual provisions that have been placed around Tabcorp's licence that are designed to do so β¦ .
188 There was evidence that, if the current funding arrangements were replaced by a uniform fee paid by all bookmakers, at present turnover levels, that fee needed to be set at a level that most bookmakers would be unable to pay because the fee would exceed a bookmaker's typical profit margin. There was also evidence that a uniform revenue fee would be no less uncommercial. That is, if a uniform revenue fee were introduced, the evidence indicated that operators would need to pay around 41% of their revenue to achieve the level of funding attracted on the existing model in the 2009/2010 financial year. Further, this funding option would be less stable than the current one. Thus, the economists' evidence indicated that there was no alternative equally efficient and viable funding model to that which already operated.
The business of Sportsbet
189 It is convenient at this point to turn to the business of Sportsbet, the consideration of which is important for resolving the appeals. Sportsbet is a corporate bookmaker with an annual turnover of about $2 billion. As already stated, Sportsbet is not registered as a bookmaker in Victoria under the GRA, but holds a licence under the RBA (NT) to conduct the business of sports bookmaking from its licensed premises in Darwin: see RBA (NT), s 70.
190 The primary judge found (at 441 [78]) that:
A person wishing to place a bet with Sportsbet must first register and acknowledge Sportsbet's terms and conditions. A bet placed with Sportsbet, the Sportsbet's computer server and Sportsbet's bookmaking business, are all regulated by Northern Territory law. Sportsbet accepts bets by telephone and over the internet from registered members situated throughout Australia, including Victoria. The contingencies on which registered players bet include races conducted in each state and territory and sporting events conducted in each state and internationally.
191 Sportsbet operates a number of computer servers from its licensed premises. A registered Sportsbet customer may place bets by use of a computer connected via the internet to one of these servers. The primary judge found that "[c]ustomers may be located outside the Northern Territory and Sportsbet seeks to attract such customers located in states of the Commonwealth including Victoria": see Sportsbet v Victoria at 442 [83]. As we have seen, Sportsbet also sought to accept wagers over the internet by means of a betbox installed in licensed premises in Victoria.
192 The primary judge made a number of important findings with respect to the conduct of Sportsbet's business that were not challenged on the appeals: see Sportsbet v Victoria at 442-444 [84]-[87]. These findings were that:
(a) Sportsbet was registered as a company on 29 June 1999 under the Corporations Law 1989 (Cth), as applied to the Northern Territory by the Corporations (Northern Territory) Act 1990 (NT). Its registered office was that specified in the registration application: see ss 117 and 121. When the Corporations Act 2001 (Cth) (the Corporations Act) commenced, Sportsbet's registration was taken to have effect under the corresponding provisions of the Corporations Act. Sportsbet's registered office and principal place of business remained the same: s 1378(3) of the Corporations Act. Moreover, for the purposes of s 119A of the Corporations Act, Sportsbet was taken to be registered in the Northern Territory: s 1378(4) of the Corporations Act.
(b) Sportsbet had a registered licensed business which operated from licensed premises at the Fannie Bay Racecourse in Darwin under the RBA (NT).
(c) Sportsbet's licence under the RBA (NT):
(1) permit[ted] Sportsbet to offer a much wider range of bets to punters than that permitted under Victorian law;
(2) permit[ted] Sportsbet to provide credit to punters (contrary to anywhere else in Australia);
(3) permit[ted] Sportsbet a more flexible approach to marketing (than other places in Australia);
(4) until recent changes to the Victorian legislation, provided Sportsbet with better access to capital resources because the [RBA (NT)] did not insist on directors and shareholders of the registered bookmaker themselves being bookmakers;
(5) required, as a condition of the licence, that Sportsbet take[] bets from the Fannie Bay Racecourse in Darwin.
(d) a significant part of Sportsbet's computer system was located in Darwin and Sportsbet's customers (both national and international) interacted with the Sportsbet business through the Darwin office.
(e) while Sportsbet had a registered office in Darwin, it had much larger offices in Melbourne.
(f) a substantial part of Sportsbet's business was conducted in Melbourne "including its IT department, marketing, human relations, finance and administration, its bookmakers, the risk management department for real time client bet monitoring and the fraud department including anti-money laundering checking" (443 [84]).
(g) the management of Sportsbet's business was conducted in Melbourne and there was a far greater concentration of senior and other staff in Melbourne.
(h) Sportsbet's senior management spent most of their time in Melbourne and were resident in Melbourne.
(i) although Sportsbet's Northern Territory licence explained the physical location of Sportsbet's servers at the Fannie Bay Racecourse, the licence had no significance for the purposes of the impugned provisions because it did not confer any right, and did not purport to confer any right, on Sportsbet to engage in bookmaking in Victoria.
(j) by installing the "betbox" with logos and advertising, Sportsbet had a physical presence in Victoria and, in substance, the transactions occurred within Victoria.
193 Mr Edward Berry, a racing inspector employed by the Licensing, Regulation and Alcohol Strategy Division in the Territory's Department of Justice, gave substantially unchallenged evidence about the regulation of licensed bookmakers in the Territory. Mr Berry's evidence was that, in the Territory, a licensed sports bookmaker such as Sportsbet was required "to record and maintain all betting and financial information" and to supply the information to the Northern Territory Racing Commission (NTRC) for audit and compliance purposes. A sports bookmaker was also required to comply with accounting procedures; to maintain proper betting records; to ensure senior personnel, directors and major shareholders undergo police checks; to report unusual betting circumstance to AUSTRAC; and to comply with the Territory's Mandatory Code for Responsible Gaming. Mr Berry made it clear, however, that the Territory pursued a policy of "minimum regulatory intervention". This was consistent with s 17(2) of the RBA (NT).
194 Sportsbet was free to advertise in Victoria and to accept bets from its registered members in Victoria (other than through a betbox). Sportsbet was liable to pay a fee to Victorian race control bodies for the use of Victorian race field information. Whilst Sportsbet submitted on the appeals that this contribution was similar to that which applied to fixed odds wagers accepted by Victorian bookmakers and Tabcorp, the evidence to which Tabcorp referred did not bear this out and indicated, instead, that Tabcorp made a significantly higher rate of contribution derived from fixed odds betting than Sportsbet.
The betbox
195 Sportsbet's National Business Manager β Retail, Mr Paul Merrigan, gave evidence that Sportsbet wanted to install betboxes in licensed premises throughout Victoria. The primary judge found that the betbox operated from the Hotel was "intended to attract customers to Sportsbet and to attract patrons to the hotel": see Sportsbet v Victoria at 439 [63]. Her Honour continued (at 439 [63]):
The idea was that by putting the "betbox" in the sports bar of the Eureka Stockade Hotel, punters would have a drink, watch television, eat a meal and bet on the "betbox". β¦ In fact, the licence for the "betbox" between [Sportsbet and Eureka] included an obligation to locate the "betbox" in a prominent and visible position adjacent to the main bar. Sportsbet paraphernalia was disseminated throughout the bar to attract customers.
Her Honour found that the betbox, including the computer terminal located within it, constituted "the physical presence of Sportsbet within the venue": see Sportsbet v Victoria at 439 [64].
196 As noted at the outset of these reasons, the betbox is a device by which a customer selects and places a bet with Sportsbet and Sportsbet notifies the customer of its acceptance of the bet: Sportsbet v Victoria at 434 [40]. The primary judge described the operation of the betbox at the Hotel (at 445 [92]) as follows:
Here, a punter in Victoria approached a "betbox" situated in Victoria which was installed in Victoria and owned by Sportsbet. On approaching the "betbox", the punter accessed information on a website maintained by Sportsbet and selected a race on which to place a bet. The punter then selected the size of the bet and sent that "request". The request was received by Sportsbet on its server located in Darwin. That server then communicated Sportsbet's acceptance of that bet with notification of acceptance of the bet being capable of being received on the "betbox" in Victoria.
197 In contrast to Tabcorp's Easybet terminals, Sportsbet customers set up betting accounts via the betbox and Sportsbet could extend credit to them. The Sportsbet servers in Darwin used software developed by Sportsbet to process the bets communicated via the servers to it. Ordinarily, Sportsbet accepted a bet via this automated process. Thus, her Honour found that "Sportsbet's customers β¦ interact with the Sportsbet business through the Darwin office": see Sportsbet v Victoria at 444 [87]. A decision requiring human decision-making was, however, generally made in Melbourne (for example, as to extending or terminating credit to a Sportsbet member or as to accepting a substantial bet outside a member's normal profile).
198 Tabcorp contended that the licence granted to Sportsbet under the RBA (NT) did not authorise Sportsbet to operate off-course betboxes. This was because Sportsbet's licence only authorised Sportsbet to conduct the business of a sports bookmaker at identified premises at the Fannie Bay Racecourse in Darwin. This latter proposition may be accepted. There is, however, no contravention of the Unlawful Betting Act (NT) whilst Sportsbet conducts its business in accordance with its licence: see ss 31 and 33. If Sportsbet were to open premises not on the Racecourse to the public "to attend in person for the purposes of placing a bet", then Sportsbet would apparently breach special condition 24 of its licence. On these appeals, however, there is no occasion to determine whether special condition 24, or some other licence condition or statutory provision, would be engaged in the event that Sportsbet installed a betbox at a place in the Territory other than the Fannie Bay Racecourse. This is not what Sportsbet has done. It is immaterial that, as Mr Berry stated in cross-examination, Sportsbet had not applied for approval to use a betbox in the Territory. It may well be that, as Tabcorp submitted, Sportsbet would require specific authority from the NTRC to operate a betbox in the Northern Territory, but this is not what Sportsbet has sought to do. Whether approval, if sought, would be given is speculative. On these appeals, licence condition 8 is relevant in so far as it permitted Sportsbet to accept bets, over the internet or by any electronic means approved by the NTRC, from anywhere at its premises at the Fannie Bay Racecourse. Mr Berry deposed that Sportsbet had given the NTRC a prototype betbox for review and had informed the NTRC of its intention to operate a betbox from outside the Territory; and that the NTRC had confirmed that the betbox complied with Sportsbet's licence. Having regard to Sportsbet's licence and Mr Berry's evidence, Sportsbet's proposed use of betboxes in Victoria was not shown to be inconsistent with Sportsbet's licence conditions or otherwise unlawful under the law of the Territory. Tabcorp's argument with respect to these matters should be put to one side.
The market for wagering service providers
199 In relation to Sportsbet, the primary judge found (at 442 [82]) that:
Sportsbet competes with Tabcorp in a national wagering market. β¦ [W]agering services on racing and sporting events are supplied throughout Australia by means of telephone and the internet to users of those services. That competition has been increasing for at least 10 years and is now "fierce". β¦ Tabcorp accepts bets over the internet and through "Easybet terminals" β¦ Sportsbet also competes against bookmakers in Victoria who are able to stand at racecourses and accept bets by a person present on the racecourse, over the telephone and over the internet: ss 4 and 4A of the Racing Act. Tabcorp established "Luxbet", a Northern Territory subsidiary in response to Sportsbet and other corporate bookmakers offering wagering products. This competition has resulted in lower priced wagering products for punters.
200 In recent years, interstate corporate bookmakers, mostly operating internet and telephone businesses, have become more prominent in Australian wagering. It has become commonplace for persons in Victoria to place bets, via internet or telephone, with interstate wagering providers. In this respect, the market has changed since 1994 when Tabcorp was incorporated and granted the sole wagering licence. Mr Harding stated in cross-examination that competition amongst wagering service providers was not significant in 1994, but that competition only became "more fierce" "towards the latter part of the 1990s", although, as at 2001, corporate bookmakers had "only a niche segment of the Australian wagering market". By July 2010, however, Tabcorp faced significant competition from a range of wagering operators throughout Australia.
201 The popularity of corporate bookmakers had seemingly some adverse effect on Tabcorp, particularly with respect to its totalisator wagering, as evidenced by a relative decline in funding to the racing industry in recent years. This decline had been stalled, however, by changes in Tabcorp's business, including Tabcorp's expansion of its fixed odds business. Indeed, as Sportsbet noted, there was evidence that there had been a growth in the wagering market over the past few years; a steady increase in Tabcorp's wagering turnover in the five years from 2006; and a steady increase in prize money paid in the same period. Over the past decade, moreover, Tabcorp's revenue had grown more or less steadily, as had the revenue received by Racing Victoria.
202 Sportsbet affirmed and Tabcorp denied that Tabcorp's fixed odds business had altered, or would inevitably alter, the operation of the current industry funding model. As noted earlier, however, the proportion of Tabcorp's revenue derived from its fixed odds business is comparatively small compared with its totalisator revenue. Further, if this or some other aspect of its business were seen to threaten the existing funding model, including totalisator wagering, Tabcorp's approval in respect of that aspect of its business could be revoked under s 4.5.5 of the GRA.
203 Sportsbet sought to develop arguments based on: (1) the amount of Tabcorp's licence fee allegedly attributable to gaming rather than wagering; and (2) the refund provisions of the GBA. Neither matter was raised before the primary judge. If it had been, further evidence might well have been led in response. We would therefore put these arguments to one side. In any event, there was some evidence that any contribution from Tabcorp's gaming business to the racing industry was only a relatively minor component of Tabcorp's overall contribution to the industry.
OVERVIEW OF RELEVANT PRINCIPLES
204 Before outlining the principles for construing s 92 and hence s 49 of the Self-Government Act, it is convenient to note a pertinent difference between the operation of s 92 and s 49.
205 As the joint judgment in Sportsbet v NSW observed, s 49 of the Self-Government Act is expressed as a command: see Sportsbet v NSW at 409 [10]. Citing Lamshed v Lake (1958) 99 CLR 132 at 147, the plurality there explained that "a federal law in the terms of s 49 is a 'positive rule' relating to the government of the territory and thus supported by s 122 of the Constitution". Previously, in AMS v AIF, Gleeson CJ, McHugh and Gummow JJ said (at 176 [37]):
Lamshed v Lake β¦ establishes that provisions such as s 49 of the Self-Government Act are laws of the Commonwealth which attract the operation of s 109 of the Constitution. As a species of what is often identified as "operational inconsistency", this supremacy of Commonwealth law operates to exclude, in relation to the matters to which it applies, the operation of the laws of a State β¦ .
Hayne J agreed: see AMS v AIF at 232-233 [220]-[221].
206 The relevance of this distinction is that, whilst s 92 renders the infringing legislation or executive measure invalid, s 49 of the Self-Government Act does not limit State legislative power. If the operation of a State law is inconsistent with s 49, then s 109 of the Constitution is attracted, with the result that the State law is inoperative to the extent of the inconsistency. An exercise of discretionary power under State legislation that is inconsistent with s 49 is not, of course, affected by s 109, although it would involve an error of law: see Sportsbet v NSW at 409 [12]; AMS v AIF at 176 [37]; Miller v TCN Channel Nine Pty Ltd (1986) 161 CLR 556, at 596-597, 614-615; and Racing NSW v Sportsbet Pty Ltd (2010) 189 FCR 448 ("Racing NSW v Sportsbet") at 490-491 [141].
207 As noted earlier, s 49 of the Self-Government Act is to be given an ambulatory interpretation that follows the construction of s 92. Accordingly, the principles relevant to the construction of s 92 are also relevant to s 49 of the Self-Government Act. These principles are outlined below.
Cole v Whitfield
208 In the decade immediately before Cole v Whitfield (1988) 165 CLR 360 ("Cole v Whitfield"), the High Court was unable to agree on an approach to the construction of s 92: see, for example, Clark King & Co Pty Ltd v Australian Wheat Board (1978) 140 CLR 120 and Uebergang v Australian Wheat Board (1980) 145 CLR 266. By the late 1970s, the criterion of operation doctrine, which had found expression in Hospital Provident Fund Pty Ltd v Victoria (1953) 87 CLR 1 ("Hospital Provident Fund") and had been accepted for 25 years, was no longer accepted by a majority of the High Court.
209 There were three objections to the criterion of operation doctrine and, since they are relevant to the submissions in these appeals, it is useful to note them here. First, the doctrine was said to depend "on the formal and obscure distinction between the essential attributes of trade and commerce and those facts, events or things which are inessential, incidental, or, indeed, antecedent or preparatory to that trade and commerce": Cole v Whitfield at 401. Second, the doctrine was thought to place "interstate trade on a privileged or preferred footing, immune from burdens to which other trade is subject": Cole v Whitfield at 402. Third, the doctrine failed "to make any accommodation for the need for laws genuinely regulating intrastate and interstate trade": Cole v Whitfield at 403. This led the Court in Cole v Whitfield at 403 to observe:
The history of the movement for abolition of colonial protection and for the achievement of intercolonial free trade does not indicate that it was intended to prohibit genuine non-protective regulation of intercolonial or interstate trade. β¦ [T]here has been a continuing tension between the general application of the formula and the validity of laws which are purely regulatory in character.
210 The history of s 92 since Cole v Whitfield indicates that accommodating s 92 with the need for regulatory laws continues to provoke controversy. In a sense, these appeals reflect the tension to which the Court referred. Further, as these appeals indicate, even after Cole v Whitfield, there is perhaps a tendency in some s 92 analysis to veer towards a preference for interstate over other trade; and, as these appeals show, with respect to the identification of interstate trade, the attraction of arguments about essence remains.
211 By reference to an historical analysis, Cole v Whitfield substantially resolved the controversy over the construction of s 92, by holding that s 92 applied to laws that discriminate against interstate trade or commerce in a protectionist sense: see Cole v Whitfield at 391-395, 407. Thus, the Court said (at 393):
Section 92 precluded the imposition of protectionist burdens: not only interstate border customs duties but also burdens, whether fiscal or non-fiscal, which discriminated against interstate trade and commerce. That was the historical object of s 92 and the emphasis of the text of s 92 ensured that it was appropriate to attain it.
The Court held (at 394) that:
The history of s 92 points to the elimination of protection as the object of s 92 in its application to trade and commerce. The means by which that object is achieved is the prohibition of measures which burden interstate trade and commerce and which also have the effect of conferring protection on intrastate trade and commerce of the same kind. The general hallmark of measures which contravene s 92 in this way is their effect as discriminatory against interstate trade and commerce in that protectionist sense.
The focus in subsequent s 92 cases, as in these appeals, has been on whether the impugned measure is discriminatory in a protectionist sense, as to which the Court in Cole v Whitfield gave some guidance.
212 Whilst acknowledging that the concept of discrimination "commonly involves the notion of a departure from equality of treatment", the Court held (at 399) that:
It does not follow that every departure from equality of treatment imposes a burden or would infringe a constitutional guarantee of the freedom of interstate trade and commerce from discriminatory burdens. Nor does it follow that to construe s 92 as guaranteeing the freedoms of interstate trade and commerce from discriminatory burdens would mean that interstate trade and commerce was rendered immune from any regulation which did not affect like intrastate trade. Such regulation might not constitute a burden at all. Even if it did, it might not be discriminatory in the sense to which we have referred.
213 Further, Cole v Whitfield recognized that the question whether or not an exercise of legislative power is invalid in so far as it impermissibly burdens interstate trade and commerce may depend on the practical operation of the law. Thus, the Court stated (at 399) that:
The concept of discrimination in its application to interstate trade and commerce necessarily embraces factual discrimination as well as legal operation. A law will discriminate against interstate trade or commerce if the law on its face subjects that trade or commerce to a disability or disadvantage or if the factual operation of the law produces such a result.
214 At issue in Cole v Whitfield was the validity of a Tasmanian law that made it an offence to sell undersized crayfish, whether or not taken in Tasmanian waters. Whilst the law burdened interstate trade in crayfish, the Court held that the burden was not discriminatory in a protectionist sense. The Court explained (at 408) that:
[W]here the law in effect, if not in form, discriminates in favour of intrastate trade, it will β¦ offend against s 92 if the discrimination is of a protectionist character. A law which has as its real object the prescription of a standard for a product or a service or a norm of commercial conduct will not ordinarily be grounded in protectionism and will not be prohibited by s 92. But if a law, which may be otherwise justified by reference to an object which is not protectionist, discriminates against interstate trade or commerce in pursuit of that object in a way or to an extent which warrants characterization of the law as protectionist, a court will be justified in concluding that it nonetheless offends s 92.
The Tasmanian law was not discriminatory in a protectionist sense because it did not confer a competitive or market advantage over the trade in imported crayfish; and, even if the Tasmanian law advantaged local trade by improving the competitive quality of local supplies, on the agreed facts, the extension of the prohibition to crayfish caught outside the State was "a necessary means of enforcing the prohibition against the catching of undersized crayfish in Tasmanian waters": Cole v Whitfield at 409.
215 The basic premise of Cole v Whitfield β that s 92 prohibits only discriminatory burdens of a protectionist kind β has not since been doubted, although subsequent decisions have explored its ramifications.
Bath, Castlemaine Tooheys and Barley Marketing Board
216 Prior to the Betfair cases (see below), after Cole v Whitfield, whether or not an exercise of legislative power was contrary to s 92 was examined in such subsequent cases as Bath v Alston Holdings Pty Ltd (1988) 165 CLR 411 ("Bath"), Castlemaine Tooheys Ltd v South Australia (1990) 169 CLR 436 ("Castlemaine Tooheys") and Barley Marketing Board (NSW) v Norman (1990) 171 CLR 182 ("Barley Marketing Board"). In the present appeals, the parties relied on these authorities to support their respective positions. These cases illustrate that there was no departure from Cole v Whitfield at the time they were decided. Rather, the ramifications of the principles in Cole v Whitfield were explored by reference to the circumstances in each case. Each party drew comfort from what it saw as the ramifications that the Court supposedly accepted.
217 At issue in Bath was a Victorian law that required the payment of licence fees by tobacco wholesalers and retailers. The Victorian Act first imposed a licence fee on wholesalers in respect of tobacco sold to Victorian retailers and, then, a licence fee on Victorian retailers in respect of any tobacco not sold to them by licensed wholesalers. The result was that tobacco products purchased by a retailer from a local licensed wholesaler did not attract the extra fee that fell on a retailer who purchased from an interstate wholesaler. The majority concluded that the challenged provisions were relevantly discriminatory because they had the effect of protecting local wholesalers and their tobacco from competition from an out-of-State wholesaler "whose products might be cheaper in some other Australian markets for a variety of possible reasons, e.g., that the laws of the State in which he carries on his business as a wholesaler either do not require that he hold a licence at all or exact a licence fee comparatively lower than the fee exacted from a Victorian wholesaler": Bath at 425. That is, the operation of the licence fee provisions was, in practice, discriminatory against the interstate trade in tobacco products in a protectionist sense. The majority did not hold, however, that the explanation for the imposition of the burden on interstate trade was irrelevant, as Sportsbet submitted. On the contrary, the majority considered that explanation and concluded that it underlined, rather than removed, the protectionist character of the provisions: see Bath at 426.
218 In Castlemaine Tooheys the High Court held that South Australian legislation, which required beer retailers to collect a refundable deposit from the purchasers of bottled beer, discriminated against out-of-state traders supplying beer in non-refillable bottles and protected in State suppliers of beer who mostly sold beer in refillable bottles. The legislation provided a higher refund rate for refillable bottles as opposed to non-refillable bottles. The majority summarised the position thus (at 464):
The practical effect of the [legislative arrangement] was to prevent [out-of- State suppliers] obtaining a market share in packaged beer in South Australia in excess of 1 per cent whilst their competitors used refillable beer bottles. β¦
It is common ground between the parties that the object and effect of the [legislation] was to make the sale of beer in non-refillable bottles commercially disadvantageous. β¦
[South Australia] claims that the [legislative arrangement] promoted litter control and conserved energy and resources.
219 The Court held that the South Australian legislation was discriminatory in a protectionist sense and, in so doing, developed the analysis required by s 92. First, the judgment of five members of the Court emphasized that the Australian approach was different from the American commerce clause analysis. Their Honours stated (at 471):
[W]e are concerned only with the proper characterization of the law as protectionist or not, in the sense described in Cole v Whitfield. Hence there is no place for a secondary test to invalidate laws which have been found to lack a protectionist purpose or effect. Rather, the two tests are combined as one inquiry into the characterization of the law as protectionist or otherwise.
220 Since the critical question in Castlemaine Tooheys was whether the discriminatory burden imposed on interstate trade by the South Australian legislation was of a protectionist kind, their Honours specifically dwelt on the characterization process. Relevantly for these appeals, their Honours said (at 471):
[T]he fact that a law regulates interstate and intrastate trade evenhandedly by imposing a prohibition or requirement which takes effect without regard to considerations of whether the trade affected is interstate or intrastate suggests that the law is not protectionist. Likewise, the fact that a law, whose effects include the burdening of the trade of a particular interstate trader, does not necessarily benefit local traders, as distinct from other interstate traders, suggests that the purposes of the law are not protectionist. On the other hand, where a law on its face is apt to secure a legitimate object but its effect is to impose a discriminatory burden upon interstate trade as against intrastate trade, the existence of a reasonable non-discriminatory alternative means of securing that legitimate object suggests that the purpose of the law is not to achieve that legitimate object but rather to effect a form of prohibited discrimination. There is also some room for a comparison, if not a balancing, of means and objects in the context of s 92. The fact that a law imposes a burden upon interstate trade and commerce that is not incidental or that is disproportionate to the attainment of the legitimate object of the law may show that the true purpose of the law is not to attain that object but to impose the impermissible burden.
221 In so far as the present appeals are concerned, it is important to note that the Court scrutinised both the rationale for, and operation of, the impugned legislative measures. If, so their Honours reasoned (at 473-474), the legislative measure was "appropriate and adapted to the protection of the environment in South Australia from the litter problem and to the conservation of the State's finite energy resources and β¦ its impact on interstate trade [was] incidental and not disproportionate to those objects", then the burden would not be characterized as protectionist. In the result, their Honours held (at 477) that "neither the need to protect the environment from the litter problem nor the need to conserve energy resources offer[ed] an acceptable explanation or justification for the differential treatment given to the products of [out-of-state] brewing companies". The challenged legislative measures were therefore discriminatory in a protectionist sense in relation to interstate trade.
222 Barley Marketing Board concerned the establishment, by New South Wales legislation, of a board for marketing barley. The appellants particularly relied on its authority, because it concerned the establishment of a monopoly in a market that did not offend s 92. Pursuant to the legislation, barley grown by New South Wales barley growers was vested in the board, which sold the barley and returned the benefit of the sale to the growers. The result of the marketing scheme was that Victorian buyers were unable to buy barley as cheaply as they had formerly done from individual growers. This was consistent with the object of the legislation since the board had been established to achieve a collective increase in market power to support higher prices "especially [to] interstate maltsers", although the higher prices were charged to both intrastate and interstate buyers: see Barley Marketing Board at 202 (Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ).
223 After discussing cases in which marketing schemes had previously been held to conflict with s 92, the Court said (at 201):
The decisions to which we have referred proceeded according to the so-called "individual rights" theory of s 92, namely, that the section guarantees the right of the individual to engage in interstate trade and commerce. That view of s 92 prevailed until it was displaced by Cole v Whitfield where it was pointed out that the "individual rights" theory has the effect of transforming s 92 into a source of discriminatory protectionism in reverse β¦ Once that view was displaced by the interpretation adopted in Cole v Whitfield, it necessarily followed that the authority of earlier decisions of the Court, including the [Peanut Board v Rockhampton Harbour Board (1933) 48 CLR 266, North Eastern Dairy Co Ltd v Dairy Industry Authority (NSW) (1975) 134 CLR 559 and Australian Coarse Grains Pool Pty Ltd v Barley Marketing Board (1985) 157 CLR 605], was open to question to the extent to which those decisions were decided by reference to an interpretation of the section that could no longer be supported.
224 The Court applied the principles as formulated in Cole v Whitfield to conclude that the legislation did not impose a discriminatory burden of a protectionist kind on interstate trade and commerce. The Court explained (at 203):
The maltsers in both States are denied direct access to the growers in New South Wales. The Act does not result in the exclusion of one group but not the other from any market; nor does the Act lead to any difference in price of product to malsters in the two States. Consequently the New South Wales malster is given no competitive advantage over his Victorian counterpart. So the operation of the Act does not result in "a departure from equality of treatment" of interstate and intrastate trade and commerce, that being the object of the constitutional injunction in s 92.
The Betfair cases
225 At the hearing of these appeals, the parties differed as to the significance they attached to Betfair Pty Ltd v Western Australia (2008) 234 CLR 418 ("Betfair v WA"), which at the time of argument was the most recent decision of the High Court concerned with s 92. Betfair v WA illustrates that, whilst the construction of s 92 has not altered since Cole v Whitfield, s 92 may be invoked over time in very different circumstances.
226 Betfair operated a betting exchange pursuant to a licence under Tasmanian law, from premises in Tasmania for registered customers throughout Australia. Betfair's customers communicated with it via telephone and the internet. Betfair challenged the validity of Western Australian legislation specifically targeted to prevent people in Western Australia from using its services: see Betfair v WA at 470-472 [68]-[77], 478 [106], 480 [114]. In this latter regard, Betfair v WA was not dissimilar to the measures considered in Castlemaine Tooheys. The Court held that the State's legislation was invalid by reason of s 92, to the extent that it would prevent the use of Betfair's betting exchange via telephone or internet: see Betfair v WA at 473 [83]-[84] (Gleeson CJ, Gummow, Kirby, Hayne, Crennan and Kiefel JJ) and 487-488 [141]-[146] (Heydon J).
227 Contrary to Sportsbet's submissions, Betfair v WA did not involve any re-consideration of Cole v Whitfield and, as the joint judgment of Gleeson CJ, Gummow, Kirby, Hayne, Crennan and Kiefel J noted, the source of s 92 jurisprudence remained Cole v Whitfield, as developed and applied in Bath, Castlemaine Tooheys and Barley Marketing Board: see Betfair v WA at 451 [10]. Relevantly for these appeals, their Honours' decision ultimately depended on the application of the established principle that "a law the practical effect of which is to discriminate against interstate trade in a protectionist sense is not saved by the presence of other objectives β¦ which are not protectionist in character": see Betfair v WA at 464 [47].
228 Also relevantly for these appeals, Betfair v WA reaffirmed that s 92 is not concerned with the individual rights of entities that carry on interstate trade or commerce: Betfair v WA at 456 [26]. In their joint judgment, six of their Honours specifically accepted "s 92 was not designed to create 'a laissez-faire economy in Australia'; rather, it had a more limited operation, to prevent the use of State boundaries as trade borders or barriers for the protection of intrastate players in a market from competition from interstate players in that market": Betfair v WA at 460 [36].
229 Betfair v WA may perhaps be read as departing from Cole v Whitfield in relation to the appropriate and adapted test, referred to by the State as the negative criterion for determining whether or not a measure was a protectionist one. In their joint judgment at 476 [98]-[99], six members of the Court expressed dissatisfaction with a passage in Castlemaine Tooheys concerned with the appropriate and adapted criterion and subsequently used an alternative formulation of the negative criterion β that of reasonable necessity.
230 At the same time, the joint judgment indicated that there was to be no departure from the substance of the approach in Castlemaine Tooheys: see Betfair v WA at 476 [100]. Consistently with Castlemaine Tooheys and Cole v Whitfield, their Honours accepted (at 476-477 [101]-[102]) that the appropriate and adapted criterion necessarily involved:
β¦ the existence of a "proportionality" between, on the one hand, the differential burden imposed on an out-of-State producer, when compared with the position of in-State producers, and, on the other hand, such competitively 'neutral' objective as it is claimed the law is designed to achieve.
Indeed, their Honours' reference to the criterion of reasonable necessity first appeared in their elaboration of "proportionality" in the above passage. Thus, citing North Eastern Dairy Co Ltd v Dairy Industry Authority of NSW (1975) 134 CLR 559, decided pre-Cole v Whitfield, their Honours said (at 477 [102]):
That "proportionality" must give significant weight to the considerations referred to earlier in these reasons when discussing Castlemaine Tooheys. These involve the constraint upon market forces operating within the national economy by legal barriers protecting the domestic producer or trader against the out-of-State producer or trader, with consequent prejudice to domestic customers of that out-of-State producer or trader. They suggest the application here, as elsewhere in constitutional, public and private law, of a criterion of 'reasonable necessity'. (Emphasis added)
Their Honours went on to state that this "view of the matter should be accepted as the doctrine of the Court": Betfair v WA at 477 [103].
231 The reference in the above passage to the criterion of reasonable necessity elsewhere in constitutional, public and private law signalled what was intended in this context by the reasonable necessity criterion: see the discussions in, for example, Thomas v Mowbray (2007) 233 CLR 307 ("Thomas v Mowbray") at 331-333 [21]-[24] (Gleeson CJ); and Mulholland v Australian Electoral Commission (2004) 220 CLR 181 ("Mulholland v AEC") at 199-200 [39] (Gleeson CJ), which was cited with approval in Hogan v Hinch (2011) 85 ALJR 398 ("Hogan v Hinch") at 418 [72] (Gummow, Hayne, Heydon, Crennan, Kiefel and Bell JJ). Read in this light, the criterion of reasonable necessity was, as their Honours indeed observed, consistent with Cole v Whitfield and Castlemaine Tooheys: see Betfair v WA at 477-478 [103]-[105]. Hence, in Betfair v WA, the criterion of reasonable necessity operated in much the same way as the appropriate and adapted criterion. Both criteria involved consideration of whether the burden imposed by the impugned measure was greater than that required for the reasonable attainment of the purpose that provided the "acceptable explanation or justification" for the measure. See Castlemaine Tooheys at 477 and Betfair v WA at 478-480 [106]-[113]. Both criteria involved the same kind of considerations. Neither formulation required a showing that the burden on interstate trade and commerce is absolutely necessary to achieve the legitimate purpose of the measure: see, with respect to reasonable necessity, Thomas v Mowbray at 331-333 [21]-[24] and Mulholland v AEC at 199 [39].
232 Further, in Betfair v WA the assessment in the joint judgment of the competing considerations relevant to the negative criterion established that there was to be no significant departure from the Cole v Whitfield approach. Noting that Western Australia sought to justify the challenged measures on the basis they dealt with a threat to the integrity of the racing industry, their Honours concluded (at 479-480 [110]-[112]):
[A]llowing for the presence to some degree of a threat of this nature, a method of countering it, which is an alternative to that offered by prohibition of betting exchanges, must be effective but non-discriminatory regulation. That was the legislative choice taken by Tasmania and it cannot be said that that taken by Western Australia is necessary for the protection of the integrity of the racing industry of that State. In other words, the prohibitory State law is not proportionate; it is not appropriate and adapted to the propounded legislative object.
Part 4A of the Tasmanian Act contains the detailed regulatory provisions which the Treasurer had outlined. It does not discriminate against interstate trade and commerce. Counsel for Tasmania points to evidence which indicates that the prescribed standards have been fully satisfied by Betfair. Seen from the other perspective, there was a lack of evidence of any increase in Australia of dishonest practices attributable to the operation of the betting exchange by Betfair. It will be recalled that Betfair's exchange remains accessible under the laws of the other States.
In that setting, it cannot be found in this case that prohibition was necessary in the stated sense for the protection or preservation of the integrity of the racing industry.
(Emphasis added.)
233 This analysis is consistent with the approach in Cole v Whitfield and, indeed, Castlemaine Tooheys. The passage indicates that the reasonable necessity and appropriate and adapted criteria are substantially interchangeable and, on one view, it is of little practical significance which formulation is employed providing the correct process of assessment is made. Relevantly for these appeals, however expressed, the negative criterion would involve a notion of proportionality between the discriminatory burden on the one hand and the legitimate purpose of the impugned measure on the other.
234 After argument and whilst judgment was reserved, the High Court delivered judgment in Sportsbet v NSW and Betfair Pty Ltd v Racing New South Wales (2012) 286 ALR 221 ("Betfair v Racing NSW"). The Court invited the parties to file supplementary submissions to address the significance of these decisions for these appeals, which they duly did. As the High Court indicated, the reasons for judgment in Sportsbet v NSW and Betfair v Racing NSW are to be read together. The two cases show that the Court continues to adhere to the principles of construction formulated in Cole v Whitfield and explored in the subsequent cases to which refer has been made.
235 Betfair v Racing NSW concerned the validity of the imposition of a fee as part of a legislative regime pursuant to which wagering operators were unable to use New South Wales race field information without the approval of the relevant racing control body. Betfair argued that the fee β calculated as a percentage of wagering turnover on the relevant races β had a greater impact on it than wagering operators (such as the TAB Ltd) with different business models; and that, in consequence, the requirement to pay the fee was a discriminatory burden of a protectionist kind in breach of s 92.
236 Sportsbet v NSW concerned the same legislative regime as Betfair v Racing NSW, save that Sportsbet challenged the regime on a broader front and, as on these appeals, in reliance on s 49 of the Self-Government Act and s 109 of the Constitution. Sportsbet sought declarations of invalidity of the relevant legislative provisions and also of the conditions of approval requiring the payment of fees, on the ground that the impugned measures imposed a burden on trade and commerce between the Territory and New South Wales not imposed on intrastate trade and commerce of the same kind; and that the effect of these measures was to protect wagering operators in New South Wales from competition from wagering operators in the Territory.
237 In a plurality judgment in Betfair v Racing NSW at 231-232 [36]-[37], French CJ, Gummow, Hayne, Crennan and Bell JJ reaffirmed the principle acknowledged in the earlier cases that:
Not every measure which has an adverse effect between competitors will attract the operation of s 92. The "confined area" in which s 92 operates was emphasised in Cole v Whitfield. Betfair must establish that the fee conditions imposed upon it by [the racing control bodies] were unauthorised because their practical effect is to discriminate against interstate trade and thereby protect intrastate trade of the same kind. What is posited here is an essentially objective inquiry. It is the concept of protectionism which supplies the criterion by which discriminatory laws may be classified as rendering less than absolutely free trade and commerce among the states. β¦
It is important to note, as emphasised in Cole [at 407-8], that whether a facially neutral law in question is discriminatory in effect, and whether the discrimination is of a protectionist character, "are questions raising issues of fact and degree".
The plurality judgment held that the fact that Betfair operated in a national market and that the challenged measure sought to regulate its activities in that market did not call for a departure from the settled approach to s 92: see Betfair v Racing NSW at 236 [57]; and 247-249 [100]-[109], 252-253 [123]-[127] (Kiefel J). One must, therefore accept that, as the appellants argued on these appeals, the existence of a national market for wagering services does not alter the fundamental principles relevant to the operation of s 92.
238 As the judgments in Betfair v Racing NSW make clear, the subject of s 92 is trade, not traders: see Betfair v Racing NSW at 233 [46] (French CJ, Gummow, Hayne, Crennan and Bell JJ), 237 [60], 239 [68]-[69] (Heydon J), 250 [114] (Kiefel J). The plurality judgment is plain that there is no place for an "individual rights" approach in contemporary s 92 jurisprudence: see Betfair v Racing NSW at 231 [36] and 232-233 [42]; also 239 [68]-[69] (Heydon J), 249-250 [110]-[112] (Kiefel J). Thus, the fact that, on Betfair's argument, the burden imposed on it was greater than on others because of its business model did "not mandate an outcome" in its favour: see Betfair v Racing NSW at 233 [44]; and to similar effect, see Sportsbet v NSW at 411 [20]. Rather, for s 92 purposes, the relevant inquiry is whether there is discrimination against interstate trade, which may affect one or a number of traders. An individual trader can be no more than a surrogate or representative of the trade in which the trader participates and that is said to be the subject of the contested measure.
239 Applying the established principles with respect to the construction of s 92, Betfair failed to show that the impugned legislation was discriminatory against interstate trade in a protectionist sense. As the plurality noted, there was there no counterpart to that part of the case stated in Castlemaine Tooheys affirming that "[t]he object and effect of the [regime] had been to make the sale of beer in non-refillable bottles commercially disadvantageous". Similarly, in Sportsbet v NSW the plurality held (at 415 [36]) that, as a matter of fact, Sportsbet failed to make out a case of relevant discrimination.
240 Betfair v Racing NSW and Sportsbet v NSW are plainly very different cases from Betfair v WA. Betfair v WA turned on the Court's conclusion that, in the circumstances disclosed to it, the challenged provisions sought to create a barrier to entry into the Western Australian market, and the Court considered the position of the individual trader that wished to enter the market because that trader's trade was barred by virtue of the barrier: see Betfair v Racing NSW at 224 [6] (French CJ, Gummow, Hayne, Crennan and Bell JJ) and 251 [121] (Kiefel J).
241 In contrast to Betfair v WA, in Betfair v Racing NSW, the plurality explained at 235-236 [55]-[56]:
The circumstance that the fee structure adopted by Betfair for its wagering operations differed from that adopted by other wagering operators did not constitute a relevant difference which, consistently with s 92, could not be disregarded by treating alike interstate and intrastate wagering transactions utilising NSW race field information. All that Betfair established was that by maintaining its current pricing structures, and given its low margin, the fees imposed by [the relevant racing control bodies] absorbed a higher proportion of its turnover on interstate transactions than that of the turnover of the TAB, the principal intrastate wagering operator.
Nor did Betfair demonstrate that the likely practical effect of the imposition of the fees will be loss to it of market share or profit or an impediment to increasing that share or profit. (Emphasis added)
242 As will appear in the following discussion, the current appeals are more akin to the circumstances considered in Betfair v Racing NSW and Sportsbet v NSW than in Betfair v WA.
QUESTIONS TO WHICH THE RELEVANT PRINCIPLES GIVE RISE
243 Having regard to the plurality judgment in Betfair v Racing NSW at 234-235 [52], these appeals give rise to the following broad questions:
1. whether the impugned provisions in their terms or practical operation discriminate against trade or commerce between the Territory and the State because:
(a) they draw a distinction in terms between intrastate trade and commerce and trade and commerce between the Territory and the State, otherwise than by reference to a relevant difference between them;
(b) they do not draw a distinction in terms between intrastate trade and commerce and trade and commerce between the Territory and the State, notwithstanding a relevant difference between them; or
(c) their practical operation shows that the objective intention of the legislature was to achieve the effect in (a) or (b);
2. if so, whether the impugned provisions burden trade and commerce between the Territory and the State to its competitive disadvantage or to the competitive advantage of intrastate trade and commerce; and
3. if so, whether that burden is nonetheless reasonably necessary or appropriate and adapted for the State to achieve a legitimate non-protectionist purpose?
Discrimination against trade or commerce between the Territory and the State
Trade or commerce between the Territory and the State?
244 The subject of s 49 of the Self-Government Act is, relevantly, trade between the Territory and the States, in this case, Victoria. When s 49 is invoked in a challenge such as this, whether or not trade is characterised as intrastate or between the Territory and the State is essentially a question of fact and degree, to be determined by reference to the substance of the transactions that constitute the trade said to be burdened by the impugned measures.
245 Section 49 of the Self-Government Act cannot be engaged in these appeals unless the impugned provisions burden trade between the Territory and the State. The appellants submitted that the impugned provisions did not relevantly affect trade between the Territory and the State. If this submission were accepted, then s 49 would have no application.
246 The appellants argued that Sportsbet's installation of a betbox at the Hotel was functionally equivalent to establishing a retail outlet in the State. Thus, so the argument ran, when a punter placed a bet with a wagering service provider at a retail shop in the State and when a punter placed a bet with Sportsbet via a betbox, the punter was engaged in intrastate trade. On this argument, the basic transaction was the provision of a wagering service at the place where the betbox was installed.
247 As the authorities show, the subject of s 49 of the Self-Government Act is not traders, whose trade may consist of in-State transactions and transactions between the State and the Territory (and elsewhere). Hence, the cross-border elements of the trader's business that belong to transactions outside the trade in question do not bear on whether that trade attracts the protection of s 49. Consideration of matters such as the location of the trader's principal office and senior management, or the trader's infrastructure and business model, distracts attention from the relevant inquiry, which first requires identification of the transactions constituting the relevant trade. This is borne out by the plurality judgment in Sportsbet v NSW at 410 [17] and Betfair v Racing NSW at 233-234 [46], particularly the reference (at 234 [49]) to O Gilpin Ltd v Commissioner for Taxation (NSW) (1940) 64 CLR 169. The plurality described that case in the following terms:
The taxpayer β¦ was incorporated in Victoria, where its central management and control was located. But it carried on business as a draper at retail shops in four States including Victoria and New South Wales. This Court held that where a business ordinarily consists of selling goods (and, it might have been added, of supplying services), the contracts with consumers are of the essence of the business. The result was that, despite the location in Victoria of the central management and control, the taxpayer carried on trade in New South Wales where contracts were made and it derived income in that State.
On these appeals then, the question whether s 49 is attracted at all first depends on the identification of trade between the Territory and the State that is said to be burdened, and not on the cross-border character of Sportsbet's organisation and business as a whole. This depends on the relationship between the impugned provisions and the trade said to be affected by them.
248 It can readily be accepted that the movement of goods across borders between the Territory and the States, and the commercial transactions of which the movement is the direct result, constitutes trade and commerce between the Territory and the States: compare Australian Coarse Grains Pool Pty Ltd v Barley Marketing Board (1985) 157 CLR 605 ("Australian Coarse Grains Pool") at 626-627. Plainly enough, as well as the movement of goods, trade and commerce between the Territory and the States can involve intangibles, including, as Mason J said in Australian Coarse Grains Pool (at 628), "the telegraph, the telephone, broadcasting, television, communications, the transmission of intelligence and those aspects of banking and the provision of services which involve movement across State boundaries" (emphasis added). See also Bank of New South Wales v The Commonwealth (1948) 76 CLR 1 ("the Banking Case") at 380-381, approved in The Commonwealth v Bank of New South Wales (1949) 79 CLR 497 at 632-633. Today, no doubt his Honour would add the trans-border transmission of services by internet, as in Betfair v WA.
249 Considered from the punter's perspective, Sportsbet's installation of a betbox at the Hotel was akin to Sportsbet's establishing a retail outlet in Victoria. It was immaterial to the punter whether the bet was processed by one of Sportsbet's servers in Darwin or elsewhere: compare Menashe Business Mercantile Ltd v William Hill Organisation Ltd [2003] 1 WLR 1462 at 1471 (CA). From Sportsbet's perspective, the processing of the bet by its servers at its licensed premises in Darwin was important because it thereby acted under its licence under the RBA (NT) and in accordance with the law of the Territory that allowed it to undertake its bookmaker business in the first place.
250 The perspectives of the punter and the wagering operator are not, however, determinative, although they do serve to direct attention to what is important β the transactions involved in the relevant trade. Focusing on these transactions, it is apparent that there is a provision of wagering services across State and Territory borders. The punter, who has registered with Sportsbet, selects the race on which the punter wants to bet, nominates the amount and kind of bet and electronically sends a request to Sportsbet. Sportsbet receives the request, via its servers, at its licensed premises in Darwin, where the bet is processed and accepted. Sportsbet sends, electronically, a notification of acceptance to the betbox where it is read by the punter in Victoria. These transactions are repeated whenever a bet is sought to be placed with Sportsbet via a betbox in Victoria. They are the transactions that constitute the trade said to be burdened by the impugned provisions. Since the trade involves the provision of wagering services across State and Territory borders or, as the primary judge would have it, the movement of intangibles, the trade is relevantly between the State and the Territory.
251 The appellants relied on Hospital Provident Fund (see [208] above) in support of the contrary conclusion that the transactions constituting the trade were intrastate transactions. In that case, the Hospital Provident Fund Pty Ltd (HCF) challenged the validity of a Victorian statute that required the registration of hospital and medical benefits associations. HCF, a company incorporated in Victoria to provide health insurance, was held not to engage in interstate trade, notwithstanding that it had contracted with contributors to pay benefits and hospital fees anywhere in Australia if they incurred medical and hospital expenses and some contributors lived outside Victoria. The High Court held that the HCF was not engaged in interstate trade because "[n]either the contract nor its performance contemplates or of its nature involves the movement from one place to another of things tangible or intangible, and certainly not from a place in one State to a place in another": see Hospital Provident Fund at 15 (Dixon CJ, with whom Kitto J agreed). That is, because the contract did not expressly provide for the movement of goods, services or other intangibles across State boundaries, there was no interstate trade. Further, as Dixon CJ remarked, "the contingencies against which the contract provides have nothing of the character of inter-State commerce or intercourse": Hospital Provident Fund at 15; also 39 (Fullagar J), 45 (Taylor J). It was also irrelevant that HCF organised and administered its business across State boundaries.
252 As the appellants noted, the reasoning in Hospital Provident Fund was applied, with respect to the application of s 92, in HC Sleigh Ltd v South Australia (1977) 136 CLR 475 ("HC Sleigh") in relation to a system of refinery exchange: HC Sleigh at 506. The exchange did not contemplate either the cross-border movement of petroleum products, "or for that matter the movement interstate of debits and credits": see HC Sleigh at 506-507 (Mason J, with whom Barwick CJ and Stephen J agreed). (This aspect of the case was not apparently affected by Ha v New South Wales (1997) 189 CLR 465.) In Street v Queensland Bar Association (1989) 168 CLR 461 ("Street") at 539-540, Dawson J expressly adapted Dixon CJ's reasoning in Hospital Provident Fund to deny that a barrister could be characterised as engaged in interstate trade and commerce.
253 As earlier observed, Hospital Provident Fund marked the Court's acceptance of the criterion of operation analysis, which was formally rejected in Cole v Whitfield. The appellants sought to circumvent this objection with the submission that the ruling on interstate trade and commerce, referred to above, formed part of the ratio of the case, but did not depend on the criterion of operation doctrine. That the ruling formed part of the ratio may be accepted; and, whilst the criterion of operation test may resonate in some of the language Dixon CJ used in characterising the trade that was subject to the challenged legislation, his Honour's approach to characterisation was not substantially affected by that test. This approach involved considering the relation of the legislation in question to the trade said to be burdened by it. Since in Hospital Provident Fund the challenged legislation applied because of the nature of the business that the company carried on, the focus was on that business. Since the "essence of the business" from the company's point of view was "the making of contracts involving β¦ the receipt of money and β¦ the payment of money on the occurrence of certain contingencies", these contracts and contingencies were determinative of whether the business of the company was characterised as in interstate trade: see Hospital Provident Fund at 14-15.
254 A similar approach in HC Sleigh was also appropriate because of the nature of the measure under challenge. Dawson J's adaption in Street of Dixon CJ's language in Hospital Provident Fund should be understood as no more than an elucidation of his Honour's view of the essentially local character of a barrister's practice.
255 Furthermore, although it may not matter, when the reasons for judgment of Dixon CJ in Hospital Provident Fund are read as a whole, it is difficult to resist the conclusion that some, at least, of the language in the passages on which the appellants relied were written with the criterion of operation doctrine in mind and that this doctrine suffused his Honour's reasoning. The doctrine continued to hold sway when HC Sleigh was decided.
256 The impugned provisions in these appeals are of a different character. They do not involve the consideration of Sportsbet's business as a whole or of its wagering contracts in particular. Rather, the impugned provisions have a much narrower focus and the passages (in Hospital Provident Fund at 14-15) upon which the appellants rely do not assist them. The focus of the impugned provisions is on betting houses or places of betting (GRA, s 2.5.2; cf LCRA s 115) or instruments of betting (GRA, s 2.6.1). The relevant inquiry is, therefore, as to the relation between the operation of these provisions and trade between the Territory and the State. The simple fact that the provisions have a local, within-State operation is not enough to show that they do not burden this trade, although it does mean that the inquiry is relevantly different from Hospital Provident Fund, and that the reasoning in that case on which the appellants relied does not assist them.
257 In the present appeals, Sportsbet contends that there is a cross-border provision of wagering services made by: (1) the cross-border movement of wagering information between the punter in Victoria and Sportsbet in the Territory (involving the selection, placement and notification of acceptance of wagers) via the electronic transmissions between the betbox used by punters in Victoria and Sportsbet's servers in Darwin; (2) the acceptance of the wagers in the Territory from punters in Victoria; and (3) the associated financial transactions in respect of the wagers received from these punters effected on an account maintained in the Territory. Betfair v WA, Australian Coarse Grains Pool and, earlier still, the Banking Case support the conclusion that these elements involve transactions in interstate trade and commerce and, thus, in this case, transactions in trade between the Territory and the State. See Australian Coarse Grains Pool at 628; the Banking Case at 289 (Rich and Williams JJ) and 380, 383 (Dixon CJ); and cf Betfair v WA at 481 [118].
258 These considerations lead to the rejection of the appellants' submission that Hospital Provident Fund justifies a finding that the impugned provisions did not relevantly affect trade between the Territory and the State and in consequence interstate trade was not involved. The primary judge was correct to hold that the placement and acceptance of wagers via electronic transmissions (and the associated financial transactions) constituted trade between the State and the Territory: Sportsbet v Victoria at 445 [92].
The nature of the burden
259 Sportsbet claimed that ss 2.5.2 and 2.6.1 of the GRA and s 115 of LCRA burdened Sportsbet's trade between the Territory and the State by prohibiting Sportsbet from using and installing a betbox in Victoria as an element of its trading operations between the State and the Territory. This much may be accepted.
260 Sportsbet also asserted that the impugned provisions burdened interstate communications. This was not a case that Sportsbet had previously pleaded or, indeed, apparently argued at first instance. In any event, as Tabcorp noted, the impugned provisions did not prohibit or restrict communication with Sportsbet's servers in Darwin or elsewhere. Thus, the impugned provisions do not affect communications with Sportsbet's servers via a computer or mobile phone. The impugned provisions did not attach to the use of a betbox merely because the betbox was the means by which a bet was communicated to Sportsbet. Rather, in the primary judge's words, "[t]he sole, dedicated and public use of the "betbox" is to facilitate betting" and the betbox "is the means by which the bet is selected, placed and its acceptance is notified": see Sportsbet v Victoria at 434 [40]. It would therefore be erroneous to characterise the burden that the impugned provisions impose in the way that Sportsbet proposed.
261 It is convenient here to note Tabcorp's argument that there was no relevant burden because the impugned provisions only prohibited Sportsbet from doing that which it could not do under its Territory licence in any event. Hence, so Tabcorp said, the impugned provisions did not prevent Sportsbet from operating its business in the manner it was entitled to do. For the reasons already stated (at [198] above), this argument was misconceived. In any event, whether or not Sportsbet can use a betbox in the Territory does not answer the question whether the impugned provisions burden its trade between the Territory and the State by preventing its use of a betbox in Victoria.
Discrimination against Territory β State trade
262 The critical question at this stage is whether, in imposing this burden, the impugned provisions in their terms or practical operation discriminate against trade or commerce between the Territory and the State. As Gaudron and McHugh JJ explained in Castlemaine Tooheys at 478:
A law is discriminatory if it operates by reference to a distinction which some overriding law decrees to be irrelevant or by reference to a distinction which is in fact irrelevant to the object to be attained β¦ A law is also discriminatory if, although there is a relevant difference, it proceeds as though there is no such difference, or, in other words, if it treats equally things that are unequal β unless, perhaps, there is no practical basis for differentiation.
263 None of the impugned provisions in terms discriminate against trading or commercial transactions in goods or services between the Territory and the State as compared with intrastate trading or commercial transactions in the same or substitutable goods or services.
264 Tabcorp aside, in their practical operation as well as in terms, the impugned provisions treat all bookmakers equally, irrespective of whether they engage in intrastate trade or trade between the State and the Territory or elsewhere. No-one can operate as a bookmaker in Victoria unless registered under the GRA and, if registered, may only engage in bookmaking while at a racecourse in Victoria licensed under the Racing Act. Sportsbet is in the same position as any unregistered bookmaker. Sportsbet sought to avoid this difficulty by asserting that all Victorian bookmakers other than Tabcorp were de minimis. This, as the State noted, was not borne out by the evidence at trial. There is, moreover, nothing to preclude a bookmaker wishing to engage in Territory β State trade from obtaining registration under the GRA. Even when registered, however, no bookmaker, whether engaged in intrastate trade or out-of-State trade can conduct off-course business by means of a betbox or similar device.
265 This led the appellants to submit that Sportsbet is, in effect, seeking an advantage for itself that is not enjoyed by any other trader (save perhaps for Tabcorp, whose position is discussed below) on the basis that it is engaged in out-of-State trade. The appellants argued that Sportsbet's case, if accepted, would place out-of-State trade in a more advantaged position than intrastate trade, which would continue to be subject to the prohibitions in the impugned provisions. The appellants submitted that Sportsbet's case, if accepted, would reintroduce individual rights jurisprudence for the protection afforded by s 92 and s 49 of the Self-Government Act. For the reasons elaborated hereafter, the appellants' submissions should be accepted.
266 The primary judge identified discrimination against out-of-State trade on the assumption that it was easier for a Victorian bookmaker to conduct business from a Victorian racecourse than for an out-of-State bookmaker. Thus, her Honour held that the exception to s 2.5.2 for registered bookmakers favoured Victorian bookmakers "by requiring registered bookmakers to be present at a racecourse in Victoria": see Sportsbet v Victoria at 446-497 [100] (emphasis in original). There was, however, no evidence that it was easier for a Victorian bookmaker to conduct business from a Victorian racecourse than a bookmaker like Sportsbet engaged in trade between Victoria and the Territory. In Sportsbet's case too, the evidence was that its main administration was based in Melbourne. In these circumstances, the primary judge's assumption would not appear sustainable.
267 In any event, the impugned provisions apply only if a bookmaker seeks to establish a physical presence in Victoria, as Sportsbet seeks to do by means of the installation of a betbox. The relevant question in this context is whether, if a bookmaker has a physical presence in Victoria, the requirement that the bookmaker be present at a racecourse and not elsewhere in Victoria is more difficult for an out-of-state bookmaker like Sportsbet than an intrastate bookmaker. There is no reason to suppose that this might be so. Further, if a requirement that all bookmakers (save Tabcorp, discussed below) conduct their business at a particular location in the State necessarily infringes s 92 of the Constitution and s 49 of the Self-Government Act, then the State can determine the place where intrastate bookmakers locate their business, but cannot do the same for bookmakers engaged in trade between Victoria and the Territory (or elsewhere) even though they are physically in Victoria. This would restore out-of-State trade and traders to the privileged position that they enjoyed when the individual rights theory of s 92 held sway.
268 As Cole v Whitfield and Betfair v Racing NSW illustrate, not every adverse effect on business amounts to discrimination. The fact that the impugned provisions preclude Sportsbet from conducting its business in Victoria by means of a betbox is insufficient in and of itself to attract s 49 of the Self-Government Act. Neither s 92 nor s 49 protects the right of the out-of-State trader to use any particular business model, such as conducting business through a betbox: see Betfair v Racing NSW at 232-233 [42] and 247 [103], 248 [105]; also Betfair v RNSW at 388 [103]. This was the substance of Sportsbet's complaint: see, e.g., [269] below. The primary judge was mistaken in holding that the disadvantage imposed on Sportsbet did not "hinge upon Sportsbet's particular circumstances or business model": see Sportsbet v Victoria at 451 [125]. In this subsidiary argument, Sportsbet failed to establish that the impugned provisions operated to discriminate against trade between the Territory and the State.
269 Sportsbet's principal argument was that the impugned provisions discriminated against trade between the Territory and the State in their practical operation because the impugned provisions did not apply to Tabcorp. Much of this argument assumed that trade between Victorian punters and Sportsbet by means of a betbox or similar device was properly treated as a proxy for TerritoryβState trade and commerce, and that trade between Victorian punters and Tabcorp was a proxy for intrastate trade. This assumption underpinned Sportsbet's central complaint that Tabcorp was "permitted recourse to a particular and effective means of communication with its customers (Easybet terminals), whereas [Sportsbet was] prohibited from doing so (Betbox)".
270 The proposition that Sportsbet is a proxy for trade between the Territory and the State, whilst Tabcorp is a proxy for intrastate trade does not withstand analysis. As Betfair v Racing NSW demonstrated at 232-233 [42], [44], an individual out-of-State trader such as Sportsbet cannot rely on the particular circumstances of its business activities β in this instance a desire to use a betbox as part of its business activities β to characterise a law as effecting practical discrimination against interstate trade or, as here, trade between the Territory and the State. As Betfair v Racing NSW demonstrates, this would involve a return to the individual rights theory of s 92: see Betfair v Racing NSW at 232-234 [42]-[50] and 248 [105]. Something more must be shown to constitute an infringement of the protected freedoms.
271 An individual trader is a convenient proxy for the relevant trade where, because of the nature of the challenged measures and the transactions to which they apply, the transactions of a trader affected by the measures are necessarily in interstate trade (or, in the case of s 49, in trade between the Territory and the States); or in intrastate trade and commerce. In such a case, the validity of a measure can, in consequence, be tested by reference to its operation on that trader. Bath, Castlemaine Tooheys and Betfair v WA are illustrative of this kind of analysis. Some care needs to be taken, however, in treating a trader as representative of interstate trade (or, here, trade between the Territory and the State) lest s 92 and, by extension, s 49, are turned into provisions for the protection of the individual rights of entities that carry on such trade or commerce, as Betfair v Racing NSW and Sportsbet v NSW confirm.
272 In the present case, Sportsbet fails to show that the circumstances of its own trading activities make it a proxy for trade between the Territory and the State. There are two reasons for this failure. First, the evidence did not support the conclusion that, by reason of its internal organisation or its business undertaking, Sportsbet was properly seen as a proxy for trade between the Territory and the State. The evidence established that, although registered in the Territory, licensed as a bookmaker under Territory legislation and carrying on some business in the Territory, Sportsbet also carried on business in Victoria, where its senior management was located. In the words of the plurality in Sportsbet v NSW, Sportsbet was a wagering operator that conducted its business from more than one "particular political and geographical subdivision in Australia", both within those subdivisions and across their borders: see Sportsbet v NSW at 410 [17]. As a consequence, Sportsbet failed to show that its business was in substance merely a Territory business.
273 Second, whether or not Sportsbet's undertaking is in substance a Territory business, the impugned provisions do not provide any basis for treating Sportsbet as a proxy for trade between the Territory and the State. So far as these appeals are concerned, Sportsbet happens to be a trader that engages in trade between the Territory and the State, but its status as such has no necessary connection with the impugned provisions and any competitive disadvantage to out-of-state trade.
274 The circumstances under consideration in these appeals are very different from those in Bath, Castlemaine Tooheys and Betfair v WA. In Bath, the challenged provisions infringed s 92 because of their operation on interstate trade in tobacco as such. In Castlemaine Tooheys and Betfair v WA the extrinsic circumstances showed an intention on the part of the legislature specifically to target an interstate trader. There was no evidence of any such circumstance in these appeals. On the contrary, in this case, there was no evidence or reason to suppose that the impugned provisions were aimed at Sportsbet's trade between Victoria and the Territory. The mere fact that that trade was burdened was not enough to establish discrimination per se: see Castlemaine Tooheys at 475, citing Exxon Corporation v Governor of Maryland (1978) 437 US 117 at 126.
275 Sportsbet justifies various arguments as to discrimination by reference to the existence of a national wagering market. The existence of such a national market does not, however, alter the inquiry when an infringement of s 92 or, here, s 49 of the Self-Government Act, is alleged. Further, the existence of such a market does not mean that s 92 operates to confer individual rights on all participants in that market, or that a mere comparison of two participants in that market can establish infringement of these provisions. Sportsbet submitted that, if the impugned provisions were not held to contravene s 49, then "Tabcorp will continue to enjoy a major competitive advantage β¦ denied to Sportsbet". Even if accepted, this would not, for the reasons stated, demonstrate infringement of s 49.
276 Furthermore, Tabcorp is not correctly treated as a proxy for intrastate trade. First, like Sportsbet, Tabcorp's business interests extend beyond Victoria. Tabcorp's wholly-owned subsidiary, TAB Ltd, is the exclusive totalisator operator in New South Wales. Tabcorp is also ultimately responsible for the operation of Luxbet in the Territory. Second, and perhaps more importantly, Tabcorp's position as the sole wagering licensee is different to the position of other in-State wagering service providers. Tabcorp is the only wagering service provider to be granted a licence for a defined period to engage in off-course and totalisator wagering. Under the Victorian regulatory scheme, the difference between Tabcorp as the sole wagering licence holder and every other wagering service provider, whether engaged in intrastate or interstate trade, or in trade between the Territory and the State, is the same in so far as none has the entitlements conferred on Tabcorp by the licence. Besides Tabcorp, the other participants in the in-State Victorian market are registered bookmakers who are subject to the impugned provisions in the same way as Sportsbet. Tabcorp cannot stand as a proxy for them or for the intrastate market.
277 In addition, comparing the business activities of Tabcorp and Sportsbet distracts attention from the fact that an individual trader (Sportsbet) is disadvantaged by a law of general application to all traders in the same position as it (i.e., all traders who do not hold the sole wagering licence) and does not take into account the fact that Tabcorp is, by virtue of the Victorian regulatory scheme, in a different position to all such traders by virtue of the sole wagering licence and its concomitant obligations under the scheme considered in its entirety. As Betfair v Racing NSW at 233 [45] acknowledged, the proper enquiry should be directed to whether the trader (Sportsbet) as a participant in the trade between the State and the Territory is subject to a differential burden by reason of the operation of the impugned provisions in the common circumstances of the trade. This enquiry fails, however, to show discrimination against such trade.
278 Sportsbet's case focused on the differences between the conduct in which Tabcorp was permitted to engage and that which Sportsbet was prohibited from undertaking. For the most part, this focus was explicit, as for example in relation to the complaint that Tabcorp was permitted to engage "in remote terminal self-service betting" via Easybet, but Sportsbet was not because its use of a betbox was prohibited. On occasions, however, the focus was implicit, as for example in Sportsbet's submission that "the evidence demonstrated that remote terminals were a vital increasing source of revenue for wagering operators". Since no evidence was led in this regard other than with respect to Tabcorp, Sportsbet must be understood as focusing on Tabcorp's position with respect to Easybet terminals. The differential treatment flowed from Tabcorp's status as the licence holder. Assuming the status of licence-holder was a relevant difference, the differential treatment did not establish discrimination per se or against trade between the Territory and the State.
A statutory monopoly is not per se discrimination against out-of-state trade
279 The practical operation of the impugned provisions is to confer off-course retail exclusivity in Victoria on Tabcorp as the sole licensee. The primary judge held that the impugned provisions burdened trade and commerce between the Territory and the State "because in their legal and practical operation they establish Tabcorp as a monopoly provider of off-course betting services in Victoria in what is a national market for the supply and acquisition of off-course betting services": see Sportsbet v Victoria at 427 [7]; also 447 [101], 448-449 [103], [105], [109]-[110] and 451 [123].
280 A statutory monopoly does not, as Barley Marketing Board shows, necessarily involve a contravention of s 92 or s 49 of the Self-Government Act. As explained earlier, the High Court ruled that the legislative scheme at issue in Barley Marketing Board was valid without there being any need to determine whether it was justified by reference to a non-protectionist purpose. Where a statutory monopoly exists of the kind considered there, the relevant discrimination is between the monopoly holder and all other traders, whether in or out of State. There is no discrimination against out-of-State trade and commerce because no trader, in State or out of State, is able relevantly to compete with the monopoly holder.
281 A licensing scheme such as the one in issue in these appeals that prohibits all traders but one licensed trader (Tabcorp) from offering a service within the State establishes a statutory monopoly for the term of the licence. In terms, such a licensing scheme discriminates only between the licence holder (Tabcorp) and those who do not have the licence, irrespective of whether their trade is intrastate or out of State. The scheme does not per se discriminate against out-of-State trade in the absence of adequate justification.
282 Even apart from Barley Marketing Board and Tabcorp's status as a monopoly holder, the conferral of off-course retail exclusivity on Tabcorp does not involve differentiating between intrastate trade and trade between the Territory and the State. The intrastate or out-of-State nature of the trade is immaterial to the operation of the impugned provisions.
283 As the plurality observed in Sportsbet v RNSW at 411-412 [20]-[22], it is necessary to consider the practical operation of the impugned provisions as a whole. Thus, the impugned provisions and Tabcorp's exemption from the offences that they create must be considered in the context of the entire regulatory scheme, which includes the obligations that Tabcorp bears under the scheme. To obtain the licence allowing it to carry on totalisator wagering and approved betting competitions and granting it the exclusive right to conduct off-course wagering, Tabcorp made a substantial payment and was required to enter into the JVA pursuant to which it assumed the obligations already mentioned, including the making of substantial payments to fund the racing industry, and the facilitation of in-depth scrutiny and a level of control over its activities by the racing industry. Tabcorp is, as already noted, subject to a special and distinct regulatory regime both under the JVA and under the State's laws by reason of its status as the holder of the sole wagering licence: see [165] above.
284 The fact that Tabcorp and Sportsbet do not enjoy the same rights and privileges in Victoria with respect to their bookmaking businesses does not of itself mean that their differential treatment amounts to discrimination. Rather, this differential treatment recognises that Tabcorp and Sportsbet are relevantly different. Sportsbet fails to establish discrimination. Tabcorp's retail exclusivity derives from the arrangements made in 1994, pursuant to which Tabcorp acquired, for a substantial price, the business of the TAB and the sole wagering licence. As part of these arrangements, the racing industry was given a 25% interest in the profits of its business. As indicated earlier, the arrangements and obligations to which Tabcorp is subject were assumed by Tabcorp in the negotiations that led to it acquiring the TAB's business and the sole wagering licence, as evidenced in the MOU. In substance, Tabcorp's favoured position in relation to Sportsbet and all other traders was the quid pro quo for payments it made and the obligations it assumed when it entered the JVA, acquired the TAB's business and became the sole holder of the wagering licence: see GBA 1994, s 11(2)(e).
285 In these appeals, Sportsbet does not challenge the provisions pursuant to which Tabcorp was granted the sole wagering licence. Nor does it contend that the grant of the licence was in itself contrary to s 92 or s 49 of the Self-Government Act. Rather, Sportsbet's complaint is that it cannot do that which Tabcorp may do pursuant to that licence. In substance, Sportsbet argues for preferential treatment because it is engaged in interstate trade and commerce. Neither s 92 nor s 49 of the Self-Government Act can support its position in this regard.
286 Since the impugned provisions do not in their terms or practical operation discriminate against trade or commerce between the Territory and the State, they cannot infringe s 49 of the Self-Government Act. For this reason, the appeals must be allowed.
Protectionism β disadvantaging out-of-state trade or advantaging intrastate trade?
287 If an impugned measure is discriminatory against out-of-state trade, the critical issue for the purposes of s 92, and s 49 of the Self-Government Act, becomes whether that discrimination is properly characterised as protectionist: see Cole v Whitfield at 394, 408 and Castlemaine Tooheys at 471, discussed at [211]-[215] and [218]-[220] above. As already noted, the primary judge concluded that there was discrimination of a protectionist kind because the impugned provisions "entrench Tabcorp's position as the sole supplier in Victoria of betting facilities of a kind which Sportsbet seeks to supply in Victoria and the market in which both Tabcorp and Sportsbet operate is a national market": see Sportsbet v Victoria at 451 [123], [125].
288 Since the impugned provisions are not, in our view, discriminatory against out-of-state trade and commerce, no question about protectionism arises. The impugned provisions cannot be characterised as discriminatory in a protectionist sense because they treat intrastate and out-of-State trade in the same way. For this reason too, they cannot be said to burden out-of-State trade to its competitive disadvantage or to the competitive advantage of intrastate trade.
289 In case the impugned provisions are discriminatory against trade between the Territory and the State, as the primary judge held, the following paragraphs seek to explain briefly why the impugned provisions are not properly characterised as protectionist even in that event.
290 As already noted, the circumstances in the current appeals are relevantly different from the circumstances in Castlemaine Tooheys and Betfair v WA. In those two cases, as noted above at [218]-[222] and [225]-[232], the legislative history and the practical operation of the challenged measures at the time of their enactment showed an objective intention on the part of the legislature to target a significant interstate trader: see Castlemaine Tooheys at 464, 475-477 and Betfair v WA at 470-472 [68]-[77], 478 [106], 480 [114], 481-482 [122]. In contrast to these cases, the statutory history of the impugned provisions gives no reason to suppose that, at the time of enactment, the legislature intended to disadvantage out-of-state trade or advantage intrastate trade. Further, as discussed hereafter, the character of the impugned provisions, judged by reference to the liabilities, rights and privileges they create, does not justify the imputation of such an intention: compare Grain Pool of Western Australia v Commonwealth (2000) 202 CLR 479 at 492 [16] and Kartinyeri v Commonwealth (1998) 195 CLR 337 at 352-353, 372. Nor does the practical operation of the impugned provisions demonstrate discrimination of a protectionist kind β whether considered in terms of their objective legislative intention at the time of enactment, or in terms of their effect at the time the VCGR seized the betbox at the Hotel (see below at [296] and following).
291 As already noted, the impugned provisions have their origins in late 19th and early 20th century Victorian laws, when gambling was permitted only on race courses. There is no suggestion that, as blanket prohibitions, they disclosed a protectionist purpose. Rather, Sportsbet would have the court impute a protectionist character to them because their prohibitions apply to all bookmakers conducting business in Victoria save for Tabcorp.
292 As the plurality judgment stated in Bayside City Council v Telstra Corporation Ltd (2004) 216 CLR 595 at 629-630, "where a certain kind of differential treatment is put forward as the basis of a claim of discrimination, it may require an examination of the relevance, appropriateness, or permissibility of some distinction by reference to which such treatment occurs, or by reference to which it is sought to be explained or justified". Whether or not, as a practical matter, the differential treatment inherent in exempting Tabcorp from the impugned provisions is of a protectionist nature depends on a consideration of matters of this kind.
293 The relevant statutory history does not support any imputation of protectionism. As already noted, Tabcorp's favoured position has its origins in the establishment of the TAB by the Racing (Totalizators Extension) Act 1960 (Vic), enacted as a consequence of Justice Martin's report in 1959: see [147] above. History discloses that the statutory monopoly enjoyed by the TAB was introduced to allow off-course totalisator wagering with a single wagering operator in a regulated environment. More immediately, however, Tabcorp's favoured position derives from the arrangements made in 1994, pursuant to which Tabcorp acquired the business of the TAB. These arrangements were designed to secure funding for the racing industry and also to provide for the well-being of the industry: see [148]-[154] above. These arrangements included the enactment of the GBA 1994 and the grant to Tabcorp of the sole wagering licence for an eighteen-year term, as a result of which Tabcorp enjoys retail and totalisator exclusivity. The arrangements also included the JVA and other agreements pursuant to which Tabcorp undertook significant obligations to the racing industry, including a funding obligation to contribute at a higher effective rate than any other wagering operator and to operate a totalisator. When enacted in 2003, the GRA represented no material departure in the legislative scheme or purpose from the GBA 1994. As noted above (at [155]), the main purpose of the GRA was that of re-enactment and consolidation of the existing regulatory regime: see GRA, s 1.1(1).
294 As we have seen, the grant of the sole wagering licence under the GBA 1994 operated to exempt Tabcorp from the prohibitions in the impugned provisions and conferred a monopoly on Tabcorp with respect to off-course retail wagering. The GRA operated to preserve Tabcorp's exemption and its monopoly rights. As explained earlier (at [282]-[284]), the existence of a monopoly of the kind enjoyed by Tabcorp does not demonstrate discrimination of a protectionist kind: it does not operate in terms or practical effect competitively to disadvantage out-of-state trade or advantage intrastate trade: compare Castlemaine Tooheys at 467, 468; Barley Marketing Board at 203; and Betfair v WA at 481 [118].
295 At the time of the enactment of the GRA, the regulatory scheme of which Tabcorp's monopoly formed part had been in operation for almost a decade. In 1994, besides making the substantial payment and assuming the obligations to which reference has been made, Tabcorp was also made subject to a distinct regulatory regime: see [165] and [283] above. The GRA continued this regulatory regime and preserved Tabcorp's rights as the sole wagering licensee whilst, at the same time, Tabcorp's obligations under the 1994 arrangements continued. Competition from out-of-state bookmakers was insignificant in the early 1990s and, by 2003 when the GRA was enacted, it was still no more that "a niche segment" in the Australian wagering market: see [200] above. In this context, there is little reason to suppose that when the GBA 1994 and the GRA were enacted, they created or preserved a monopoly that operated to advantage intrastate trade or disadvantage out-of-state trade in a protectionist sense.
296 The appellants argued that the fact that, at the time of enactment, the practical operation of the impugned provisions was not to advantage intrastate trade or disadvantage out-of-state trade was conclusive of the absence of protectionism. They submitted that: (1) the practical effect of a law on out-of-state trade was relevant only to identify the character of a law; (2) the process of characterisation was an inquiry into the objective intention of the legislature in enacting the impugned provisions; and (3) the relevant time for an inquiry as to the practical effect was at the time of enactment of these provisions. The appellants argued that the practical operation of the impugned provisions on facts that were not in Parliament's contemplation at the time of enactment was not relevant to the question of validity. The appellants argued that the primary judge wrongly rejected this submission and that her Honour failed to consider the correct question β whether the practical operation of the impugned provisions founded an inference that the true purpose of the provisions was to achieve a protectionist object.
297 Against these propositions, Sportsbet argued that, in s 92 jurisprudence, where validity depended on the practical operation of a law, the practical effect of an impugned measure was to be considered as at the time of the alleged invalidity β in this case, on 16 July 2010, when the VCGR seized the betbox and thereby interfered with Sportsbet's trade. In written submissions, Sportsbet said:
It is clear that since July 2004 the wagering market has changed considerably with the development of internet wagering, the growth of corporate bookmakers and the introduction of race fields.
Section 92 must be applied in a way that accommodates these changes. The core questions posed by s 92, namely whether a discriminatory burden of a protectionist kind is imposed and, if so, whether the burden is saved by a non-protectionist purpose are to be answered as a practical matter at the time the burden bites.
298 The issue of time raised by the parties' submissions is an important one that has attracted scholarly attention: see, for example, Sonter D, "Intention or Effect? Commonwealth and State Legislation after Cole v Whitfield" (1995) 69 ALJ 332 at 337-341; Simpson A, "Grounding the High Court's Modern Section 92 Jurisprudence: the Case for Improper Purpose as the Touchstone" (2005) 33 FL Rev 445 at 465-484; and Bell AS, "Section 92, Factual Discrimination and the High Court" (1991) 20 FL Rev 240 at 245-248. As explained below, it is, however, unnecessary to determine the issue here, because the changes relied on by Sportsbet do not affect the resolution of these appeals.
299 Whilst the evidence showed that, by 2010, Tabcorp faced competition from a range of wagering operators, including out-of-state corporate bookmakers like Sportsbet, there was no reason to suppose that Tabcorp's favoured position was on this account converted from a permissible to an impermissible monopoly. The change could not retrospectively alter the objective intention of the legislature in enacting the GRA, or the GBA 1994. This was, and remained, a non-protectionist purpose. Equally importantly, the different treatment accorded Tabcorp as compared with other traders, including out-of-state traders such as Sportsbet, continued to be explicable by reference to a relevant difference between Tabcorp and other traders. That is, Tabcorp's favoured position continued to be explicable by reference to the arrangements made in 1994, pursuant to which Tabcorp acquired the sole wagering licence and assumed the significant obligations to which reference has been made.
300 Sportsbet argued that it was competitively disadvantaged in comparison with Tabcorp by reason of the fact that the impugned provisions prevented it from using a betbox in Victoria although Tabcorp could use Easybet terminals. Sportsbet contended that "[t]he competitive disadvantage that flows to [out-of-state] traders was clearly proved by the commercial exploitation of the Easybet terminals by Tabcorp". There are a number of difficulties with this submission, some of which have already been noted.
301 Sportsbet's argument with respect to changed circumstances tended to assume, at another level still, an individual rights theory of s 92. The fact that the impugned provisions prevented Sportsbet from competing with Tabcorp in one way (by using a betbox) does not demonstrate protectionism. To establish discrimination of a protectionist kind, Sportsbet had to show, in effect, that, by exempting Tabcorp from their operation, the impugned provisions subjected Sportsbet, as a proxy for trade between the State and Territory, to a competitive disadvantage sufficient to warrant a finding that the provisions were protectionist: see Cole v Whitfield at 399, 409 and Bath at 426. Sportsbet did not satisfy this requirement. Having regard to the whole of the legislative scheme, there was no evidence that, as a matter of fact, the impugned provisions created such a competitive disadvantage for Sportsbet as an out-of-state trader that warranted the provisions being characterized as protectionist. There was, for example, no evidence that Sportsbet's market share or profits were reduced as a consequence of the impugned provisions: compare Betfair v Racing NSW at 235-236 [55]-[56], 237 [62]-[63], 249 [110], 254 [133]. Nor was there evidence that, Tabcorp aside, the impugned provisions operated to the competitive advantage of in-State wagering operators as a whole. As Betfair v Racing NSW and Sportsbet v NSW clearly showed, the fact that the impugned provisions affected competition between participants in a national market, even on different sides of State and Territory borders, was insufficient to establish protectionism: see also Castlemaine Tooheys at 472 and 474.
302 In supplementary submissions dated 18 April 2012, Sportsbet made what it termed a "formal submission" that s 92 should be construed to "prohibit any β¦ restriction of trade, commerce and intercourse among the States which is detrimental to competition in a market, which operates without reference to State boundaries". This submission must fail, having regard to the authorities discussed earlier. Furthermore, as the appellants noted, this was not the case Sportsbet ran at trial and has no basis in the pleadings. The submission was not the subject of a notice of contention. Had the submission formed part of Sportsbet's case at trial, it seems likely that the appellants would have led further evidence.
Protectionism β Not reasonably necessary to achieve a legitimate purpose?
303 Even if the impugned provisions discriminated against out-of-state trade to its competitive disadvantage or the advantage of intrastate trade, the provisions cannot be characterised as protectionist if they were enacted in pursuit of a legitimate objective and were appropriate and adapted, or reasonably necessary, to achieve that objective: see Cole v Whitfield at 408-410 and Betfair v WA at 477 [102]-[103], discussed at [231]-[233] above.
304 The appellants contended that the impugned provisions were reasonably necessary for:
(a) funding the Victorian racing industry by means of the payment obligations imposed on Tabcorp as the holder of the sole wagering licence conferring off-course retail and totalisator exclusivity (Victoria's contention);
(b) for the regulation, control and restriction of off-course betting in Victoria (Victoria's contention);
(c) for the promotion of a vibrant and successful racing program and associated spectacle, including by materially funding the racing industry (Tabcorp's contention);
(d) for the promotion of an attractive and socially beneficial form of wagering through the provision and protection of an ubiquitous totalisator (Tabcorp's contention); and
(e) for the preservation of integrity and probity within the Victorian racing and wagering industries (Tabcorp's contention).
305 Plainly enough, these objectives overlap and are inter-related: compare Racing NSW v Sportsbet at 490 [138]. Further, when considered in light of the circumstances mentioned earlier, objectives (a) and (c) may be regarded as different formulations of essentially the same idea. Both involve the proposition that the impugned provisions are reasonably necessary for the promotion of a successful racing industry, including for the purpose of funding the industry. Likewise, objective (b) and objective (e) can be understood as different ways of expressing essentially the same objective. Objective (d) may be considered as part of both sets of objectives.
306 The primary judge rejected the contention with regard to funding because the appellants failed to demonstrate that the impugned provisions were "the only means or a necessary means" to achieve that end (emphasis in original): see Sportsbet v Victoria at 455 [141], 455-456 [143], 456 [145], 457 [149], 458 [150]-[151]. In her Honour's words (at 455 [141]), "the evidence did not establish what was the necessary level of funding, and whether that level of funding could only be secured by maintenance of the impugned provisions". Similarly, her Honour held that the appellants had not shown that the impugned provisions were reasonably necessary for the regulation, control and restriction of off-course betting in Victoria because it was not shown that "the objectives sought to be achieved could not be achieved without the impugned provisions": see Sportsbet v Victoria at 459 [154].
Reasonably necessary for the promotion of a successful racing industry, including for the purpose of funding the industry
307 The legislative history shows that, objectively speaking, these objects were amongst the chief purposes of the legislative regime, of which the impugned provisions formed part: compare APLA Ltd v Legal Services Commissioner (NSW) (2005) 224 CLR 322 at 394 [178] (Gummow J) and 462 [423]-[424] (Hayne J). Under the legislative scheme, Tabcorp's exclusion as the sole wagering licensee from the prohibitions in the impugned provisions conferred off-course retail and totalisator exclusivity. The legislative history and the liabilities, rights and privileges that the impugned provisions create show that Tabcorp was granted retail exclusivity upon the basis that Tabcorp would provide a totalisator wagering service and from that service provide much of the funds for the Victorian racing industry: see [145]-[171] above; also Sportsbet Victoria at 453-454 [135].
308 It was, of course, open to the State to be of the view that the Victorian racing industry contributed to the social, cultural and economic well-being of Victoria and to decide upon a funding model for the industry: see [142]-[144] above. This model (see [172]-[185]) has worked well. As noted, the primary judge stated that the funding model used in Victoria "has been and remains highly successful" and is also used in other Australian jurisdictions and internationally: see Sportsbet v Victoria at 454 [136].
309 Sportsbet argued that the appellants' case on funding was fatally flawed in two respects. First, the appellants made no attempt to quantify the level of funding that was necessary to fund the racing industry and, secondly, racing industry returns were not in decline, notwithstanding the increased competition from the growth of corporate bookmakers. It was, however, unnecessary for the appellants to meet these propositions. The question was whether the appellants established that the legislative scheme was reasonably necessary for a legitimate objective β such as the promotion of a successful racing industry, including for the purpose of funding the industry. Having regard to the following considerations, the appellants made out their case.
310 Sportsbet challenged the width of the prohibitions in the impugned provisions but, plainly enough, a prohibition of this kind was a concomitant of the monopoly that was part of the State's legislative scheme. Further, funding via this monopoly model is integral to the success of the Victorian racing industry. In the words of the primary judge, Tabcorp's contributions are "an essential part" of keeping the Victorian racing industry "vibrant and successful" and the industry's position "could not be maintained without substantial funding of the kind it presently receives", which necessarily included contributions from the gambling industry: see Sportsbet v Victoria 454 [136], 457 [148]-[149].
311 As the earlier discussion discloses, most of the Victorian racing industry's revenue derives from distributions by Tabcorp to the industry's controlling bodies under the JVA; revenue from other sources is significantly less: see Sportsbet v Victoria at 453 [135]. Distributions from Tabcorp are largely derived from totalisator wagering. Totalisator wagering has proved a reliable means of generating funds for the racing industry and has provided greater funding certainty for the industry than other forms of wagering. For this and the other reasons already mentioned, a successful totalisator is reasonably seen to be important for the continued success of the industry. Tabcorp's retail exclusivity is vital for maintaining a successful totalisator and Tabcorp's funding level for the Victorian racing industry.
312 It should be borne in mind that there was no evidence that any increase in wagering overall would offset the loss in funding from Tabcorp in the event that Tabcorp lost its retail exclusivity. There was also no evidence that there was an alternative viable funding model that would confer the same or more benefits than the current model.
313 In these circumstances, there was no need to establish a precise level of funding, as Sportsbet argued. The evidence was that the size and success of the racing industry varied with the level of funding it received. It was enough to show, as the appellants did, that without substantial funding of the kind the industry currently receives from Tabcorp, the Victorian racing industry could not sustain its current position; that the current funding model has sustained the success of the Victorian racing industry; that if Tabcorp were to lose its retail exclusivity, the level of funding for the Victorian racing industry would be lower and less secure; and that this would entail a less successful racing program and associated spectacle. In the circumstances, the impugned provisions can properly be regarded as reasonably necessary or appropriate and adapted for the promotion of a successful racing industry, including for the purpose of funding the industry.
314 At this point, it is necessary to consider two matters raised by the primary judge. The first was that her Honour held that, at this stage of the analysis required by Cole v Whitfield and Betfair v WA, funding was not a legitimate objective. Her Honour held, mistakenly, that this followed from the observations in the plurality judgment in Betfair v WA at 479 [108]: see Sportsbet v Victoria at 456-457 [145]-[146].
315 In Betfair v WA at 478 [106], the plurality judgment drew attention to a statement made by the relevant State Minister in the State Legislative Assembly to the effect that Western Australia opposed betting exchanges because the exchanges made no contribution to the racing industry in Australia and "allow[ed] punters to bet on any of the racing codes and lose". The plurality went on to say (at 478-479 [107]-[108]):
First, as to the absence of contribution to the racing industry in Australia, so far as that may be relevant. The evidence shows that by agreement with the Victorian regulator, Betfair undertook to return an amount equivalent to 1 per cent of the value of bets taken by it on races in Victoria; this is the same level of return as that required from bookmakers in that State. Betfair has been meeting that obligation. There is no reason to doubt the assertion by Betfair that it remains ready to undertake obligations of this kind in Western Australia and to ensure that the organisers of races in that State obtain a reward from Betfair as well as from other wagering operators in that State.
In its submissions Western Australia also contended that any practical effect of the impugned legislation in protecting the turnover of in-State operators from diminution as a result of competition from Betfair, with consequent prejudice to the returns to the racing industry and in-State revenue provided by it, could not be protectionist in nature. But a proposition which asserts that an object of revenue protection of this kind may justify a law which discriminates against trade is contrary to authority [Bath at 426-427; Sportsodds Systems Pty Ltd v New South Wales (2003) 133 FCR 63 at 80]. And it is contrary to principle, for such a justification, if allowable, would support the re-introduction of customs duties at State borders.
316 In the first of these paragraphs, the plurality acknowledged the permissibility of requiring contributions in order to fund a State's racing industry. The plurality clearly contemplated that a requirement to make such contributions is permissible at least if it is imposed at the same level on local and interstate operators: see also Betfair v WA 488 [146] (Heydon J). Read with this in mind, it is apparent that the second paragraph is concerned with a further and different object β the protection of the revenue of the State (qua State) provided by the returns to the State's racing industry. The reference to "revenue" in this paragraph is to State revenue from taxation and other imposts, which would be prejudiced if the returns to the racing industry were prejudiced.
317 In the second paragraph, on which the primary judge relied, the plurality stated in effect that, for the purpose of s 92 and s 49 of the Self-Government Act, the protection of State revenue was not a legitimate objective. The report of argument in Betfair v WA at 433 and the plurality's reference to Bath at 426-427 and Sportsodds Systems Pty Ltd v New South Wales (2003) 133 FCR 63 ("Sportsodds") at 80 confirms that this was in fact their Honours' intended meaning.
318 In particular, in Sportsodds at 80 [43], a Full Court of this Court specifically said:
The appellant submitted before us that the only objective now remaining is raising taxation revenue for the Treasury. This would not be a legitimate objective for the purpose of justifying a discriminatory burden: see Bath v Alston Holding Pty Ltd. (Emphasis added.)
Elsewhere in Sportsodds, the Full Court specifically referred to the possibility that the protection of the racing industry by appropriate funding measures could be a legitimate objective: see Sportsodds at 79-80 [41]. There is no reason to suppose that the plurality in Betfair v WA overlooked the distinction discussed in Sportsodds between protecting a State's racing industry through appropriate funding arrangements and protecting the State's revenue.
319 Considered in this way, Betfair v WA did not require the primary judge to conclude that legislative measures designed to promote a successful racing industry by maintaining funding for the industry were directed to an illegitimate objective. As the Full Court observed in Sportsodds at 79 [41], Cole v Whitfield held that the protection of Tasmanian crayfish stocks was a legitimate objective in circumstances where the exploitation of stocks was non-discriminatory. Given this, there is no reason to suppose that the promotion of a State's racing industry is not also a legitimate objective provided it is non-discriminatory. Further, there no reason in principle why such an objective should cease to be legitimate simply because the measures in question are directed amongst other things to funding the industry, as opposed to maintaining the quality of crayfish stock, as in Cole v Whitfield.
320 The second difficulty with the primary judge's analysis was that her Honour stated that, to meet their burden at this stage of the inquiry, the appellants were obliged to establish the "necessary" or "adequate" level of funding for the Victorian racing industry in a given form, or that this level of funding could only be secured by the impugned provisions: see Sportsbet v Victoria at 455 [141], 457-458 [149]-[150]. As already indicated, in our view, the appellants were not required to establish this. The inquiry is one of reasonable necessity, or whether the impugned provisions are appropriate and adapted to a legitimate objective β here, the promotion of racing, including for the purpose of funding the industry. In this context, necessary does not mean "essential" or "indispensable": see [229]-[233] above, citing Mulholland v AEC at 199 [39] and Hogan v Hinch at 418 [72]. There was ample evidence that the impugned provisions were reasonably necessary, or appropriate and adapted, for the promotion of a successful racing industry, including for the purpose of funding the industry and, indeed, that they had achieved this objective.
321 Having regard to this conclusion, there is no need to consider further whether the impugned provisions were reasonably necessary or appropriate and adapted to the other objectives on which the appellants relied.
DISPOSITION
322 For the reasons stated, the appeals must be allowed. The impugned provisions do not infringe s 49 of the Self-Government Act and there is no inconsistency to which s 109 of the Constitution applies. The impugned provisions do not in their terms or practical operation discriminate against trade or commerce between the Territory and the State. If it were necessary to examine the matter further, the impugned provisions would not properly be characterised having a protectionist operation.
323 Before the judgment in these appeals was delivered, Mansfield J delivered judgment in Sportsbet Pty Ltd v Harness Racing Victoria (No 6) [2012] FCA 896; and with the leave of the Court, Sportsbet and Tabcorp filed short submissions addressing the decision. The State did not wish to add to Tabcorp's submissions. Having considered the matter, there is nothing that would lead us to depart from what we have stated above.
324 Having regard to the fact that the appeals concern only part of the judgment of the primary judge, we would direct that, within seven days, the appellant in each appeal file short minutes giving effect to these reasons for judgment.
325 We would also direct that, if the parties in each appeal are unable to agree within seven days on the appropriate costs orders for the proceeding before the primary judge and for the appeal, within a further seven days, the appellant in each appeal file and serve its written submissions as to the appropriate costs orders and, within seven days thereafter, the respondents file their written submissions. In either case the submissions should not exceed three pages.
I certify that the preceding two hundred and fourteen (214) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Kenny and Middleton.
Associate:
Dated: 12 October 2012
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FEDERAL COURT OF AUSTRALIA
Kowalski v Complete Exhaust Specialists Marion [2010] FCA 222
Citation: Kowalski v Complete Exhaust Specialists Marion [2010] FCA 222
Parties: KAZIMIR KOWALSKI v COMPLETE EXHAUST SPECIALISTS MARION and BOB STRAWBRIDGE
File number: SAD 13 of 2010
Judge: MANSFIELD J
Date of judgment: 16 March 2010
Date of hearing: 19 February 2010
Place: Adelaide
Division: GENERAL DIVISION
Category: No catchwords
Number of paragraphs: 12
Counsel for the Applicant: The applicant appeared in person
Counsel for the Respondents: No appearance
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION SAD 13 of 2010
BETWEEN: KAZIMIR KOWALSKI
Applicant
AND: COMPLETE EXHAUST SPECIALISTS MARION
First Respondent
BOB STRAWBRIDGE
Second Respondent
JUDGE: MANSFIELD J
DATE OF ORDER: 16 MARCH 2010
WHERE MADE: ADELAIDE
THE COURT ORDERS THAT:
1. The application for leave to appeal be refused.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION SAD 13 of 2010
BETWEEN: KAZIMIR KOWALSKI
Applicant
AND: COMPLETE EXHAUST SPECIALISTS MARION
First Respondent
BOB STRAWBRIDGE
Second Respondent
JUDGE: MANSFIELD J
DATE: 16 MARCH 2010
PLACE: ADELAIDE
REASONS FOR JUDGMENT
1 The application seeks leave to appeal from part of the orders made by Federal Magistrate Simpson on 9 February 2010 in proceedings in the Federal Magistrates Court. On that day, Federal Magistrate Simpson disqualified himself from hearing the proceeding and transferred the matter to the docket of another Federal Magistrate. He did so on the application of the applicant. The applicant applied for costs in relation to the application that Federal Magistrate Simpson disqualify himself, which he indicated in submissions would be his disbursements only (as he was appearing in person). The application for costs was refused.
2 The application for leave to appeal is confined to the order refusing him costs of that application.
3 The claim in the Federal Magistrates Court is under ss 52 and 53 of the Trade Practices Act 1974 (Cth) (the TP Act). On 28 August 2009, the respondents replaced a muffler on the applicant's car at a cost of $230. The applicant claims that they falsely represented to him that the muffler on his car needed to be replaced when in fact it did not. He claims damages equivalent to the cost of the muffler, $1000 damages for unwarranted stress and anxiety caused to him by the respondents, and interest.
4 The respondents' defence is two-fold. First, they say that the first respondent is an unincorporated partnership comprising the second respondent and his wife, so they challenge the application of the TP Act at all. Secondly, they say they advised that the muffler be replaced because there were loose baffles inside it, and that the applicant's wife agreed to that work being done. They deny misleading and deceptive conduct.
5 The claim has not been determined.
6 The respondents did not attend on the hearing of the disqualification application.
7 The decision to grant leave to appeal is a discretionary one. Generally, it is relevant to determine whether the decision was attended by sufficient doubt to warrant its being reconsidered by the Federal Court, and secondly whether substantial injustice would result if leave to appeal were refused supposing the decision be wrong: DΓ©cor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397.
8 I note, so that it is not suggested that I have overlooked the material, the applicant has specified his disbursements at $70, being said to be $15 to travel to Court on 9 February 2010, plus $5 for parking fees, and $50 for typing his application and written submissions and a letter (a total of 10 pages) on the disqualification application. The payment for the typing is apparently confirmed by a copy of a letter from the typist dated 13 February 2010 on which is endorsed a receipt dated 14 February 2010.
9 In my view, leave to appeal should be refused. Federal Magistrate Simpson exercised a discretion as to whether to award costs of that application. It is one of the unfortunate consequences of a disqualification application that costs may be incurred which, in one sense, it is unfair to visit upon the applicant but in another sense it is unfair to visit upon the respondent, because the respondent (as here) played no role in the circumstances giving rise to the disqualification application and did not participate in the hearing. Given those circumstances, it was within the Federal Magistrate's discretion to order that there be no costs of the application.
10 In addition, although the applicant indicated that he was seeking recovery of disbursements only, there was no material before the Federal Magistrate upon which to indicate the nature or extent of those disbursements. He did not at the time seek an opportunity to prove them.
11 Thirdly, if the applicant's claim is ultimately unsuccessful, it was legitimate for the Federal Magistrate to consider that it would be unfair to visit upon the respondents the costs of that application when the applicant has not established an entitlement to relief at all in the proceeding, and indeed when it may be found that either or both of the respondents' defences to the claim should succeed. As an exercise of discretion on the part of the Federal Magistrate, it is not possible to say that the decision was attended with sufficient doubt to warrant it being reconsidered by the Full Court of this Court: cf House v R (1936) 55 CLR 499 at 504-505. Nor do I consider that substantial injustice will be caused if leave to appeal were refused, supposing the costs decision to have been wrong; having regard to the respective positions of the parties and to the fact that the issues between them were and remain undecided.
12 For those reasons, the application for leave to appeal is refused.
I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.
Associate:
Dated: 16 March 2010
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Australian Integrated Finance Pty Ltd v Korong Holdings Pty Ltd [2005] FCA 326
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FEDERAL COURT OF AUSTRALIA
Australian Integrated Finance Pty Ltd v Korong Holdings Pty Ltd
[2005] FCA 326
PRACTICE AND PROCEDURE β pleadings β application to strike out statement of claim β whether pleadings fail to disclose a reasonable cause of action.
Fair Trading Act 1987 (SA)
Trade Practices Act 1974 (Cth)
Federal Court Rules O 20 r 2
Yorke and Another v Lucas (1985) 158 CLR 661 applied
AUSTRALIAN INTEGRATED FINANCE PTY LTD ACN 078 700 044 & ORS v KORONG HOLDINGS PTY LTD (FORMERLY FOX FINANCE COMPANY PTY LTD) ACN 007 845 945 & ORS
SAD 206 of 2004
LANDER J
23 MARCH 2005
ADELAIDE
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY SAD206 OF 2004
BETWEEN: AUSTRALIAN INTEGRATED FINANCE PTY LTD
ACN 078 700 044
FIRST APPLICANT
ANZ SPECIALISED ASSET FINANCE PTY LTD (FORMERLY ANZ VENDOR SOLUTIONS PTY LTD)
ACN 006 197 459
SECOND APPLICANT
PRO CRETE & PUMPING PTY LTD ACN 096 425 973 (RECEIVERS AND MANAGERS APPOINTED)
(IN LIQUIDATION)
THIRD APPLICANT
AND: KORONG HOLDINGS PTY LTD (FORMERLY FOX FINANCE COMPANY PTY LTD) ACN 007 845 945
FIRST RESPONDENT
CHRISTOPHER JESSOP FOX
SECOND RESPONDENT
PHILLIP LESLIE HOLBROOK
THIRD RESPONDENT
ANDREW JOHN UNDERWOOD
FOURTH RESPONDENT
DEANS AUCTION SERVICES (VICTORIA) PTY LTD
ACN 080 176 067
FIFTH RESPONDENT
SIMON BONES
SIXTH RESPONDENT
JUDGE: LANDER J
DATE OF ORDER: 23 MARCH 2005
WHERE MADE: ADELAIDE
THE COURT ORDERS THAT:
1. The application be dismissed.
2. The fourth respondent pay the applicants' costs of the notice of motion filed on 28 February 2005.
3. The fourth respondent, if so advised, provide a request to the applicants for any particulars within 10 days.
4. The applicants respond to the proper request for particulars within 17 days.
5. The fourth respondent file his defence within 28 days.
6. The directions hearing be adjourned until 12 May 2005 at 9.00am.
7. The applicants advise each respondent (other than the fourth respondent) of the date and time of the next directions hearing.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY SAD206 OF 2004
BETWEEN: AUSTRALIAN INTEGRATED FINANCE PTY LTD
ACN 078 700 044
FIRST APPLICANT
ANZ SPECIALISED ASSET FINANCE PTY LTD (FORMERLY ANZ VENDOR SOLUTIONS PTY LTD)
ACN 006 197 459
SECOND APPLICANT
PRO CRETE & PUMPING PTY LTD ACN 096 425 973 (RECEIVERS AND MANAGERS APPOINTED)
(IN LIQUIDATION)
THIRD APPLICANT
AND: KORONG HOLDINGS PTY LTD (FORMERLY FOX FINANCE COMPANY PTY LTD) ACN 007 845 945
FIRST RESPONDENT
CHRISTOPHER JESSOP FOX
SECOND RESPONDENT
PHILLIP LESLIE HOLBROOK
THIRD RESPONDENT
ANDREW JOHN UNDERWOOD
FOURTH RESPONDENT
DEANS AUCTION SERVICES (VICTORIA) PTY LTD
ACN 080 176 067
FIFTH RESPONDENT
SIMON BONES
SIXTH RESPONDENT
JUDGE: LANDER J
DATE: 23 MARCH 2005
PLACE: ADELAIDE
REASON FOR JUDGMENT
1 This is an application by the fourth respondent to strike out the applicants' application and statement of claim upon the ground that it is embarrassing and fails to disclose a reasonable cause of action against him. The fourth respondent relies upon O 20 r 2 of the Federal Court Rules. The first and second applicants are parties to what is described as a strategic alliance agreement in which the first applicant acts as the second applicant's agent for the purpose of arranging and managing finance contracts. The third applicant is a company to which the first and second applicants advance money. It is now in liquidation.
2 The first respondent is a finance broker which acted as the agent of the first applicant in sourcing prospective customers and effected rental agreements for customers on behalf of the first applicant. The second respondent is a director of the first respondent. The third respondent is an employee of the first respondent. The fourth respondent, who brings this application, is alleged to have been a consultant of the first respondent between 5 February 2001 and 4 February 2002. Moreover, he is alleged to have been an employee and/or agent of the first respondent. The fifth respondent is a valuer and the sixth respondent is a director with the fifth respondent. The roles of the fifth and sixth respondents are irrelevant for the purposes of this application.
3 It is alleged that the first respondent sent the first applicant an application on behalf of the third applicant, seeking finance for two concrete pumps in the amount of $1.8 million. Subsequently the finance sought was extended by a considerable sum. It is pleaded that in pursuance of that transaction the first respondent provided the first applicant with two statutory declarations signed by Mirella Pacifico on behalf of the third applicant, which were witnessed by the fourth respondent. It is not pleaded that the fourth respondent is a Justice of the Peace.
4 It is asserted in paragraph 49 that the statutory declaration contained express representations that the two concrete pumps the subject of a sale and lease-back agreement existed and were owned by the third applicant. In paragraph 49 it is pleaded:
'49. The Statutory Declarations contained (and in providing AIF with a copy of the Statutory Declarations, Underwood and Fox Finance made to AIF and AVS) the following express representations:-
49.1. The two concrete pumps the subject of the "Sale and Lease back" Agreements existed, and were owned by Pro Crete.'
5 The applicants allege that by providing AIF with a copy of the statutory declarations, the persons there referred to were parties to the representations included in the statutory declarations. In paragraph 50 of the statement of claim, reference is made to implied representations:
'50. In providing AIF with the Statutory Declarations, Fox Finance and Underwood impliedly represented to AIF and AVS that:-
50.1. Mirella Pacifico had signed the Statutory Declarations on behalf of Pro Crete.
50.2. Mirella Pacifico had done so in the presence of Underwood.
50.3. They believed the representations pleaded in the preceding paragraph and sub-paragraph.
50.4. They had a reasonable basis for so believing.'
6 Both paragraph 49 and 50 suggest - if not expressly, implicitly - that the fourth respondent was a party to the provision of the statutory declarations to AIF. It may be, as Mr Strawbridge argued on behalf of the fourth respondent, that there is some tension between the allegations in paragraphs 49 and 50 and paragraph 48. In paragraph 48 it is pleaded that Fox Finance provided AIF with the two statutory declarations signed by Mirella Pacifico. However, paragraph 48 does not deny that the statutory declarations were provided by Fox Finance through the medium of the fourth respondent. In those circumstances, there is not necessarily a tension between the three paragraphs referred to in the pleadings.
7 The applicants assert that the concrete pumps the subject of the advances never existed. They also assert that the statutory declarations were not signed by Mirella Pacifico. They further assert the statutory declarations were not signed in the presence of the fourth respondent. It is pleaded in paragraphs 122 and 123 of the statement of claim:
'122. The express and implied representations pleaded in relation to the Statutory Declarations were false and/or misleading or deceptive in that:-
122.1. Neither of the concrete pumps the subject of the "sale and lease back" agreement existed, and hence were not owned by Pro Crete.
122.2. The Statutory Declarations were not signed by Mirella Pacifico.
122.3. The Statutory Declarations were not signed by Mirella Pacifico in the presence of Underwood.
122.4. Neither Underwood nor Fox Finance took any, or any adequate, steps to ensure that Mirella Pacifico signed the Statutory Declaration or to otherwise confirm the existence, ownership or location of the said concrete pumps, and therefore did not have any reasonable basis for believing, and did not believe, the said representations.
123. In making the representations it made in relation to the sighting and existence of the concrete pumps:-
123.1. Fox Finance engaged in false, or misleading or deceptive, conduct in contravention of Section 52 of the Trade Practices Act, Section 56 of the Fair Trading Act (SA) and/or Section 42 of the Fair Trading Act (NSW).
123.2. Fox, Holbrook and Underwood engaged in false, or misleading or deceptive, conduct in contravention of Section 56 of the Fair Trading Act (SA) or Section 42 of the Fair Trading Act (NSW).
123.3. Fox, Holbrook and Underwood were knowingly concerned in Fox Finance's contravention of the Trade Practices Act within the meaning of Section 75B of the Trade Practices Act.'
8 It can be seen from the plea in paragraph 123 that the applicants claim primary liability on the part of the fourth respondent, pursuant to s 56 of the Fair Trading Act 1987 (SA) and accessorial liability pursuant to s 75B of the Trade Practices Act 1974 (Cth). It is pleaded unambiguously in paragraph 122 that the express representations pleaded in paragraph 49 and the implied representations pleaded in paragraph 50 of the statement of claim were false.
9 The fourth respondent, who is a Justice of the Peace, has filed an affidavit in support of this application, in which he sets out his standard practice in witnessing a statutory declaration. He says he does not read the documents which he is about to witness. If he does not know the deponent he asks for witness identification. He asks all deponents whether the contents are true and correct before the deponent signs a document and he witnesses it. His standard practice is not to witness a statutory declaration which has not been signed in front of him. He says that he has no present independent recollection of witnessing Mirella Pacifico signing the document referred to in the statement of claim, but says:
'β¦ however, in accordance with my standard practice I would not have witnessed that statutory declaration unless I had personally seen her affix her signature to it.'
10 Next Mr Underwood deposes:
'Given that I took the statutory declarations in my capacity as a JP, I was not required, nor did I take any steps to ascertain that the contents of the statutory declaration were true. It is for this reason that I have not made any representations as alleged by the plaintiffs.'
11 In my opinion, whether or not the fourth respondent made the express representations pleaded in paragraph 49 or whether or not the implied representations in paragraph 50 can attach to the fourth respondent, is a matter of fact to be determined at trial. Primary liability and accessorial liability under the Trade Practices Act and the Fair Trading Act is a matter of fact: Yorke and Another v Lucas (1985) 158 CLR 661.
12 The statement of claim does not fail to disclose a reasonable cause of action because the respondent asserts that the applicant will be unable to establish a material fact in that pleading. The pleading will only fail to disclose a reasonable cause of action if the material facts as pleaded, which are assumed to be capable of proof, do not by themselves disclose a reasonable cause of action. It is not appropriate on an application such as this to decide whether the applicants will be able to establish the express and implied representations and the facts which support those representations, or whether the fourth respondent's denial will prevail.
13 In any event, whatever else the respondent has deposed to, there are the further implied representations pleaded in paragraph 50; that the deponent to the statutory declarations signed the document in the presence of the fourth respondent; and by signing that document the fourth respondent implicitly represented that fact. It is asserted that that is untrue and, of course, if that is established, the fourth respondent must have known of the falsity of that implied representation.
14 It might be, as the fourth respondent presently deposes, that he has no memory whatever of signing this document. It might be, as he says, that his invariable practice is not to witness a statutory declaration unless signed in his presence. However, all of those matters are matters for the trial judge. It is enough to say that on the pleadings as they presently
stand, a cause of action is disclosed against the fourth respondent. The application, in my opinion, must be dismissed.
I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander.
Associate:
Dated: 23 March 2005
Counsel for the Applicants: S Doyle
Solicitor for the Applicants: Fisher Jeffries
Counsel for the Fourth Respondent: N Strawbridge
Solicitor for the Fourth Respondent: Phillips Fox
Date of Hearing: 23 March 2005
Date of Judgment: 23 March 2005
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federal_court_of_australia:fca/single/2005/2005fca0075
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2005-02-15 00:00:00
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Derriman v National Australia Bank Limited [2005] FCA 75
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https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2005/2005fca0075
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2024-09-13T22:47:15.934080+10:00
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FEDERAL COURT OF AUSTRALIA
Derriman v National Australia Bank Limited [2005] FCA 75
BANKRUPTCY β Validity of bankruptcy notice served on debtor β Bankruptcy notice failed to contain a note in the prescribed form headed 'For the Information of the Creditor' β Whether inclusion of these words was a requirement of a valid notice β If so, whether the requirement was essential or its omission a merely formal defect.
The Australian Steel Company (Operations) Pty Ltd v Lewis [2000] FCA 1915; 109 FCR 33 considered and applied
Bankruptcy Act 1966 (Cth) ss 41, 306
Bankruptcy Rules 1997 (Cth) rule 4.02, Schedule 1
KYM DERRIMAN v NATIONAL AUSTRALIA BANK LIMITED
NSD 1554 of 2004
NSD 1555 of 2004
WILCOX J
15 FEBRUARY 2005
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD 1554 of 2004
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN: KYM DERRIMAN
APPELLANT
AND: NATIONAL AUSTRALIA BANK LIMITED
RESPONDENT
JUDGE: WILCOX J
DATE OF ORDER: 15 FEBRUARY 2005
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The appeal be dismissed.
2. The appellant pay the respondent's costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD 1555 of 2004
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN: KYM DERRIMAN
APPELLANT
AND: NATIONAL AUSTRALIA BANK LIMITED
RESPONDENT
JUDGE: WILCOX J
DATE OF ORDER: 15 FEBRUARY 2005
WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The appeal be dismissed.
2. The appellant pay the respondent's costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA NSD 1554 of 2004
NEW SOUTH WALES DISTRICT REGISTRY NSD 1555 of 2004
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN: KYM DERRIMAN
APPELLANT
AND: NATIONAL AUSTRALIA BANK LIMITED
RESPONDENT
JUDGE: WILCOX J
DATE: 15 FEBRUARY 2005
PLACE: SYDNEY
REASONS FOR JUDGMENT
WILCOX J:
1 These reasons relate to two appeals challenging orders made on 5 October 2004 by Smith FM in the Federal Magistrates Court of Australia.
2 Smith FM dismissed a motion by the present appellant, Kym Derriman, seeking an extension of time to request a review of a decision of Registrar Hedge on 22 June 2004. The Registrar dismissed Mr Derriman's application to set aside a bankruptcy notice ('the bankruptcy notice') issued against him on the application of National Australia Bank Limited ('NAB'), the present respondent.
3 The second order made by Smith FM was a sequestration order against Mr Derriman's estate. This order was made on the petition of NAB, the relevant act of bankruptcy being Mr Derriman's alleged failure to comply with the requirements of the bankruptcy notice.
4 The Chief Justice has made orders, pursuant to s 25(1A) of the Federal Court of Australia Act 1976, that each appeal be heard and determined by a single judge.
5 Section 41(2) of the Bankruptcy Act 1966 (Cth) ('the Act') requires a bankruptcy notice to 'be in accordance with the form prescribed by the regulations'. The form currently required is that prescribed by reg. 4.02 of the Bankruptcy Regulations 1997 (Cth) ('the Regulations'). It is Form 1 in the Schedule to the Regulations.
The issues
6 The bankruptcy notice served on Mr Derriman, on 6 April 2004, generally followed Form 1. It did not contain Note 3, relating to foreign currency amount conversion. Before Smith FM, Mr Derriman argued this omission constituted a defect in the bankruptcy notice, notwithstanding that the judgment upon which the bankruptcy notice was based was given in the Local Court of New South Wales and expressed in Australian currency. This argument did not succeed; although not for the fundamental reason that emerged during argument in this Court. The prescribed form contains an italicised instruction to delete Note 3 if it is not applicable. The note is obviously inapplicable in a case where there is no need to convert foreign currency into Australian currency.
7 The other matter arising out of the form of the bankruptcy notice is more substantial. The prescribed form contains the following words:
' For the Information of the Creditor
Note about use of information
It may be necessary to disclose some or all of the information provided by you on this Form to Government agencies and departments for any purpose under the Act. Also, the information may be included on a public record or given to other persons, bodies or agencies for purposes authorised by the Act.'
I will return to the significance of this omission.
8 Before Registrar Hedge the appellant argued he had a cross-claim against NAB which he could not have set up in the proceeding in which NAB's judgment was obtained. The Registrar rejected that claim. The learned magistrate agreed with her. At paras 13-15 of his reasons, Smith FM said:
'Mr Derriman put most emphasis in his submissions to me upon these two omissions from the Bankruptcy Notice. However, he also maintained the challenge which failed before the Registrar: that he had a cross-claim which he could not have set up in the proceedings in the Local Court.
As I understood his submissions on the material which he filed in support of this claim, he claimed that because the creditor bank had refused to honour two cheques drawn on a trust account for "Kids 4 Kids Inc", of which he was managing director, he had suffered "considerable damage, pain and suffering". He said "the amount claimed is fifty thousand dollars and is claimed holistically in nature and therefore also in calculation".
It is sufficient to say that I agree with the Registrar that on the material presented there is no substance to the alleged "counter claim, set-off or cross demand".'
9 The appellant's Notice of Appeal to this Court does not squarely challenge the magistrate's decision on this point. The only ground of appeal that might conceivably cover the point is the fourth ground of appeal viz 'The magistrate erred in finding that the sequestration order could legitimately be made'.
10 In his written submissions in this Court, the appellant said:
'Smith F.M. ruled that he was satisfied that I was aware that both matters would be heard on the day of his hearing. While I was aware that both matters were to be heard, it was abundantly obvious that I was not aware, though undoubtedly should have been aware, that I would be required to represent my case, which had been heard months earlier. I thought that a ruling would be made on what had already been presented months earlier. I certainly was not prepared to represent my case again regarding the counterclaim.'
11 As was pointed out by Mr J White, counsel for NAB, this statement does not constitute a complaint that Smith FM fell into error in relation to the alleged counter-claim. At least at this stage of the litigation, no point arises in relation to that subject.
12 The only matter requiring consideration in this Court is the significance of the omission from the bankruptcy notice of the words 'For the Information of the Creditor' set out in para 7 above.
Australian Steel
13 The form of bankruptcy notice prescribed in 1997 was considered by a Full Court of this Court in The Australian Steel Company (Operations) Pty Ltd v Lewis [2000] FCA 1915; 109 FCR 33. The Court was there concerned with three bankruptcy notices, all based on orders made in the Magistrates' Court of Victoria. Each bankruptcy notice set out a calculation of the interest claimed by the notice but none of them correctly identified the provision pursuant to which the interest was being claimed, as is required by Note 2 to the prescribed form of bankruptcy notice.
14 By majority (Black CJ, Heerey and Sundberg JJ; Lee and Gyles JJ dissenting) the Court held the notices to be invalid.
15 At paras 27 β 38 of their reasons for judgment, the majority judges considered the decision of the High Court of Australia in Kleinwort Benson Australia Ltd v Crowl (1998) 165 CLR 71. That case concerned an earlier form of bankruptcy notice. However, the majority judges used it to support the existence of a distinction between an essential requirement of a bankruptcy notice, non-compliance with which leads to invalidity, and a non-essential (or formal) defect that leads to invalidity only where it results in substantial injustice to the debtor: see s 306(1) of the Act.
16 In addressing the distinction between an essential and a non-essential requirement of a bankruptcy notice, at para 39 their Honours referred to a statement by McHugh, Gummow, Kirby and Hayne JJ in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355:
'A better test for determining the issue of validity is to ask whether it was a purpose of the legislation that an act done in breach of the provision should be invalid. β¦ In determining the question of purpose, regard must be had to "the language of the relevant provision and the scope and purpose of the whole statute".'
The majority then said:
'In the light of this passage, it can be seen that a requirement is "made essential" within the Kleinwort Benson principle when the enquiry as to purpose discloses the intention that an act done in breach should be invalid.'
17 Their Honours went on (at para 40) to state a general principle:
'In 1996 Parliament chose to make a form to be prescribed by regulation the sole criterion of whether a bankruptcy notice complied with the Act, with the consequence that an act of bankruptcy would be committed in the case of non-compliance with such a notice. This being the will of Parliament, it is not for a court to treat the terms of the prescribed form as inherently less important than a requirement specified in the Act itself, so as to attract a more lenient view in the case of non-compliance. Valid delegated legislation (and there is no suggestion that the present regulations are otherwise) is binding law because that is what Parliament has willed. As Lindgren J said in Re St Leon; Ex parte National Australia Bank Ltd (1994) 54 FCR 371 at 378 (obviously in relation to a pre-1996 notice) "β¦ the statutory requirement that a bankruptcy notice be in accordance with the prescribed form is itself a requirement made essential by the Act.'
18 Notwithstanding this statement of principle, the majority judges did not say that any departure from the prescribed form would lead to invalidity. Consistently with what they had earlier said, their Honours looked at the purpose behind the particular unfulfilled requirement. They concluded (at para 42):
'Having regard to the purpose behind the requirement that the provision under which interest is being claimed, and correctly claimed, be included in the notice, that requirement is made essential by the Act, and a notice issued in breach of the requirement will be invalid.'
19 For the purposes of the present case, it is unnecessary to discuss the reasons why Lee and Gyles JJ disagreed with that conclusion. However, it is relevant to note a comment by Lee J (with whom Gyles J expressed agreement) about the note 'For the Information of the Creditor' that is in issue in this case ('the note'). At para 61, Lee J described the note as being 'new material which informed the creditor of impairment of the creditor's privacy rights'. At para 66, his Honour said:
'In addition to paragraphs directed to the debtor, the prescribed form of the new notice contains instructions addressed to the person completing a "draft bankruptcy notice" or, perhaps, addressed to the Official Receiver ... For example, an introductory Note in the prescribed form instructs that words in italics "are for guidance in completion of this Notice, and are not to be reproduced in the Notice". Although the Note is not in italics, it would seem to follow that it is not intended that the Note be part of the bankruptcy notice served on the debtor. Similarly, a paragraph headed "For the Information of the Creditor Note about use of information" set out in the prescribed form would not appear to be relevant to the obligations of the person upon whom a bankruptcy notice is to be served and it suggests that it is intended that compliance with the requirements of the Act and Regulations would be satisfied if that paragraph were omitted from a "draft bankruptcy notice" presented to the Official Receiver, notwithstanding that neither the heading to, nor the paragraph, appears in italics.'
The magistrate's decision
20 It is unnecessary to refer to the whole of Smith FM's reasons for judgment. It is sufficient to set out his conclusion about the note. After dealing with the foreign currency conversion point, he said (at para 12):
'Less confidently, I also think that the note about use of information is intended by the form to be there for its stated purpose, that is: "For the Information of the Creditor", and is not intended to be provided as a warning to a debtor or for any purposes of the debtor. On that reading, I also consider that the omission of the note about use of information is a formal defect or a regularity which may be excused under Section 306 of the Bankruptcy Act 1966 (Cth) as applied to bankruptcy notices by the cases I have cited above. In the circumstances of the present case, I do not consider that the omission has caused the debtor to be misled in any respect nor that any substantial injustice was caused.'
Submissions of the parties
21 At the hearing of the appeals, Mr Derriman appeared on his own behalf. He argued the omission of the note was an injustice to him. He said a debtor is entitled to have the same information about the operation of the Act as is the creditor. In his written submissions, Mr Derriman said the words in the note 'are anything but "drafting notes"'. He went on:
'They are a clear advice to the Creditor. That there could be a necessity to disclose some or all of the information provided by the Creditor on the Form to Government agencies and departments, has a profound effect upon this debtor in particular and may well have upon any other debtor. Failure to make critical information available to both the Creditor and Debtor alike cannot be regarded as a formal defect or irregularity. It is a matter of substance.'
22 Mr White, on behalf of NAB, contended the omission of the note did not constitute a defect. He argued the terms of the note demonstrated it was not something addressed to the debtor; it was simply information for the creditor that was not required to be set out in the bankruptcy notice. He cited the comment by Lee J in Australian Steel. Mr White likened the note to the drafting notes considered by Weinberg J in Northam v Commonwealth Bank of Australia [2000] FCA 544 and Kyriakou v Shield Mercantile Pty Limited [2004] FCA 490; 207 ALR 393.
23 Alternatively, Mr White argued that, if the bankruptcy notice was defective, the defect was in relation to a non-essential requirement; it was a merely formal defect; there was no evidence of injustice to the debtor and consequently s 306(1) of the Act should be applied.
24 During the course of his oral submissions, I put to Mr White the contention of Mr Derriman that a debtor was entitled to have the same information as a creditor. Mr White responded that it might be important for a creditor to know that information contained in a bankruptcy notice might be made available to others; the creditor might decide, under those circumstances, not to proceed with an application for issue of the bankruptcy notice. However, he argued, it was not useful for a debtor to be told of the possibility of information in the bankruptcy notice reaching a wider audience; there would be nothing he could do in response to that information.
Conclusion
25 The necessity for creditors to adhere to the currently prescribed form of bankruptcy notice has been a fundamental tenet of bankruptcy law for many years. Departure from that form may have significant consequences affecting substantive rights, not only of the immediate parties. For example, a decision upon the question whether or not a particular non-compliance has resulted in the invalidity of a bankruptcy notice may affect the date of commencement of a bankruptcy, the operation of the doctrine of relation back and, consequently, the property interests of other creditors.
26 In that situation, it might have been expected that the drafters of the 1997 prescribed form of bankruptcy notice would have taken care unambiguously to indicate what material needed to be included in the notice to be issued to a debtor. They made a good start by stating that words in italics were for guidance only, and not intended to be reproduced in the notice itself. However, they then apparently departed from their own rule by setting out, in non-italicised form, a number of drafting notes that were surely not intended to be reproduced in the notice itself. After the Schedule detailing the total debt owing, the drafters inserted an item called 'For the Information of the Creditor β Notes to the Schedule', two of which took the form of an instruction to the creditor and the third of which was the foreign currency amount conversion. Were these notes intended to be reproduced in the notice itself? Presumably note 3 was so intended, where it was applicable, but the intention in relation to notes 1 and 2 is unclear. On the one hand, the notes are in the form of an instruction to the creditor; on the other hand, their inclusion may serve a purpose useful to the debtor in drawing attention to annexures to the notice.
27 No doubt it is correct to say, with Lee J, that the note under current consideration was intended to be a warning to the creditor about possible impairment of that party's privacy rights. As warnings go, it is not very effective. It conveys no clear information to the creditor. To what Government agencies and departments might information contained in the bankruptcy notice be disclosed? What information? Under what circumstances? What information might be included on a public record or given to other persons? Moreover, and more relevantly to this case, it is uncertain whether or not the drafters intended that this note should be reproduced in the bankruptcy notice itself. An affirmative answer is suggested by the fact that the note is not printed in italics, but the force of that consideration is reduced by the fact that the same comment may be made about the drafting notes. A negative answer is suggested by the circumstance that the note is described as being for the information of the creditor. As Mr White submitted, the possibility of publication of the information in the bankruptcy notice may be a matter relevant to a creditor's decision as to his or her future conduct; it cannot affect any decision as to conduct required or able to be made by the debtor.
28 Mr Derriman argued that a debtor may be damaged by publication to others of the fact that a bankruptcy notice has been issued against him or her. That is true, but any such damage stems from the issue of the notice, in an environment where such publication is possible, rather than the debtor being left unaware of the information (such as it is) set out in the note.
29 In Australian Steel, Lee and Gyles JJ expressed the opinion that the omission of the note did not constitute a defect in a bankruptcy notice. As this opinion was expressed obiter and in dissent, the opinion is not binding on me. However, as a matter of comity, I should adopt their opinion unless I perceived it to be in conflict with the majority opinion in Australian Steel, or other binding authority, or I concluded it was clearly wrong.
30 I do not think the opinion of Lee and Gyles JJ on this matter conflicts with the majority opinion. The majority judges did not deal with the question whether it was necessary for the note to be reproduced in the bankruptcy notice itself. If they had concluded this was intended, they might have had to consider whether it was an essential requirement. The majority did not adopt the view that any departure from the prescribed form leads to invalidity. The majority judges would have applied a purposive approach and it is difficult to see any purpose in this information, so far as the debtor is concerned.
31 I am not aware of any other relevant authority and I am not persuaded that the opinion of Lee and Gyles JJ is incorrect. Therefore, I believe I should adopt that opinion and hold that the drafters of the form intended that compliance with the Act and the Regulations would be achieved by a bankruptcy notice that omitted the note. Alternatively, I would take the view that, if the omission was a defect, it was a defect in relation to a non-essential matter; it was a formal defect. As no injustice is shown to have occurred, s 306 of the Act ought to be applied.
Disposition
32 In the result I hold that Smith FM was correct in rejecting all the points put to him by Mr Derriman. Both appeals will be dismissed with costs.
I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox.
Associate:
Dated: 15 February 2005
The applicant appeared in person.
Counsel for the Respondent: Mr J M White
Solicitor for the Respondent: Dibbs Barker Gosling
Date of Hearing: 1 February 2005
Date of Judgment: 15 February 2005
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